1 budget model update resources implementation team

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  • Slide 1
  • 1 Budget Model Update Resources Implementation Team
  • Slide 2
  • 2 Budget Model Principles/Issues simple, transparent and encourages accountability The overarching goal of this process will be to construct a budget model that is:
  • Slide 3
  • 3 Implementation Team Timeline April 2006 Update on progress. Input on basic assumptions and principles May 2006 Construct scenarios related to the decisions and options that will go into the building of the budget model. End of May 2006 Create detailed list of decisions / options related to the construction of the budget model along with associated pros and cons. Another round of open discussions. June 2006 Finalized list of decisions and options along with pros and cons submitted in final report.
  • Slide 4
  • 4 Summer 2006 University leadership makes the decisions and selects options to create a draft budget model. Fall 2006 Draft budget model is presented for discussion. Activity taking place during the quarter is entered into the model and the results are reviewed. Necessary adjustments are made. Winter and Spring 2007 Activity taking place during each quarter is entered and the results are reviewed. Any necessary adjustments are made. Summer 2007 Planning Units begin operation under the new model. Budget Implementation Timeline
  • Slide 5
  • 5 Areas to be Discussed 1. Linking the Budget to the Academic Plan a. The Budget Model is a Tool b. The Budget Model Supports the Academic Plan c. Shared Governance Structure 2. Connecting the Budget to Activities a. Linking the Budget Model to Academic Priorities b. Supporting University-Wide Priorities c. As Earned or Weighted Revenue d. Weighted Credit Hours to Reflect Differential Costs e. Tuition Attribution Student Credit Hours (SCH), Enrollments (majors) or Degrees
  • Slide 6
  • 6 Areas to be Discussed 3. Budget Stability a. Multi-Year Averaging b. No-Change Conversion c. Adjusting Over Time 4. Supporting Common Services and Needs a. Central Support Vs. Direct Support b. Funding Research Efforts 5. Academic Support Unit Issues a. Support Units Associated Directly with Fees b. Process for Obtaining Funds c. Rate and Service Level Review
  • Slide 7
  • 7 1 - Linking the Budget to the Academic Plan a. The Budget Model is a Tool It should not make decisions. It simply provides information about the relationship between resources and needs for those resources. The goal is to provide decision makers with information about the resources available and the activities supported by those resources.
  • Slide 8
  • 8 b. The Budget Model Supports the Academic Plan The budget model should be aligned with and support the priorities identified by the implementation teams. c. Shared Governance Structure Academic oversight of the budget model. central budget committee (like BPC), curriculum oversight function (like UCC) involvement of faculty and staff Senates Deans advisory committees at the college level. 1 - Linking the Budget to the Academic Plan
  • Slide 9
  • 9 2 - Connecting the Budget to Activities a. Linking the Budget Model to Academic Priorities The budget model cannot be a substitute for decision making. It should shed light on the relationship between resources generated by activities and the resources needed to support those activities. Decisions will either directly follow from that relationship or will diverge from it to support academic priorities (e.g. general education) that are less connected to resource generation.
  • Slide 10
  • 10 2 - Connecting the Budget to Activities b. Supporting University-Wide Priorities There should be a mechanism to collect some central resources for strategic needs related to the academic plan. This is typically generated by having all units contribute some percentage of resources or by earmarking certain central resources that cannot be easily allocated to academic units (interest income, out-of-state surcharge, etc). This fund can support needs that are less directly connected to resource generation such as activities related to the public good.
  • Slide 11
  • 11 2 - Connecting the Budget to Activities c. As Earned or Weighted Tuition Revenue Tuition revenue can be allocated on the basis of how its earned or it can be weighted by some factor or metric. As Earned puts the incentive to generate funds in direct line with how it is earned, which provides the most direct incentive for those earning revenue to earn more. Need to evaluate activities to make sure they are in line with academic priorities as opposed to simply being related to generating revenue. Weighted begins to disconnect incentives to create more revenue. It is, however, the only way to build in factors that might be valued academically (program quality, honors programs, interdisciplinary programs, general education, type of faculty teaching, etc) but which are not directly connected to revenue generation.
  • Slide 12
  • 12 2 - Connecting the Budget to Activities d. Weighting Credit Hours to Reflect Differential Costs Credit hours can be weighted like subsidy to reflect differential costs. While subsidy is earned differentially based on costs, tuition is the same regardless of program cost. Allocating tuition based on weighted credit hours does not reflect how tuition is earned and would thus introduce a disconnection that would reduce the incentive for revenue generation. It is therefore a tradeoff between building an equalizing factor into the model through weighting or making a specific allocation to units with costs that are higher.
  • Slide 13
  • 13 2 - Connecting the Budget to Activities e. Tuition Attribution Student Credit Hours (SCH), Enrollments (majors) or Degrees SCH is used because revenue is earned by credit hours and the main cost is the offering of sections. Using Enrollments (majors) reflects the costs associated with carrying majors (advising) and idea that students are attracted by majors. Using enrollments could encourage units to shift credits taken by their majors to other units. Using SCH could encourage units to turn away majors in favor of doing cheaper service courses. Using degrees granted could provide an incentive to retain and graduate students.
  • Slide 14
  • 14 3 - Budget Stability a. Multi-year averaging Averaging credit hour production over several years can help smooth swings in the budget so units can have time to adjust to changes. Conversely, when a unit is growing, the benefits of that growth will be lagged because of the averaging.
  • Slide 15
  • 15 3 - Budget Stability b. No-Change Conversion The conversion gives each unit the same budget it would have had under the old budget model. Units will receive an adjustment that increases or decreases their budget from where the revenue/cost comparison puts them to get them back to their current total budget.
  • Slide 16
  • 16 How a No-Change Conversion Works
  • Slide 17
  • 17 How a No-Change Conversion Works
  • Slide 18
  • 18 3 - Budget Stability c. Adjusting Over Time After the No-Change Conversion, the adjustment can remain fixed going forward, meaning that it never grows or shrinks over time as the unit moves forward and the revenue and costs change. This creates less incentive for units to try to address the difference between revenue and cost. Alternatively, adjustments could decrease over time creating an incentive to increase revenue or bring costs down. The potential problem is that the ability to influence revenues and costs varies by unit. This may require that the adjustment become a permanent addition to the budget of some units.
  • Slide 19
  • 19 4 - Supporting Common Services and Needs a. Central support vs. Direct support Services connected directly to unit activities provides an incentive for managing the use of those services. If the goal is for units to consciously manage a resource (such as space) or if there are services that are limited to very specific activities in only some units (such as research support), support costs would be directly allocated to the units. Services that are not easily connected to activity or are not really under control of the units, can be handled with a central support approach. For example, to discourage units from accepting students based on their financial aid status, financial aid services would be allocated via a central support approach to spread the cost across units.
  • Slide 20
  • 20 4 - Supporting Common Services and Needs b. Funding Research Efforts Overhead funds generated by research could be allocated to the academic units doing the research or to a central research operation for strategic investment. Or a mixture of the approaches could be used. Allocating it all to the units maximizes the incentive to generate research funds. In addition, overhead funds may need to be allocated to areas where overhead costs like space are located. Keeping some funds centrally provides mechanisms for moving in new strategic directions and for funding research activity that might be less directly related to revenue generation.
  • Slide 21
  • 21 5 Academic Support Unit Issues a. Support Units Associated Directly with Fees Some units or services can be directly associated with specific fees such as the general fee or technology fees. Some functions could be covered entirely by fees while others might be supported partially by fees. When a function is tied entirely to a fee, any additi