Tis the Season

tis the season santa

Tis the season and technology managers are seeing green. They are dreaming of purchases arriving in boxes. Red lights are everywhere!

Yes, it is the holiday season, but that is not what I am referencing. In higher education, it is also budget season. The vast majority of higher education institutions have a fiscal year that runs from July 1 to June 30. November through April is when we plan and gain approval for our budgets for the upcoming years. This year is going to be a particularly interesting one for many of us.

Let’s start with the green (money). This is the first budget season since the onset of COVID that should look more like a return to normal. For the past couple of years, many of us have had a “just make it work” mentality from our senior administration. Their philosophy was that students needed to be taking classes for the college to collect tuition, so anything that we needed to do to make sure those classes went on was automatically approved. This was great for our classroom upgrades and getting new equipment like microphones, document cameras, class capture and video cameras into classrooms. However, it is starting to feel a little bit like the week after Christmas, when your credit card bills start arriving and you realize how much you have spent. What we did during this time period was set expectations and those expectations will not go away quickly.

By upgrading all our classrooms and adding equipment to them, we have raised the base-level cost of every classroom on campus. This started in 2020, so as we prepare a budget that will last through the winter of 2024, we need to have budget increases to reflect the maintenance needs of this higher base cost of a classroom. In addition to all of the above reasons for a budget increase, many manufacturers have announced price increases of 10% or more. So — to keep up with that, we have to increase our overall budget by 10% simply to have the same purchasing power. Many technology managers could be asking for a 20-30% budget increase for FY 23-24.

At the same time, we are dreaming of purchases arriving in boxes. Yet, we are all very well aware of the sticky supply chain problems. Many of those dreams continue to be nightmares. As we watch the world news and see that China is still enforcing a zero-COVID policy, there is also social unrest in the country. A government crackdown and possible doubling down of the zero-COVID policy could halt any of the progress that has been made in material availability over the past few months. This continues to complicate our budget cycle in unique ways. We need to place orders for items now for upgrades that will take place over the summer, without even knowing what our budgets will be.

Beyond the obvious problem of actually getting equipment, supply chain issues cause other budgeting problems for higher education, particularly for large public institutions. These institutions typically require a purchase order for everything that is ordered. As is the point of a PO, that money is then encumbered. If the person who placed the order knows that the product will not arrive before the end of the FY, they can not cancel the PO and spend that money on other products. Their finance departments will not permit that. Rather, they need to leave the PO in place, essentially losing that money out of the current fiscal year, and then having it charged to next fiscal year. The effect on their budget is that they have that amount of money lost from each FY’s budget. On the other hand, most schools would carry some money heading into the winter/early spring of a FY to deal with emergencies that may arise. However, they are now looking to spend that money on guesses of what they may need because they know they won’t get product in the current FY if ordered after late January.

Ah, and those pretty lights that we all associate with the holiday season. Well, those may actually be blinking red and yellow lights that are signaling problems in the economy coming up in 2023. If you are paying attention to various signals, they are telling us clearly that we are heading into an economic downturn. The housing market and the auto market — two of the hottest markets of the past two years — have shown signs of a slowdown. The price of copper has dropped significantly over the year. Economists refer to copper as Dr. Copper because its price is a strong predictor of how the overall economy is doing. Finally, if we consider inflation and the end of federal COVID relief money, it is easy to see why many higher education institutions are facing a difficult and unpredictable budgeting season.

Putting it all together, we have a need for significantly increased AV budgets at our institutions due to more equipment in classrooms. We have inflation that has caused a standard across-the-board price increase on equipment. We have serious supply chain problems. There are significant signs of a global economic downturn. In retrospect, no, this will not be a “normal” budgeting season.