Where excellence and opportunity meet.™ Budget Study Group Lori Worm, John Koker, Fred Yeo, M. Ryan Haley 26 May 2015.
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Where excellence and opportunity meet.™
Budget Study Group Lori Worm, John Koker, Fred Yeo, M. Ryan Haley
26 May 2015
Our Charge
Outline UWO’s current budget model, including strengths and weaknesses.
Outline other budget models used in higher education, including strengths, weaknesses, and specific examples.
Outline attributes of a well-functioning budget model, with a focus on the university-to-college/units budget level.
Desiderata: A Budget Model Should…
be transparent, flexible, and include accountability incentivize cost controls and revenue generation align with strategic planning, mission, values, and shared
governance be installed efficiently balance the academic and economic aspects of higher
education encourage innovation
Current UWO Challenges
No general tuition setting authority Four-year tuition freeze at below average levels Unable to charge market-based tuition rates because of tuition-
price regulation UWO has very low tuition within UWS Cost-to-continue funding will disappear Unpredictable budgets inhibit long range planning Faculty/staff salaries Time to graduation Enrollment needs
Five Budget Models of Higher Ed
IBM: Incremental Budget Management RCM: Incentive-Based Budget Management PBBM: Performance-Based Budget
Management FBBM: Formula-Based Budget Management ZBBM: Zero-Based Budget Management
IBM In Brief
Centralized – allocation determined by university and sent to colleges/units
Prior allocations have heavy influence Budgets are adjusted via increments
IBM: Advantages
Relatively easy to administer Traditionally popular in higher education Can work well when GPR funding is
abundant Induces some stability in year-to-year
funding
IBM: Disadvantages
Little incentive for colleges/units to innovate Little incentive for colleges/units to control costs Little incentive to grow enrollment Can cause imbalanced workloads Tends to falter when GPR funding is low Reallocations are difficult Has a “passive” flavor
RCM In Brief
Decentralized – college/unit budget is generated not allocated
Empowers deans and unit leaders
RCM: Advantages
College/unit budgets are activity based Inherently transparent; easy to understand Clear accountability Incentivizes enrollment growth and program
revenue generation Incentivizes cost controls Increasingly popular in higher education
RCM: Disadvantages
Can cause curricular redundancies and competition for students
May induce too much focus on revenue generation
Can inhibit interdisciplinary programs Can be slow to install Requires budgetary acumen by college/unit
leaders
PBBM In Brief
Semi-centralized Links budget allocation to performance in
areas such as Graduation rates Enrollment Job placement rates
PBBM: Advantages
Generally quite flexible Allows for reallocations across
colleges/units based on performance and need
Incentivizes performance and outputs Allows administrators to directly steer
faculty actions
PBBM: Disadvantages
Defining accurate performance metrics is often difficult
Performance targets can be gamed Monitoring costs can be high Dynamic benchmark problem
FBBM In Brief
Centralized approach that uses extensive formulae to allocate resources
Clinical version of PBBM
FBBM: Advantages
Once established, offers an automated approach to resource allocation
Can help ease political complications of reallocating resources across colleges/units
Instills a form of equity, insofar as the formulae are able
FBBM: Disadvantages
Formula creation can be contentious Requires numerous formulae, which can
become a labyrinth Can result in an over-reliance on formulae Formulae must be well calibrated to avoid
biased allocations Formulae can be gamed
ZBBM In Brief
Centralized approach that re-zeros college/unit budgets each year
College/units then re-justify full allocation each year
ZBBM: Advantages
Forces colleges/units to fully justify all expenses each year, and not just incremental changes to their budgets
Keeps colleges/units focused on producing outcomes to aid the justification process
Allows for reallocation of funds based on need and performance
ZBBM: Disadvantages
Budget requesting process is onerous “selling ability” vs. actual value Can devolve into IBM if central planners
rubber stamp the ongoing budget core (e.g., faculty salaries) and focus instead only on incremental changes
Can induce unstable year-to-year funding
Current UWO Budget Model
Typical IBM for decades Oddly timed budget request process Mostly a cost allocation
Differential Tuition Segregated Fees Fee For Service Chargebacks Cost Recovery Programs (e.g., CAPP) Indirect Cost Recovery (Grants)
A Path Forward?
Do more with less in the low-GPR reality Selecting a new budget model:
Understand the core tenets of the “big five” Select the best model for university needs Create the “right flavor” of the chosen model
Our inquiry suggests RCM to be the best fit Budget Model Installation Committee
Where excellence and opportunity meet.™
Questions?Thoughts?
Comments?
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