On November 7th Provost Christine Riordan and Eric Monday, Executive Vice President for Finance and Administration, sent a campus-wide email to update us on the implementation of the new financial model for UK. The transition to the new financial budget model has three phases:
- design (August 2011-August 2013),
- implementation (September 2013-June 2015), and
- monitoring (July 2015 on).
This fall, the implementation training has accompanied sessions with academic leaders that have helped to make the budget model more response to UK’s needs. Over the next year, the model implementation team will be working closely with deans and colleges to understand the model and how it can help facilitate and enhance our work together. They hope to develop a financial model that is more transparent about how resources are allocated, and a financial model that returns more of those dollars to the colleges and areas that create them in the first place. By January the FY2015 budget development should begin and be in place by July 1, 2014.
The model relies on a framework that clearly defines the various academic and administrative units at UK as well as some core assumptions. The framework defines UK units as split into three parts:
- Colleges and other Revenue Generating Units (RGUs)
- Support and Resource Units – this is where the Division of Undergraduate Education (UGE) has been placed for the purposes of the financial model
- Auxiliaries and Self-Supporting Units
A key assumption is that primarily colleges should be given credit for teaching students, regardless of where the student is enrolled. This will be reflected through the new allocation categories for the distribution of tuition (see flowchart from page 16 of the Training slides): 75% to the instructor’s home college and 25% to the college of the student’s major.
Along with all other units on campus, Undergraduate Education is learning more our role in new values-based budget model. The new model recognizes the important role that Undergraduate Education plays in Academic Support, as a campus partner for all undergraduate colleges in promoting student success. The primary impact of the changes in budgeting policies and procedures will be to make UGE’s programs and units more transparently accountable. We will need to show clearly and concisely how what we do helps the colleges and the campus as a whole achieve our mutual goals in areas such as recruiting excellent students, assisting students achieve academic and career goals, and the institution reach higher levels of retention and graduation. Performance metrics and benchmarks will become an important way that we demonstrate our contribution.
As an Academic Support unit, the Division of Undergraduate Education does not directly receive an allocation of tuition revenues for courses taught via DSP, EXP, HON, HMN, UKC, UK – or for students affiliated with Undergraduate Studies (see below on the allocated expenses for how UGE is funded). However, the model increases the relative value of a student credit hour associated with UGE-related courses, especially incentivizing the colleges to offer their faculty to teach in the Honors Program or to mentor students choosing to enroll in EXP courses. The student credit hours (SCHs) generated from the HON courses will count for six times the value of a regular SCH – the incentive is meant to replace the potential for the faculty in any department to teach large introductory courses that produce several times the SCH of a 20-student HON seminar.
Another core assumption is that state appropriations will be used to support the recruitment, retention and graduation of Kentucky students and help leverage the growth of UK’s research efforts. Some financial resources will remain under the President and his senior leadership team to use in University-wide priorities and for strategic investments – a Special Investment Fund (SIF). Colleges will be allowed to keep more of what they earn from sponsored grants (facilities and administrative costs aka indirect costs or overhead), and they will be paying their fair share of allocated expenses for the costs of running the University. These costs are called “allocated expenses” and colleges will pay for the services coming from the Support and Resource Units (see pp. 33-37 in the Training slides).
The Division of Undergraduate Education’s units fit within this framework under “Academic Support.” The colleges will pay to fund the net general fund expenses of the academic support units based on their percentage share of total earned student credit hours at the University. For example, if a college is 10% of total earned SCHs at the University, they would be allocated 10% of the net general fund expenses of the academic support units. It also means that all the colleges will support directly student financial aid (for undergraduates and graduate students) and, as a result, have a clearer understanding about the resources invested in certain students for strategic purposes.
Some financial resources will remain under the President and his senior leadership team (a Strategic Investment Fund or SIF) to use for University-wide priorities and to make strategic investments in key initiatives or collaborative efforts between and among colleges. They might also apply for additional support from the President’s “Support and Resource Unit Fund” – 50% of which is to be reserved for re-investment in the Support and Resource units. It would make sense for the Division of Undergraduate Education to partner with the colleges to apply for financial support from the Strategic Initiatives Fund (SIF) as they help coordinate collaboration between colleges, start up new programs or engender strategic campus investments.
This means for the Division of Undergraduate Education that we must operate in a fully transparent and accountable mode, readily offering up how these new expenses for the colleges have resulted in a particular strategic goal the colleges have identified as important. Overall, the state appropriations for the colleges incentivize not only funded research efforts but also recruitment/retention of Kentucky students and the completion of degrees by Kentucky students. This means not just improving the retention and graduation rates of our native cohorts, but also producing degrees from students who transfer in to UK (or stop out and return several years later).
The President and Provost are developing a governance process that will give the colleges “a voice in the conversation about service unit budgets” (see p. 4 of the FAQs training document). This does not mean, however, that changes will occur on a monthly or weekly basis based on an actual financial situation changing. Instead, the model insures that “numbers will change only as we make informed, collaborative and deliberate decisions to change the assumptions upon which the new model is built (FAQs: 7).” How we communicate the Division’s added value to the colleges and other revenue generating units (and how regularly we send out these communications) is crucial moving forward in this new model.