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Winter Symposium Winter Symposium 20122012January 19, 2012January 19, 2012SMSU BallroomSMSU BallroomRoy Koch, Provost and Vice President for Academic AffairsKevin Reynolds, Vice Provost for Fiscal Strategies and PlanningMonica Rimai, Vice President for Finance and Administration
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PSU External Context and HistoryContinuing reduction in state supportMeasure 5Increased obligations on state budget (e.g. K-12, prisons)
Recent protracted economic downturn
Increasing demand for higher education
Concern over cost of higher education
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PSU Reactions Increase tuition to offset loss of state funding
Annual reaction to budget shortfalls
LTIFS Long term planning Strategic Enrollment Management New budget allocation model
Financial FuturesNew budget allocation model
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“Take away” messages from last year The present doesn’t look like the past – and neither will the future
We are largely “tuition driven”
We have considerable control over our revenue
We must use our resources wisely
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Imperatives for our continued development
Enhance our revenue Use the revenue efficiently to achieve our multiple objectives
Develop an effective budget allocation model for this new context
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How can we grow our revenue?
Strategic enrollment management (SEM) Enrollment Tuition rates Student retention Student mix – resident vs. non-resident
Funded Research Philanthropy
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Budget Allocation Model Directly connects budget allocation and the activities that generate revenue
Clarifies unit-level budget allocation and the potential for generating additional revenue
Promotes efficient use of resources
Based on an understanding that not all mission-critical activities generate adequate revenue and must be supported by those activities that are revenue producing
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Plan for the day Brief presentations
Context and general motivations for a new budget allocation model
Characteristics of RCM-type budget allocation models•Revenue generating units•Revenue supporting units
Experiences and timeline for development
Group Q&A Table discussion and report out of positive aspects of a new budget allocation process
Table discussions and report out of concerns regarding a new budget allocation process
Summary and next steps
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The List Continues to Grow. . .
IUPUIIndiana University BloomingtonUniversity of Illinois, Urbana ChampaignSouthern Illinois UniversityMarquette University American University University of ToledoClemson University Harvard University Washington University of St. Louis Mercer University CalTech University Vanderbilt University Duke University Auburn University USCUniversity of CincinnatiUniversity of Washington
University of IowaClarkson University University of OregonTemple University University of Toronto West Chester University (PA) Central Michigan University University of Alaska McGill University Florida International University CornellClaremont Graduate UniversityUniversity of IllinoisRensselaer Polytechnic InstituteUniversity of DenverUCLAUniversity of VirginiaUniversity of New Hampshire
RCM/RCB In Use or In Development:
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Typical Timeline from Initiation to Implementation Process Concept – Design – Implementation – MonitoringTimeline to ImplementationUniversity of Virginia 2011-2014University of Minnesota 1996 (4 year process)University of Florida 2011 (3 year process)University of New Hampshire 2000 (3 year review)
Monitoring and adjusting Oversight committeeChanges have to be made, but only periodically
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Principles and Reasons for Change Support, not determine, university mission and goals
Provide incentive for positive behaviors, innovation, and operational efficiencies
Transparency As simple as possible to understand, administer, and implement
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Principles and Reasons for Change Assign revenues to the units responsible for the activity that generates them
Clearly identify cross subsidization
Recognize the importance of maintaining current funding levels or phasing‐in funding reductions
Source: University of Washington Activity Based Budgeting (2013 implementation)
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College1
College 2
College3
Revenue Supporters (partial funding)
Revenue Supporters
(“fully” funded)
1. Estimate E&G funds
2. Distribute Funds
3. Academic Cross-subsidization
4. Tax. Based on revenue, expenses or costs (space and headcounts)
Generalized Model for Flow of E&G Resources
State Appropriat
ions
Net Tuition
Allocated based on SCH, enrollment, degrees,
targeted funds..
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Revenue Allocation
Invariably to school/college level (not departmental)
Student Tuition generated by unit Net Tuition (gross tuition less remissions)
Aggregate tuition rate or more granular (differential tuition, residency).
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Revenue Allocation State Funding
Some institutions use this for cross subsidies or to pay for revenue supporting units.
Allocate using resident students enrollment and cell values (resource allocation model) of the classes they take.
Any targeted funding treated separately
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Moving PSU to a Single Model for Revenue Allocation
Principle: model should be simple, transparent and predictable
Single system to allocate tuition and state funds to academic units.
Decentralized
PSU Self Support
Centralized
New Budget Model
Summer Session
In Load
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Revenue Distribution Factors – Simple and Predictable Generally a ratio of SCH and Majors (ratios vary dramatically- no magic formula)
Degrees granted (student success) OUS productivity measure and current basis for incentive funding
Used by UO and planned by U of W In addition to, or instead of majors
Sponsored Research (in addition to F&A costs) Not a net revenue generator, incentive Component of state funds and OUS expectation
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Cross Subsidies
Between Colleges – almost invariably necessary Institutional decision Transparent Examined, revisited, and could be a fixed dollar rather than %
Within a college Dean-level decision – input from the departments
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Allocation Model and Strategic Priorities ONLY a budget allocation methodology
How funds are spent should be aligned with institutional priorities (student success, educational opportunity, civic leadership, global excellence, effective resource utilization)
Funds follow students
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Allocation Model and Strategic Priorities Performance-based budget models lead to a greater focus on students (recruitment, retention, and graduation)
More effective utilization of resources (local and direct impact from changes)
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Next Steps
Working group to develop and share current status of resource allocation, i.e. revenue net of all costs to produce revenue
Two categories of costs
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Direct Costs
The direct cost of producing revenue: all expenditures directly tied to “revenue generators”
Examples:Faculty salariesSchool or college administrative support
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Indirect Costs
The indirect cost of producing revenue: all expenditures directly tied to “revenue supporters”
Examples:President’s OfficeLibrarySpace
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Relationship to IPEDS Data
Academic Support, Institutional Support, Instruction, Public Service, Research, Student Services, Unassigned
IPEDS format is objective, validated and known
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Lessons Learned Keep it simple
How many outcomes can we incentivize in a budget model?
Let the model evolve Be data driven
Good to push and pull on the Working Group regarding data validity, but in the end, let’s be transformed by the facts
Be transparent Commitment to iterative process Getting comfortable with sharing data broadly
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General Timeline 2011-2012: Model Development
Cost accounting, methodology Cross subsidy analysis Merge various models (Extended Studies, Summer Session)
Establish Revenue and SCH targets Development of revenue sharing plan (i.e. what we incentivize)
2012-2013: Run Parallel/Shadow model Refine model based on results
2013-2014: Implementation
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Relationship Between Steering Committee and Working Group
Working Group
Steering Committee
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Winter Symposium 2012Smith Memorial Student Union BallroomPlanning for a New Budget Model
First Break Out Session
What positive outcomes of the new budget model are you anticipating the most? (List 1-3) Why?Anticipated Outcome
Why?
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Winter Symposium 2012Smith Memorial Student Union BallroomPlanning for a New Budget Model
Second Break Out Session
What concerns do you have regarding the new budget model? (List 1-3) How can your concerns be allayed? Concern? How can your
concern be allayed?