Inside Iowa State

Aug. 25, 2006

Take a look this fall at proposed budget model

by Anne Krapfl

Embrace a new budget model or stick with the current one?

After more than a year of draft models, discussion and modifications, the university community is in the home stretch to make a decision about a new budget model for Iowa State. Following presentations, simulated budget exercises and more discussion this fall, President Gregory Geoffroy expects to make a decision in January (see timeline below).

The Budget Model Development Committee submitted its final report, including a proposed budget model, to Geoffroy in early July. (The report is online at www.iastate.edu/~budgetmodel). That committee has been succeeded by a 16-member Budget Model Review and Implementation Committee, chaired by LAS associate dean Doug Epperson.

Summary

In a nutshell, the change proposed would replace the current model -- in which units receive incremental annual increases (or decreases, in years of budget cuts) that are a percentage of the previous year's allocations -- with a model that links revenues to the responsibilities and performance of major units, whether academic or administrative.

Those major units also would pay for campus space and services they use, such as payroll and utilities, and some "common good" services they may or may not use, such as general university classrooms or the Memorial Union.

Notably different features of the proposed model are: transparency (revenues, expenses and policy are publicly known); a greater reliance on data and formulas to determine costs; and the ability to carry over funds from year to year.

With the elimination of a budget planning/analysis position in the president's office and the transfer of budget oversight to the provost's office this summer, associate vice president for budget and planning Ellen Rasmussen has a lead role in the ongoing budget model discussions.

She said the model proposed in the final report is a blend of two earlier models, but also includes suggestions the committee received from other universities that have switched to a responsibility center model.

"The economic environment for higher ed is changing -- for everyone, not just Iowa State," Rasmussen said. "With reduced state appropriations, reduced federal funds available and increasing tuitions, we need a different philosophy and a different type of accountability that helps us align decisions with consequences, economically."

Who's covering me?

Here's a quick look at how key units would be funded under the proposed model:

Colleges: Tuition would be distributed based on formulas tied to the colleges students enroll in and the student credit hours colleges teach. A portion of the annual state appropriation would be added to the tuition pool that is distributed, based on undergraduate student credit hours. Private gifts would go to the program/function designated by the donor.

Auxiliary units (for example, residence, ISU Dining, athletics, University Book Store, Student Health Center, Vet Med clinics): They keep the revenue they generate and the private gifts they raise.

Special appropriation units (for example, Ag and Home Ec Experiment Station, Cooperative Extension, Leopold Center, ISU Research Park, IPRT): They keep special state and federal funds appropriated to them.

Student services: A proposed 25 percent of central student services would be funded from the state appropriation; the remaining 75 percent would be funded by the colleges in proportion to the size of their expense budgets.

Services (from payroll to IT support, public safety to groundskeeping): These would be paid for by the units that use them and computed based on a relevant and measurable variable, for example, square feet occupied, FTE employees, monthly consumption, etc.

Library: Costs would be covered by the colleges and special appropriation units in proportion to the size of their expense budgets.

Central administration (includes offices of the president, three VPs, vice provosts for research and extension): A portion of the state appropriation would fund these units.

Why subventions?

In the proposed model, still another portion of the state appropriation will flow to colleges, research administration and the special appropriation units as discretionary assistance, noted as "subventions." Subventions are a permanent feature of the model.

If the proposed budget model is implemented, in its first year, these amounts would be what's needed to balance expenses with revenues in those units, "to make them whole," Rasmussen said. In subsequent years, the size of that assistance would be determined by university leaders, not formulas, and reflect strategic decisions.

Keep collaboration

A concern voiced about other budget model options in the past year is that they discouraged collaboration -- in research or teaching -- across disciplines.

Rasmussen said the discussion needs to continue, but that the proposed model better addresses the concerns.

"What encourages faculty to work together?" she said. "They're at intersections of knowledge, and to be successful, they still need to build coalitions.

"Clearly, we need to make sure a new budget model supports that kind of environment."

She said no changes are proposed in how direct expenses in a sponsored program are handled.

The portion of sponsored funding known as indirect cost recovery will be shared, based on where the expenses occur. So, in addition to the principal investigator(s) and a central facilities improvement fund receiving dollars as they do now, indirect cost recovery funds also will go to the college or center-level unit(s) that: administer the grant, pay the principal investigator's salary and pay for the space where the research is done.

Timeline for a decision

July 1-Sept. 20: Seek broad feedback on the final report and proposed budget model and implementation plan for 2006-2009.

Sept. 30: Geoffroy makes a decision from three options: -- Ask the new Budget Model Review and Implementation Committee to refine the proposed model or its implementation plan. -- Reject the proposed model or its implementation plan. -- Submit the proposed budget model and implementation plan to the Faculty Senate and vice presidents for review and advice.

Oct. 15: Refinements to proposed budget model due if the first option (above) is chosen.

Dec. 20: Formal input from Faculty Senate and vice presidents due to Geoffroy if the third option (above) is chosen.

Mid-January 2007: Geoffroy makes final decision on adopting the new budget model.

Members of the university community are encouraged to learn more about the proposed budget model and provide ideas or questions that could make it better. Here's how:

Attend a campus forum hosted by the Budget Model Review and Implementation Committee:

• Aug. 29, 4-5 p.m., MU Campanile Room
• Sept.6, 12-1 p.m., MU Campanile Room
• Sept. 7, 12-1 p.m., MU Gallery (an open forum of the P&S Council).

Find the appropriate administrative channel in your college or vice president-level unit. During August and September, members of the implementation committee are holding one-on-one sessions with leaders in each of the units to explain the proposed model, how it would work in that unit and what changes are in store. Each of the units is expected to continue its own discussion.

E-mail your comments directly to the committee at: budgetmodel@iastate.edu.