Winter Symposium 2012
January 19, 2012 SMSU Ballroom
Roy Koch, Provost and Vice President for Academic Affairs
Kevin Reynolds, Vice Provost for Fiscal Strategies and Planning
PSU External Context and History
Continuing reduction in state support
Measure 5
Increased obligations on state budget (e.g.
K-12, prisons)
Recent protracted economic downturn
Increasing demand for higher education Concern over cost of higher education
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 Futures
“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
Imperatives for our continued
development
Enhance our revenue
Use the revenue efficiently to achieve
our multiple objectives
Develop an effective budget allocation
How can we grow our revenue?
Strategic enrollment management (SEM)
Enrollment Tuition rates
Student retention
Student mix – resident vs. non-resident
Funded Research Philanthropy
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
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
The List Continues to Grow. . .
IUPUIIndiana University Bloomington
University of Illinois, Urbana Champaign Southern Illinois University
Marquette University American University University of Toledo Clemson University Harvard University
Washington University of St. Louis Mercer University CalTech University Vanderbilt University Duke University Auburn University USC University of Cincinnati University of Washington University of Iowa Clarkson University University of Oregon Temple University University of Toronto
West Chester University (PA) Central Michigan University University of Alaska
McGill University
Florida International University Cornell
Claremont Graduate University University of Illinois
Rensselaer Polytechnic Institute University of Denver
UCLA
University of Virginia
University of New Hampshire
Typical Timeline from Initiation to
Implementation
Process
Concept – Design – Implementation – Monitoring
Timeline to Implementation
University of Virginia 2011-2014
University 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 committee
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,
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)
College 1 College 2 College 3 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
Appropriations Net Tuition
Allocated based on SCH, enrollment, degrees, targeted funds..
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
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.
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
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
Cross Subsidies
Between Colleges – almost invariably necessary
Institutional decision Transparent
Examined, revisited, and could be a fixed dollar
rather than %
Within a college
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)
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
Next Steps
Working group to develop and share
current status of resource allocation, i.e. revenue net of all costs to produce
revenue
Direct Costs
The direct cost of producing revenue: all expenditures directly tied to “revenue
generators” Examples:
Faculty salaries
Indirect Costs
The indirect cost of producing revenue: all expenditures directly tied to “revenue supporters”
Examples:
President’s Office Library
Relationship to IPEDS Data
Academic Support, Institutional Support,
Instruction, Public Service, Research, Student Services, Unassigned
IPEDS format is objective, validated and
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
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
Relationship Between Steering
Committee and Working Group
Working Group
Winter Symposium 2012
Smith Memorial Student Union Ballroom
Planning 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?
Winter Symposium 2012
Smith Memorial Student Union Ballroom
Planning 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
