October 18, 2001-Vol33n7: The Budget Process at UB

The Budget Process at UB
Prepared by the Faculty Senate Budget Priorities Committee

The university's budget affects everyone in the university community, but the budgeting process often is misunderstood and communicated using terminology that is unfamiliar to those who do not deal with budget issues on a regular basis. The provost and the Faculty Senate Budget Priorities Committee believe that a clear understanding of the budget process at UB is important to faculty and staff. Faculty should have input into this process and understand how their decisions affect the university's resources. This report describes the budget process at UB.

Principles for Budget Management UB manages resources in the context of an all funds budget. This means all revenues, regardless of source, are identified and subsequently allocated. While a source of funding may have requirements and restrictions as to expenditures, the total aggregate revenues establish the overall university budget for the fiscal year.

The budget allocation process supports the academic values and mission of the university. When additional resources are available, they will be allocated to activities that improve and maintain high levels of quality and productivity. The level of quality and the productivity of activities will be evaluated through comparisons with programs in the best public research universities in the nation.

Campus expenditures for university-wide programs and services, such as merit scholarships, library acquisitions, athletics and technology, are funded from the all-funds budget revenues. University revenues are also used to support administrative services and academic programs. Academic program expenditures are the responsibility of the decanal units (College of Arts and Sciences, School of Social Work, etc.). Each decanal unit is responsible for how resources are allocated among its departments, programs and activities.

The Big Picture

The University receives revenues from the following sources to pay for its general expenditures:

Tuition—base-level funding for all areas of university activity
Fees—targeted for specific purposes by fee type
State tax support—base-level funding for all areas of university activity
Grants and contracts—targeted to specific purposes based on agency requirements
Sales and services—mainly student services in residence halls, food service and the bookstore
Endowment income and gifts—targeted or unrestricted, depending on the donor's wishes
Industry and foundations—for targeted activities based on project definition

University revenues primarily are used to pay for teaching and research, UB's main missions. Funds also provide for necessary student and administrative services that support the university's teaching and research activities. The first priority for the use of all funds is the academic mission of the university.

Academic functions currently use about two-thirds of the base budget, while administrative functions use one-third. There is nothing magic about this proportion. It is a result of previous allocations of budget resources through the years. The university seeks to keep administrative costs to a minimum, and no increase in the administrative budget is planned unless there is an increase in workload produced by increased academic functions. For example, additional facilities staff was needed in the Health Science Center for lab renovations to support the scientists we recently hired. We increased these staff members this year, but still decreased the total administrative budget by more than $700,000 by not immediately filling positions when people retired or resigned.

The provost is responsible for determining the allocation of resources to the decanal units, and for funding university-wide academic priorities. In this process, the provost works closely with the senior vice president, with advice from the deans, faculty, staff, students, business community and other stakeholders.

Decanal unit budgets provide funding for faculty and staff salaries and support, recruiting, supplies, selected information technology support for faculty and staff, travel and equipment, and program-specific requirements. Schools and departments are not responsible for such expenditures as general student services, utility costs, building maintenance and general administrative services.

The View in the Decanal Units

How are the decanal-unit budgets determined?

Budgeting throughout the university is approached from an incremental point of view. The focus is on changes in the overall level of resources needed and available for the coming year, and how these changes will be allocated among the various activities within the university, including the decanal units. Each decanal unit has a base budget that results from the prior year's allocation. If a decanal unit's base-budget allocation is not expended fully by the end of the fiscal year, the unit keeps the unexpended balance and carries it forward. However, if the unit doesn't maintain the level of enrollment on which the base is determined, the dean meets with the provost to ascertain whether this is a temporary or more long-term problem. If temporary, the base is not changed. If it is expected to be long-term, the base budget may be reduced. Sustained increases in enrollment will increase the unit's base budget.

Decanal units can generate more money—in addition to the base—for their coming year's budget in three ways:

Incremental expected enrollments. Each year the dean of the unit estimates, with the help of the Provost's Office, how many additional credit hours the unit plans to teach in the next academic year. Increased funding is received for planned increases in graduate or professional student enrollments, and for increases in transfer-student enrollments beyond previously funded levels. The campus receives the tuition from the increased enrollment, and half of the tuition is passed on to the decanal unit responsible for staffing the enrollment. Funding is greater for increases in professional, graduate and out-of-state credit hours. The Provost's Office uses the other half of incremental tuition to support academic programs, interdisciplinary centers and university-wide initiatives, such as merit scholarships.

If the actual incremental enrollment in the decanal unit exceeds the agreed-upon total, the unit's budget is not changed for that year. However, the budget for the following year is increased if the additional enrollment from the previous year is maintained and approved (through negotiations between the dean and the provost) as part of the unit's enrollment plan for the next fiscal year. If enrollment for the current year is greater than planned, the unit is expected to temporarily absorb the additional costs of this unplanned enrollment, or make any necessary reallocations of resources. This system encourages units to plan future enrollments carefully and accurately.

Indirect cost recovery. Grants reimburse faculty and units for direct research costs and also generate revenues to pay for indirect costs. Presently, the actual indirect costs incurred by all UB sponsored research are 78 percent of direct costs, while the negotiated rate between UB and government agencies is 54 percent of direct costs, after equipment costs are deducted. In actuality, UB only receives a very low 24 percent over all grants—because not all governmental agencies pay the negotiated rate and non-governmental agencies are not bound by it. Even when estimated very conservatively, actual expenditures in support of all research in 2000-2001, whether funded or not, exceeded indirect cost recovery from grants by about $3 million. However, the provost strongly encourages grant activity because this supports UB's mission to be a nationally ranked research university. Charging units for these deficits—the difference between actual and reimbursed indirect costs—would discourage such activity. Therefore, as a policy decision, the provost has decided to absorb this difference, plus, as an added incentive, 12 percent of recovered indirect costs will be allocated to the decanal units with sponsored research.
Performance funding. Performance funding is not available for 2001-02 due to the lack of available resources. When additional funds become available, they will be allocated to the decanal units based on the quality and productivity of their academic programs. The deans each have been asked to identify the 10 best public research schools of their type to serve as benchmarks for their programs, and to define measures of quality and productivity. Once these data are available, the Provost's Office will allocate any additional resources, above those needed for core priorities, based on performance. Funding to reward performance should be available within the next few years. Rewarding performance is a very high priority for the provost, and will be implemented as soon as is feasible.

The Provost's Role: Moving the University Forward

The Provost's Office retains revenues not allocated to the decanal units and uses these resources to fund programs that further the overall mission of the university. These programs include university-wide initiatives, such as merit scholarships, library acquisitions, technology, program enhancement and SUNY and state priority investment areas; non-academic support needs (e.g. campus cleanliness); academic support not provided through the allocation mechanisms noted above (e.g. central advising needs), and unplanned costs, such as recent utility cost increases.

The Role of Faculty and Staff

Members of the university community develop new academic programs, make curriculum changes and admissions decisions, and make many other decisions that have budget implications. Faculty and staff strongly influence the amount of resources the university has, and how those resources are spent. They also have the opportunity to influence the way resources are allocated to the campus and within the campus. Campus needs are made known through state and national lobbying efforts and by publicizing our accomplishments to the citizens of New York. On campus, faculty and staff can advise their deans on budget matters through their decanal-unit budget committees. The Faculty Senate Budget Priorities Committee meets monthly and engages in a consultative dialogue with Senior Vice President Robert Wagner and Provost Elizabeth D. Capaldi, who attend each meeting. Faculty and staff can communicate their budget concerns to this committee through their senate representatives.

Faculty and staff will be more effective in dealing with budget issues if they clearly understand the process by which resources are allocated. This report is an attempt to explain the budget process. A second installment will address the budget numbers themselves.