Future Reserve Strategy - Carry Forward Policy

The purpose of this memo is to provide an overview of the strategic management of university reserves (aka: carry-forwards) and the necessary reallocation of resources to provide better balance between decentralized (unit level) reserves and centralized (campus level) reserves. Currently, the majority of reserves are allocated at the unit level leaving insufficient reserves at the campus level. It is important for the university to have campus level reserves for university-wide strategic initiatives and emergency reserves. University-wide strategic initiative reserves provide funds to be directed by senior leadership to support strategic priorities such as student success, academic programs, research, and campus infrastructure. Emergency reserves (aka: Rainy Day Fund) provide the university with resources to withstand adverse unforeseen financial events and allow the university to continue operations without disruption. Therefore, the university is establishing two different campus level reserve funds (1) Emergency Reserve Fund (aka: Rainy Day Fund) and (2) Strategic Initiative Fund. The initial target for the Emergency Reserve Fund is $7 million or 5% of the general fund budget, excluding financial aid. The initial target for the Strategic Initiatives Fund is 3% of the general fund budget, or $5 million.

To establish these campus level reserve funds, a reallocation from other carry-forward balances will be required as well as an adjustment to the carry-forward policy going forward.

Reallocation of Carry-Forward Balances

The proposed reallocation of carry-forward balances to the campus level reserve funds includes the following sources:

  • Campus central funds: 100% of the balance as of 6/30/21 (Estimate: $6.4 million)
  • Business Affairs: Approximately 83% of the balance as of 6/30/21 (Estimate: $2 million)
  • Unit level (Colleges and Service Units): Reclassification based on 7/1/20 carry-forward balances (beginning of fiscal year 2021):
    • 10% across-the-board for all unit level carry-forward funds (certain funds are exempt **)
    • Additional 5% from carry-forward funds where the total unit carry-forward balance is in excess of 25% of its FY 20 budget (certain funds are exempt **)

Carry-Forward Policy

The university recognizes the importance of a carry-forward policy that provides unit leaders with the necessary one-time funding to prioritize needs and deploy resources in the most strategic and prudent manner possible. The proposed carry-forward policy strives to strike a balance between unit level reserves and campus level reserves.

Carry-forward policy effective beginning in fiscal year 2021:

  • 75% of the annual budget surplus is retained by the unit (exemptions apply**)
  • 25% of the annual budget surplus is transferred to the Strategic Initiative Reserve

The proposed policy and reserve balances will be re-evaluated on a regular basis to ensure the university carries adequate reserve levels to financially protect the university, but also provides the units with financial flexibility to address unit level goals and strategic plans.

(**) Exemptions include faculty and research-related chartfields as well as certain funding agreed to in advance, deemed extraordinary, and mission critical by senior leadership.

Policy owned by: Business Affairs
Last revised: March 23, 2021