Inside Iowa State

May 17, 2007

Simulation year will start three-phased budget model implementation

by Anne Krapfl

It's that time of year when the university's budget builders are working long days to finalize Iowa State's budget for the fiscal year that begins July 1. But that's not the only budget-related project.

On the heels of President Gregory Geoffroy's decision this winter to implement a new budget model for the university, work continues full steam to implement the new model campus-wide just over a year from now.

The Budget Model Review and Implementation Committee (BMRIC), the Geoffroy-appointed team that steered a seven-month study of the proposed model last summer and fall, issued its final report May 1. That group officially has been disbanded. Its report is online.

In this Q&A, Inside talks with associate vice president for budget and planning Ellen Rasmussen for a progress report on the implementation. Rasmussen was a BMRIC member and now facilitates the Leadership and Transition Team, which is overseeing broad university issues and processes affected by a new model.

What new information is in BMRIC's final report?

The report is one clear description of the new budget model, or Resource Management Model. It pulls together elements of BMRIC's October 2006 and January 2007 reports. A significant change in the May report is that it extends the implementation timeline by one year and clarifies each year's process.

What does the revised timeline look like?

Here's a short summary of each of the next three budget years:

• FY2008, the "simulation year": The university continues to use the current model for the fiscal year that begins July 1, 2007. Budget staff in the provost office, led by Dave Biedenbach, will conduct an offline simulation of the FY08 numbers with the new Resource Management Model to test the processes and procedures that currently are being developed to support it. Throughout the year, unit administrators will receive reports on the results of this simulation.
• FY2009, the "base year": The university uses the new Resource Management Model for the fiscal year that begins July 1, 2008. That budget-building process actually will begin this fall, starting with expense budgets first. Next, units will project the revenue side of their budgets, which will include their share of the Resource Management Fund. This fund essentially is the mechanism for distributing state-appropriated dollars to units of the university, and it will align each unit's revenues with its expenses. This "base" year sets the base level of state support for each budgetary unit under the new model.
• FY2010, the "first year": The university fully implements the Resource Management Model for the fiscal year that begins July 1, 2009. The process uses the FY09 budget as a starting point and will be guided by recommendations from the various budget advisory committees. Units manage their own revenues and expenses. In this year, the portion of the Resource Management Fund that units actually receive may differ from the base year, due to strategic decisions by the president and executive vice president.

Why was the implementation process extended a year?

We added a simulation year to the timeline to see how the model would function -- without budgetary consequences to the units. In the second year, the new budget model is applied -- with a big safety net under it to help reduce deviations in revenues or expenses that are not controllable by unit administrators. In the third year, university units will be accountable for their own revenues and expenses and we see how we do as a university. If there are any university-wide fluctuations in revenues and expenses that year, the central administration could step in again to manage any funding shortfalls centrally.

Earlier this spring, we heard about two teams that will guide the implementation process. What kinds of tasks are those groups doing currently?

The Leadership and Transition Team is coordinating development of the six budget advisory teams in the new model, a process that should be done by June 1. One of those, the University Budget Advisory Committee, met for the first time in April and will meet several times this summer. The Leadership and Transition Team also is developing operating principles and guidelines for those advisory committees, and will deal with significant implementation issues as they are identified.

The Operations Team is dealing with the nuts and bolts of implementing the new budget model. They're the group moving it from concept to reality, which means they also are the control point to insure the timeline for implementation stays on target over the next three years. The charge of this team is to change university financial policies procedures and modify the university's accounting system to support the new model. They're also developing a centralized "data warehouse" for all the data that is needed to support the model, and establishing reporting tools that will make it much easier for users across the university to access and analyze the data.

What is the consultant's role in the process right now?

Iowa State has a contract with the McLean, Va.-based consulting firm BearingPoint through June 2008. David Maddox, who is representing that firm, has expertise both in higher education budgeting and in institutional change. As an independent "outsider," he will help assess receptivity to change and recommend strategies that will help ensure a smooth implementation process. As a starting point, during June and July, he will meet with constituent groups on campus, identify their concerns and, in August, report his findings to the provost academic council.

We've heard all along that, to be successful, this model would require the authority to carry over unused funds from one fiscal year to the next -- which is quite a change from the current practice. Has that been accomplished?

Yes. The education appropriations bill approved this spring includes a provision that, as an institution, we can carry forward unspent tuition dollars. This will be a significant change in our financial management practices. It will allow us to plan for multiple budget cycles, and it provides a buffer against unexpected revenue fluctuations.

Where can I get more information about the new model?

All budget model development reports, a chronology of the budget model development process and related articles are online. In the alphabetical index, go to " Budget Model Development."

In this Q&A, Inside talks with associate vice president for budget and planning Ellen Rasmussen for a progress report on the implementation of the new budget model.