The Decentralized Budget Model January, 2017 Fiscal Year 2016 - 2017 | 1
Agenda 1. Setting the Stage: An Overview of UCR’s Revenues & Expenditures 2. Context: Why Did the Budget Model Change? 3. New Budget Model: Development and Overview 4. Revenue for Schools and Colleges Overview • • Undergraduate Tuition • Graduate Tuition • Subvention • Facilities & Administrative Cost Recovery 5. Strategic Investment Fund 6. Service Providers, Cost Pools & Service Level Agreements 7. Space and Facilities 8. Other Considerations 9. Available Resources | 2
Setting the Stage: An Overview of UCR’s Revenues & Expenditures | 3
State funding to UC has been decreasing over time Per Student Average Expenditures for Education by Fund Source (2015-2016 Dollars) State Funding Tuition (Undergraduate) (Graduate) State General Funds UC General Funds Contracts and Grants Student Tuition & Fees Gifts & Endowments University Revenue Source: University of California “Straight Talk on Hot-Button Issues ” | 4 http://universityofcalifornia.edu/sites/default/files/Straight-Talk-Report-3-29-16.pdf
UCR Revenue Overview The major revenue streams at UC Riverside include State Support , Student Tuition and Other Fees , Contracts & Grants, and Auxiliary Enterprises. Source 2015-2016 Actuals % State Funds $237.6M 28% 24% Tuition ( Net of Scholarship Allowance)* $200.6M ** Other Student Fees $131M 16% Contract & Grants $108.9M 13% Gifts & Endowments $11.7M 1% Sales & Service $75.5M 9% Auxiliary Enterprises $74.7M 9% Other $975K 0% UCR Total $840.8M 100% * A required discount of revenue due to waivers and UC specific financial aid on student accounts (GASB 35) | 5 ** Amount includes Federal Student Aid Programs (Pell)
UCR Expenditures (by Budget Category) in FY15-16 By Budget Category (in millions) Academic Salaries, $194 , 26% 69% of expenses are Non-Salary Costs, $169 , 23% attributed to Salaries and Staff Salaries, $179 , 24% Benefits Financial Aid, $63 , 8% Benefits, $146 , 19% Total 2016 Expenses = $751M | 6
UCR Expenditures (by Function) in FY15-16 By Function (in millions) Academic, $277 , 37% Auxiliary and Self- Supporting, 51% of total spend is in $139 , 19% the Academic & Research Enterprise Financial Aid , Research, Only 22% of spend is in $63 , 8% $107 , 14% the support centers (Cost Pools) Student Infrastructure, Support, $54 , 7% $33 , 4% Central Admin*, Academic & $18 , 3% Research Support, Functional Admin**, $44 , 6% $16 , 2% Total 2016 Expenses = $751M *Central Admin includes Chancellor, Planning & Budget, International Affairs, etc. | 7 **Functional Admin includes Finance, HR, etc.
Context: Why did the budget model change? | 8
UCR’s budget redesign engagement included all campus constituents over a two year period Led by Deloitte | 9 Led by UCR
When asked to describe the budget model, an audience of faculty, staff and leadership said that the process was….. | 10
Here is what the fund allocation used to look like… | 11
The previous budget model… No College level budgets Very complex and to difficult to understand Created incentive for units to ask for as much as possible Decisions made only on increment not on the base Allocation decisions based on closed door negotiations and never announced publicly | 12
New Budget Model: Development and Overview | 13
When faculty & staff were asked to describe what came to mind for a future budget model… | 14
Budget redesign workgroups were established representing a wide cross-section of campus stakeholders BUDGET REDESIGN WORKGROUPS Assessed and …the previous resource allocation process Evaluated …national leading practices for resource Benchmarked allocation for higher education Created … a sample budget model … a plan to implement Developed the budget model | 15
Guiding principles were established for the budget model redesign with input from campus workgroups Ability for campus to understand flows of revenue 1 Transparent and use of resources 2 Tuition distributed based on performance (student Incentivized credit hours, majors, graduation rate) 3 Strategic Create Strategic Investment Fund 4 Reward entrepreneurial behavior by Risk Tolerant department/unit (e.g., expanding masters degrees) Costs decentralized to benefiting units (rent charge 5 Logical and utility charge) | 16
The new model categorizes all UCR Organizations as either Revenue Generators or Service Providers Service Providers Revenue Generators Grouped into one of four Generate revenue for Cost Pools campus • Infrastructure • Administration Include academic units • Student Support and self- Academic/ Research • supporting/auxiliary Support units | 17
Under the new model, Schools & Colleges have more control THE NEW MODEL IS: Devolves considerable autonomy to the Decentralized School & College levels Some funding follows directly from units’ Performance-Based success in achieving institutional priorities (e.g. Graduation Rates, Research) Workload Based Most tuition funding follows teaching loads | 18
Schools and Colleges have greater autonomy Schools & Colleges can now… • Graduate students in 4 years Grow their • Teach more students budgets (Credit hours & Majors) • Faculty • Staff Choose how to • TAs/Graduate Support spend revenue • New Programs • Infrastructure Tuition goes to Schools and Colleges as General Funds. Allocation to departments will be at the discretion of the Deans. | 19
With clear guiding principles, a more transparent funds flow was developed Revenue Sources Tuition & Fees Contracts & Grants Gifts Auxiliary State Appropriations Other Revenue Revenue Aux / Self-Supporting Academic Units Subvention & SIF Enterprises Recipients Infrastructure Cost Pools Administration Academic & Student Support Research Support Aux / Self-Supporting Academic Units Enterprises Central Subvention & SIF Support | 20
Revenue from the various sources now flows directly to the revenue generators Revenue Sources Revenue Sources Tuition & Fees Contracts & Grants Gifts Auxiliary State Appropriations Other Revenue Revenue Aux / Self-Supporting Subvention & SIF Academic Units Recipients Enterprises Academic Units Auxiliary / Self-Supporting Housing/Dining BCOE SPP Athletics UCR Card VPUE - English CHASS UNEX Faculty Housing Writing CNAS/OR Palm Desert HUB GSOE VPUE - Summer Bookstore Health Center SOBA Session Child Dev Ctr Rec Center SOM TAPS Academic Units and Auxiliary Units generate revenue through several revenue sources such as Contracts & Grants, Tuition, Gifts, Sales & Services, and Auxiliary. | 21
Service providers generate indirect expenses which are allocated to Colleges & Self-Supporting Units following a step-down methodology Infrastructure Cost Pools Administration Academic & Student Support Research Support Aux / Self-Supporting Academic Units Enterprises Academic & Research Infrastructure Administration Student Support Support BAS – HR Academic Senate BAS – Business & Financial Library RED – Facilities Services Graduate Division Services Research & Econ Dev BAS – Police / ERM Student Affairs BAS – General Administration Advancement C&C CEVC/P&B VP Units: VPUE, VPIA, Academic Personnel | 22
In the transition process, FY15-16 was established as a budget ‘Hold Harmless’ year Hypothetical Sample: School X ( Revenue Generator) Old Model New Model An Organization’s budget before and after the new Provost Budget $58 M $0 budget model was held the same in the ‘Hold Total Tuition Revenue $0 $38 M Harmless’ year via Direct Revenue Open Open subvention in FY15-16 Direct Expenses $54 M $54 M Subvention : a block Indirect Expenses $0 $24 M allocation used in order to Net ensure that an Org’s budget $4 M $-40 M remained the same during the Subvention $0 $44 M transition to the new budget model Carry Forward $4 M $4 M | 23
Revenue for Schools & Colleges: Overview | 24
Schools & Colleges Revenue Sources Tuition Undergraduate Tuition Graduate Tuition Other Direct Revenue General Funds (Subvention) Facilities & Administration Student Fees* Sales & Service/ Clinical Contracts & Grants Gifts *Professional Degree Supplemental Tuition, Course Material Fees, Self-Supporting Degree Fees | 25
Schools & Colleges Revenue Source Distribution Portion of Schools and Colleges Total Revenue* 25% 50% 0% Tuition 1. Undergraduate Tuition 2. Graduate Tuition Direct Revenue 3. General Funds (Subvention) 4. Facilities & Administration Student Fees Sales & Services / Clinical Contracts & Grants Gifts *Summer Session not included | 26 1 st Quartile 3 rd Quartile Min Median Max
Revenue for Schools & Colleges: 1. Undergraduate Tuition | 27
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