Update from the Budget Model Development Committee
May 03, 2006
Print version of this report
The purpose of this update is to brief the university community on the
progress made by the committee since the release of its third report in
March, to describe the work the committee will engage in this summer,
and to assure the university community of its role in the review process
that will begin when the academic year commences next fall.
The third report:
- Included two alternate budget models as well as a description of the
current budget model to provide a point of comparison,
- Introduced Huron Consulting and described the assistance they would
provide to the process,
- Identified key issues and challenges being addressed by the committee,
and
- Recommended that the timeline for development, review, and implementation
of a new budget model for the university be extended for an additional
year.
In the six weeks since the third report was issued, the committee
has:
- Developed prototypes for both alternative models under consideration and
a simple tool that allows colleges to simulate scenarios about enrollments
and other revenues,
- Identified long-term data needs that will be required regardless of the
model recommended and worked with various data stewards and information
technology managers to begin planning for these needs, and
- Worked to resolve the key issues and challenges provided in the third
report by tasking subgroups to develop options for addressing them.
The 2 1/2 day visit by James Kemp and John Curry from Huron Consulting
provided an opportunity for many constituent groups and the full committee
to discuss the benefits of more responsibility-oriented resource allocation
models and the issues that many institutions face as they contemplate such a
transition. Their insights and observations have prompted the committee to
work to finalize the conceptual model as soon as possible, to further
develop the scenario simulation tool, to focus more attention on governance,
process change and infrastructure development, and to develop a work plan
that will result in a recommendation to the President on June 30 and a
university review process for fall semester.
Context and reason for a new budget model:
Iowa State University faces a turbulent external environment:
- Demographic trends presage declines in the number of students graduating
from high school resulting in greater competition among universities
nationwide, if not globally.
- The university's ability to generate new revenue from tuition rate
increases is increasingly constrained by this competitive enrollment
situation and by public policy considerations outside of the university's
control.
- The portion of the university's general fund comprised of state
appropriations has dropped 15% in the last five years and is growing more
slowly than the rate of inflation thus losing real purchasing power.
- Entitlement programs are consuming an increasing portion of the federal
budget, leaving federal financial aid and research sponsorship in
jeopardy.
The inevitability of these macro trends and the risk of a "business as
usual" approach form the context in which a new approach to budgeting is
being proposed for Iowa State. These trends are important reasons why
President Geoffroy has asked the Committee to propose a new approach to
budgeting that is more flexible and responsive to external conditions by
shifting from a centralized, top-down approach to one that empowers
decision-makers throughout the university to set academic strategies within
their colleges and departments, and to fund initiatives directly with
revenues they generate. The assumption underlying this strategy is that
decisions made by individuals closer to teaching, research, and outreach
efforts such as deans, department chairs, and unit leaders will be better
aligned with academic strategies and market opportunities and demands than
will decisions made formulaically or at the margin by a central
authority.
While a new budget model will not "fix" the trends, it will provide
better means of navigation by:
- linking revenue generation and revenue distribution,
- linking decision making with resource implications,
- focusing on the best use of all revenue sources rather than just the
general fund,
- more automatically moving resources among units as a reflection of
changes in activity and consumption of services,
- allowing funds to be accumulated and carried over the fiscal year for
strategic expenditures and to manage revenue fluctuations,
- making budget decisions and priorities more transparent, and
- providing a regular review of expenditures and service costs.
By June 30 the Budget Model Development Committee will provide a report
to the President that:
Recommends a single budget model with descriptions of the structure of
authority and accountability, the decision making process that supports
budget development, and the method of distributing revenues and expenses.
The report will describe a mature, fully implemented budget model
recognizing that many interim steps will be necessary to achieve the final
goal. And, not all of the details will be worked out in the report.
For example, the report might recommend that expenses for utilities and
custodial services be distributed to a defined set of organization units
with the goal of aligning the cost of space occupancy with the decisions on
how a given area within a building will be used. However, the precise method
for calculating these costs and the basis for distributing the costs will
not be included but rather developed as the model evolves from
recommendation to implementation.
- Suggests advisory and regulatory groups that will be needed to support
the new model including a brief description of each group's role, reporting
relationship, proposed membership, and member selection process. The report
will also address possible roles for existing groups that participate in
budget and resource allocation processes.
Describes data and technical processes needed to implement the
recommended budget model, the work required to meet these needs, and
recommends a manageable level of complexity.
Continuing the utilities and custodial example from above, it will be
necessary to identify what actual cost information is available, e.g., is
cost information for individual utilities (electricity, cooling, heat,
water, sewer) available at the building level and should the average cost of
custodial services be used to distribute costs, rather than creating
different costs per square foot because of the seniority of individual
custodians? Some space is much more expensive to operate than others. Should
that be reflected when costs are distributed or should averages be
used?
- Suggests a review process for the conceptual model that will engage the
campus in the review and that will provide input to the President to inform
his final decision on whether to implement a new budget model.
During the summer, and in preparation for the fall review process, the
Budget Model Development Committee will:
- Continue to run scenarios to further expand the knowledge base of how the
model functions in a wide variety of situations. Once actual data is final
for FY06, two-year simulations can be constructed, which will further
enhance understanding of the model's functionality.
- Develop the mechanisms that achieve the conceptual goals of some aspects
of the model, e.g. the distribution of space costs example from above. Form
or expand working groups that include individuals with a solid understanding
of how current processes function.
- Further define the process for review and consultation about the proposed
conceptual model that will occur in the fall. A series of dialogues and
forums will be developed with various constituent groups.
- Engage individual college deans in discussions that allow them to begin
to incorporate a new method for resource allocation into the leadership of
their colleges. The scenario simulation tool currently under development
will be shared and working sessions scheduled to familiarize college
personnel with the proposed model.
- Continue to identify changes needed to data bases and administrative
systems.
- Continue to advance the need for carryover authority with the Board of
Regents.
Committee members:
Mark Chidister, Mike Crum, Rick Dark, Doug Epperson, Todd Holcomb, Kevin
Kane, Mark Kushner, Johnny Pickett, Ellen Rasmussen, Darin Wohlgemuth
Committee web site:
www.iastate.edu/~budgetmodel/
