Materials Linked from May 15, 2013 Budgets & Fiscal Planning
Materials linked from the May 15, 2013 Budgets & Fiscal Planning Committee agenda
Possible steps for a conversation on a new budget model for OSU:
1. Establish budget principles—what do we want a budget model to do and what is
important to us in the budget model and the process we use for distributing the
budget. As a starting point, attached are some principles that were written when
the budget rebasing model was developed.
2. Identify the metrics we want to use to distribute the major types of revenue to
education, scholarship, and engagement units:
a. Base tuition charges
b. Differential and professional tuition (program quality, not so much
program growth)
c. State “cell” or general funding
d. State targeted funding
e. Facilities and administrative reimbursement from grants (indirect costs)
f. Student fees
g. Sales and service income
h. Miscellaneous income
3. Identify how the costs of service, support, and management (SSM) units are
assessed against the income distributed to the ESE units. For reference, the
metrics currently used in doing the budget rebasing assignment of overhead costs
is include at the end (in the interest of the Budget Office staff, I will note that this
detailed an approach is very cumbersome and complex!). This work would
include a discussion of :
a. how different functions (academic colleges, auxiliaries, service centers,
etc.) contribute to the costs of SSM units,
b. how some revenue increases volume and service needs (more students,
more research, more tickets, more beds in housing and dining, etc.) and
some primarily increases program quality or program specific needs, not
amount (differential and professional tuition, individual course or field
trips fees, etc.).
c. how the process of setting the budget for SSM units would work (i.e. how
do we decide how much facilities needs and therefore how much facilities
costs need to be distributed to units)
4. Determine how the amount for the strategic or community fund would be
established. This fund supports cross-unit subsidies (if you need them) and
provides an investment pool sufficient for the President and Provost to affect
policy and strategic directions.
1. BUDGET PRINCIPLES AND PROCESS
Budget Principles
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We will remember in all decisions that we are stewards of funds provided by students and citizens to
promote education, research, and public service. The University, while not a business, must operate with
a balanced budget.
The budget of the University is a tool that will be used to further our long-term strategic plan and
should serve to leverage external funding, promote creative activity, and encourage entrepreneurship.
Budget decisions will be based on accurate information about programs, incomes, and costs that are
consistently defined, rigorously reviewed, and publicly accessible.
The budget process will provide an environment that promotes fiscal sustainability. The University, and
units, must build and maintain fiscally prudent reserves.
The diversity of programs across campus that contribute to OSU’s core missions is a strength of the
University and will be recognized and considered in the budget process.
The diversification of revenue sources is to be encouraged, but it is recognized that all revenue sources
must contribute appropriately to the overhead costs of the University.
Our budget process, discussions, and decisions will be transparent and consultative.
Responsibility for budget implementation and unit-level decisions should be decentralized with
appropriate accountability.
The President and Provost are responsible for our final budget decisions.
Annual Budget Allocation Process
The purpose of the annual budget allocation process is to allocate new revenues to units consistent with
their achievement of their strategic goals. Allocation of new resources will be driven by the following
principles and considerations:
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All units need to have an equal opportunity to be successful, but all do not need to participate and
contribute in an identical way.
Financial incentives for units should be aligned with performance and goals of the Strategic Plan.
Revenues and expenses should be explicitly linked to generating units.
Budget allocation methods will be simple, straightforward, and transparent.
An appropriate portion of all revenues should be dedicated to the support of university-wide goals.
Appropriate oversight and accountability is essential.
Budget stability and predictability is desirable.
Annual budget allocations to units will be consistent with their achievement of their strategic goals. The
allocation process will consider factors such as Student Credit Hours, Student Headcount, and Research
for academic units, and efficiency, customer satisfaction, and productivity for service and support units.
All major investments should be considered carefully. Such investments should further the academic
goals of the university in education, research, and public service. The fiscal consequences of adding or
deleting a program must be considered carefully including a quantified statement of benefits to the unit,
the University and any outside interests, references to other related activities and to other units that will
be affected, a thorough quantification of all direct and indirect costs, FTE counts, space needs and
capital expenditures, anticipated funding sources, potential problems, significant underlying
assumptions, and identification and assessment of all financial, service and organizational risks to the
unit and to the University.
2. Common University Revenue Pools and Allocation Approaches used in RCM Budget Models
The allocation to revenue to the units that create that revenue is straightforward for some things, but more
complex for others. Metrics are needed to assign all categories of revenue that are easily tracked, accurately
captured, and jointly agreed upon.
Revenue Type
Undergraduate tuition
Attribution metrics
SCH, number of majors,
number of undergrad
degrees
Issues and Notes
Most often 60-80% on SCH, but almost
always with a head count basis; most often
uses average rate blended for resident/nonresident tuition to discourage “poaching” of
non-residents. Usually net tuition after
financial aid is taken off centrally
Graduate tuition
Number of majors, SCH, More heavily weighted to home of major,
number of degrees
up to 100%; some blended, some actual
tuition; most often gross tuition and units
responsible for managing remissions
Differential tuition above base
Unit of major or unit
Sometimes a share to units offering SCH
charging differential
outside unit of major that charges
differential, but not common
Professional tuition (above base) Unit of major or unit
Rare to share outside professional unit;
charging professional
sometimes total professional tuition
tuition
allocated, sometimes that above base
graduate tuition
State general funding
Held centrally for admin
Many places originally kept state funding as
and service costs or
support for central services; have moved to
distributed proportional to allocating it with tuition as state funding
tuition allocations
was so unstable; sometimes tiered to
program cost, sometimes not
State targeted funding
Most often to unit
Many of these at OSU, from SWPS, to
identified in the funding
Centers, to College things like ETIC. Most
authorization
build capacity and increase numbers of
things like students or research volume
Facilities and Admin (overhead) To unit (or units) in
Most commonly to units where direct costs
proportion to where the
incurred
direct costs are expended,
or allocated to places it is
reimbursed for
Student fees
To unit charging or to
These are usually pretty clear
unit for which it is
charged
Sales and Service
To unit providing the
These are usually pretty clear
service charged for
Gift and royalty income
To unit in establishing
These are usually pretty clear
language or patent
Miscellaneous (interest e.g.)
Various
Often held centrally or put in tuition type
pool
3. Metrics used to allocated service and support costs in OSU’s annual rebasing analysis
Overhead Unit
Summer Session
Cost Allocation Basis
Summer Session student
credit hours (pro rata
distribution)
Student Affairs
Total academic year student
credit hours (pro rata
distribution)
Athletics
Undergraduate academic
year student credit hours
(pro rata distribution)
Total Unclassified and
Classified employees (FTE)
Office of the
President
Office of the
Provost and
Academic Affairs
University
Advancement
Institutional
Management
70% Unclassified FTE
(Instructional, Research &
Professional), 30%
undergraduate student
credit
Total Unclassified and
Classified employees (FTE)
E&G Expenses (Grad Fee
Remissions allocated to
SWPS based on actual costs)
University
Libraries
48% Graduate student credit
hours, 32% Faculty FTE, 20%
Undergraduate student credit
hours
Facilities
Services
Assignable Square Footage
and Space Classification
Finance &
Admin
Total expenditures (all funds)
Graduate School
Graduate academic year
student credit hours (pro rata
distribution)
Information
Services
50% Unclassified, Classified
& Graduate Assistant
employees; 50% total
academic year student credit
hours
Rationale
Services benefit units offering summer
session courses. These same units receive
summer session revenues and related RAM
allocations based on student credit hours.
Services benefit students in instructional
programs. These same units receive
instructional revenues and related RAM
allocations based on student credit hours.
Subsidy is to support intercollegiate athletic
programs the primary purpose of which is
to enhance the undergraduate experience.
Time and effort is distributed across
institutional programs, and most efforts
serve the institution generally.
Time and effort is primarily devoted to
faculty matters in academic, research &
professional programs. In addition,
significant effort is focused on
undergraduate program issues.
Time and effort is distributed across
institutional programs, and most efforts
serve the institution generally.
Pooled expenses for instructional and other
E&G costs. Non-E&G programs pay these
costs directly. (Remissions directly support
SWPS research programs)
University Libraries' estimate of actual
utilization of programs and services.
Distributes facility operating and
maintenance costs based on occupancy,
utilization and space function. Includes
costs of common and shared (unassigned)
space.
Distributes costs based on utilization of
services. Financial, administrative,
accounting and purchasing functions are
provided across all fund types.
Services benefit graduate programs. These
same units receive instructional revenues
and related RAM allocations based on
graduate student credit hours.
Estimated allocation of investments in
systems and staffing to support academic,
research and administrative users.
Allocated costs are net