The green at the University of Vermont. Photo by Daisy Benson/Flickr
The University of Vermont is about to implement a new budgeting system that links how much academic programs receive to how much revenue they generate.
The Incentive-Based Budgeting (IBB) system goes into place July 1 and seeks to tie a program’s future budget to its revenue production, rather than an increase or decrease to the previous year’s appropriation.
“Under the current system, the funding allocated to these units has primarily been based on what they had received the previous year,” said Richard H. Cate, vice president for finance and treasurer at the University of Vermont, on Monday. “IBB provides incentives for enhancing academic programs and making adjustments where necessary as the needs of students evolve over time.”
The new budget system — which ran parallel to the existing budget system this past year as a test — is aimed at strengthening academic programs while aligning the flow of dollars according to enrollment and other factors, UVM officials say.
“This is ultimately about securing a prosperous future as an academically excellent, top-tier research university,” said Provost and Senior Vice President David Rosowsky in an email. “IBB will provide the incentives that will ensure we will continue to innovate, create knowledge and provide access to student success.”
More than 240 members of the UVM community have been involved in the development and implementation of the system, Cate said.
The system will change the way money is allocated to the school’s academic departments, Cate said.
“Under the new system, the revenue coming into those academic units (to be called responsibility centers) is going to be based on the student credit hours that they are teaching,” as well as other determinants, Cate said. “If engineering is teaching more than education, then there is going to be more money moving in that direction.”
The goal is to increase the attention paid to enrollment and student retention, Cate said.
Every unit will be starting out “budget neutral” on July 1 to give departments time to transition to the new model, he added.
“In other words, they are getting the same amount they got last year, net of the planned across-the-board budget reductions that were not related to IBB,” Cate said. “Therefore, no unit is disadvantaged or advantaged on day one. It is in the out years that they will be affected by the algorithms/formulas that are outlined in the report.”
Denise J. Youngblood, president of United Academics, the faculty union at UVM said, union has not taken a position on IBB, in an email Wednesday.
“There are rumors swirling about what MIGHT happen, but there’s no EVIDENCE that anything has changed,” Youngblood wrote. (The emphases are her own.) “Speaking as a long-time UVM faculty member (NOT as president of UA), IBB has the potential to encourage competition among units for scarce research dollars and students that could be unhealthy for the university in long-term.”
Youngblood said the new budgeting system could lead to the commodification of the curriculum by discouraging investment in programs that are less “popular” with students, and therefore less profitable to the university.
Cate said there are two driving forces behind IBB — finances and the hope for more desirable offerings at UVM for students.
“There is a financial piece of this, but the hope is that it will also drive enhancements in academic quality,” he said.
UVM has raised tuition 3.4 percent for the coming fiscal year, Cate said. He said the university’s expense budget will increase by 2.2 percent because much of the new revenue is poured into financial aid for students.
Undergraduate financial aid (entirely grants) is expected to rise by about 8 percent to $120 million, in line with the university’s strategic objective of affordability and financial access, Cate said.
The university will supplement budgets via a revenue sharing mechanism called subvention, said Cate, “to deal with the fact that some schools and colleges need more support than they can initially generate, by way of the new IBB formulas, to continue their current activities.”
At the very least, academic units will now be seeing all the bills.
“What does the light bill look like? What does it cost to have these classrooms?” are questions they will be dealing with for the first time, Cate said. “In the past, it’s just been a central charge,” for utility and brick-and-mortar costs.
Cate said not all departments will have a positive net gain and “we have to have some activities that don’t make money.”
“There isn’t going to be some sort of mass elimination of programs. We are going to look at the whole portfolio, and make sure that it is positive when you put them all together,” he said.
<h4>IBB is not new</h4>
Some higher ed institutions have been using IBB for 30 years, said Cate. About a quarter of higher education institutions in the country are now using the budget system.
UVM President Tom Sullivan was used to the IBB system at the University of Minnesota, and he helped steer the UVM community “through a very thorough process,” which included a self-study on the budget system, Cate said.
As a response to the new system, proposals are already coming in for creating new programs.
One example: When the School of Business evaluated its part-time Master of Business Administration (MBA) program, which “wasn’t getting them what they wanted in terms of national reputation,” Cate said, they revamped the program into an MBA for entrepreneurship.
The school made the program full-time, and condensed into a three-semester, 12-month course of study.
“It’s been very successful in terms of attracting more people,” Cate said, and it has generated more revenue.
“(IBB) does drive people to think more about current needs than the needs of the past,” he said.
The post UVM launches new incentive-based budgeting plan appeared first on VTDigger.