New Budget Model

1. New Budget Model Spring 2007 Update

2. Guiding Principles • The institution’s values as expressed in the academic plan should inform and drive budgetary decisions. • While the new budget model will link resources with revenue generating activity and total costs, it is simply a tool for the allocation of limited resources in a way that serves and supports the academic mission of the University. • Different programs require different levels of resources and resource allocation decisions must be made to maximize academic quality, while maintaining fiscal responsibility.

3. Academic Quality Indicators • Number of Tenure-Track Faculty • Tenure-Track Faculty Credit Hour Production • Research and Creative Activity Production • Minimal Course Duplication • Controlling Section Size • Controlling Grade Inflation • Incoming Student Profile • Program Accreditation • Support for Honors Programs • Interdisciplinary Programs

4. Elements of the Budget Model • Revenue Attribution • State Investment in Instruction (SII) • Undergraduate Tuition • Non-Resident Surcharge • Graduate Tuition & Non-Resident Surcharge • Success Challenge • Indirect Cost Recovery • Headcount Majors • General Fee

5. Elements of the Budget Model • Cost Allocation • Direct Budgets • Undergraduate Scholarships • Graduate Fee Waivers • Employee Fee Waivers • Space Costs (Custodial, Maintenance, Utilities) • Enrollment-related (Registrar, Fin Aid, Admissions) • Overheads (Library, Research, Administration, Supported Academic Units)

6. New Taxonomy = 26 Models Groupings of disciplines with similar costs - Arts / Humanities (AH), Business / Education / Social Science (BES), Science / Technology / Engineering / Math / Medicine (STEMM) 13 Undergraduate 9 Masters 2 Doctoral 2 Medical State Share of Instruction (SII)

7. Model Cost SII Tuition AH1 $6,993 $2,132 $4,862 AH2 $9,108 $2,776 $6,336 AH3 $11,760 $3,585 $8,176 AH4 $17,121 $5,219 $11,902 AH5 $26,529 $10,108 $16,421 AH6 $32,868 $12,524 $20,344 State Share of Instruction (SII) Example Model Costs

8. Uniform Share 31% on Undergraduate 38% of cost of Graduate Costs Additional STEMM weighting The remainder of the cost would be obtained through tuition, but tuition is not differential depending on discipline cost For some disciplines we collect more from tuition and subsidy than the total cost while for others we do not collect enough to cover costs State Share of Instruction (SII) Key Concepts

9. Model Cost SII Tuition DOC1 $30,230 $14,832 $15,397 DOC2 $33,265 $22,249 $11,016 State Share of Instruction (SII) Doctoral Subsidy

10. Doctoral Subsidy Revenue is capped - $11,431,753 for Ohio University Our FTE target is 791 FTE (in Doc 1 terms) As long as you maintain 85% of this target, the full revenue is received. We have 771 FTE or 97% of our target. Therefore, if we maintain at least 673 FTE our full revenue will be received If we add more FTE at the Doctoral level, we will not receive any additional revenue. State Share of Instruction (SII) Doctoral Subsidy Revenue

11. Complete SII Model List

12. State Share of Instruction (SII) Issues to Understand • This is a closed system – fixed appropriation shared across all institutions. • Growth in FTE may or may not result in additional revenue – depends on what everyone else does. • STEMM weighting is supposed to be phased out over time. • Doctoral subsidy is capped – more FTE simply fragments the same revenue across more units.

13. State Share of Instruction (SII) • $75,065,948 is earned by credit hour (FTE) production – by formula • $55,023,722 Undergraduate • $20,042,226 Graduate • In addition • $11,431,753 Doctoral • $10,653,810 Medical • Next Step: • Determine FTEs (OH Residents only) produced by each college by each model

14. SII Allocations to Colleges Based on 3-Year Eligible (OH) FTE Average

15. SII Allocations to Colleges Based on 3-Year Eligible (OH) FTE Average

16. SII Allocations to Colleges Doctoral Subsidy Allocation Based on 3-Year Eligible FTE Average

17. Tuition Allocation • Since tuition is flat while the costs vary by discipline, the tuition will be attributed on the basis of weights. • New set of weights based on statewide average (6-year) model costs. • BES1=Undergrad Base • BES5 = Grad Base

18. Tuition Allocation Financial Aid • Undergraduate student financial aid will be deducted “off-the-top” so all units share proportionally in this tuition reduction. • Avoids creating a perverse incentive for units to turn away students because they have financial need. • Graduate fee waiving is treated differently across programs. Waivers will be “charged” to the unit (academic support as well as academic colleges) generating the stipend • Puts the decision to waive tuition with the unit.

19. Tuition Allocation Non-Resident Surcharge • Non-Resident Surcharge is conceptually linked to making up for subsidy missing from out-of-state students. • Since weighting for subsidy and tuition differ within the STEMM models, undergraduate non-resident surcharge income will be allocated to the units using the subsidy weights. • At the graduate level, there are very few non-residents since nearly all graduate students apply for residency. This means they bring in subsidy. • Almost all non-resident surcharges are waived for graduate students so graduate non-resident surcharge income will simply be lumped in with tuition.

20. Tuition Allocation Revenues • Financial aid removed proportionally from the instructional fee (tuition) and non-resident fee at the undergraduate level. • At the graduate level, instructional and non-resident fees are lumped together. • Note that ultimately only about 14% of graduate tuition is actually collected.

21. Tuition Allocation As Earned Based on 3-Year All FTE Average Note: There are some small allocations to HTC, INST and OST not shown here

22. Tuition Allocation Using Weighted SCH Change = variation from As-Earned Based on 3-Year All FTE Average Note: There are some small allocations to HTC, INST and OST not shown here

23. Non-Resident Surcharge Allocation Undergraduate Only – Using Subsidy Weights Weighting Effect = variation from As-Earned Based on 3-Year InEligible (Non-OH) FTE Average Note: There are some small allocations to HTC, INST and OST not shown here

24. Success Challenge Allocation Earned by a combination of graduating At-Risk students and graduating students in four years.

25. Indirect Cost Recovery • This is the overhead charged to some types of grants. • Currently held centrally and used to support research startup, research incentive and research investment programs run by the VP Research. • This is somewhat variable since it depends on which grants are funded and is earned as expenditures are made on the grant. • These funds are currently split among the VP Research, Principle Investigators, Departments/Centers, and Colleges. Need to determine if anything should be pooled centrally to support inter-disciplinary efforts. This shows the effect of complete distribution to units.

26. Tuition Distribution by Head Count • Costs associated with recruiting, advising and retaining majors are not reflected in number of student credit hours generated by a unit. • Many of these systems distribute tuition revenue partially on credit hours generated and partially on the number of headcount majors. • This reflects the additional costs to units housing the major of a student and provides incentive to attract and retain majors as well as offer service courses. • Current weighting will be 85% on SCH and 15% on Heads

27. Combined Revenue Allocation

28. General Fee • General Fee revenues and expenditures are being separately tracked and budgeted. • Increases in costs of supported services (raises, minimum wage, benefits, etc) as well as changes in services offered will drive annual changes in the General Fee. • Enrollment fluctuations will also require adjustments in funding levels for these activities. • In addition to these direct costs, costs associated with space, waivers, etc will also be associated.

29. Cost Allocation - Space • There is currently over $31 million needed to operate our physical facilities – Plant Operations and Maintenance (POM) • Custodial - $9.7 M • Maintenance – $9.3 M • Utilities – $10.8 M • With all revenues now allocated to the academic units, these POM costs would be “charged” to these units - possibily in proportion to the percentage of space they control • These are NOT costs associated with building and renovating space - separate Capital budget

30. Cost Allocation - Space • All space is coded by type and associated with a department • All Non-assignable square footage is removed to produce Net Assignable Square Feet (NASF) • 4,930,590 total square feet • 3,733,395 NASF • Additional reductions to NASF could be made for space not receiving custodial or maintenance service (hangers, garages, facility shops, HDL, Ridges, Etc). Just a partial list

31. Cost Allocation - Space Outstanding Issues • Part of the POM (custodial and maintenance) costs are shared with the Residence & Dining Hall (R&DH) Auxiliary and there are direct payments from R&DH for facilities personnel as part of their overhead. R&DH Utilities are separate. The impact of R&DH space on POM costs will have to be separated. • 100% of athletic grounds costs are attributed to the general fee. • Still some debate about how to deal with units required to maintain relatively large amounts of space to support the university research goals. • Still some debate about whether the quality of space should be considered when allocating space costs. • Should there be another allocation factor instead of or in addition to NASF?

32. Costs – Employee Fee Waivers • Treated as a benefit like health care as opposed to “charging” units for actual use. • $6,536,000 annual cost • 3855 eligible employees • ~$1700 per employee Some minor units are omitted from this display.

33. Cost – Graduate Fee Waivers • Graduate Fee Waivers will be matched with the source of the stipend generating the waiver: • College controlled waivers • Special Summer • Non-Resident • Research Waivers • Of the $31 million in graduate tuition, $23 million is not collected – i.e. waived

34. Cost – Graduate Fee Waivers • About $10 M is allocated to colleges and therefore controlled • Research Waivers vary depending on grants that hit • Non-Resident varies based on international enrollments • Summer is nearly 100% waived This is an approximation based on 2005-6 waivers. Under the model, waivers could be a direct budget cost to an academic support unit or could be a direct deduction from graduate tuition attributed to an academic unit.

35. Costs associated with college budgets, technology fees, space, employee waivers and graduate fee waivers can be directly associated with college activities. All the rest of the costs associated with the general fund budget would also need to be funded through the revenues associated with the academic colleges. This includes enrollment-related functions, the library, the VP Research and general administrative costs. Today, the tuition and subsidy revenue generated by the colleges supports the operation of those colleges, all POM costs and all these overhead costs. Since all the revenue has now be associated with the colleges, these overhead costs also need to be divided up among the colleges. That division is also under debate. College Direct Costs vs. Overhead

36. Enrollment-Driven Overhead Costs • 4.6M in costs for the Registrar, Admissions and Financial Aid (budget, space, fee waivers, etc) could be allocated to the colleges based on the number of undergraduate majors in that college. • 1.2M in costs to operate graduate programs (OGSS budget, space, waivers, etc) could be allocated to the colleges based on the number of graduate majors in that college.

37. Library and Research Overhead Costs • Library costs are $12.4M (budget, space, waivers, etc) • VP Research costs are $6M (budget, space, waivers, etc) • Includes Eminent Scholars, Applied Ethics Institute, Innovation Center and Animal Care in addition to Research Compliance, Grant Writing and Office of Research and Sponsored programs. • Both could be allocated to academic units in proportion to their percentage of the total academic revenue (tuition, subsidy, IDC). • About 25% of the VPR costs could be allocated in proportion to grant activity – tradeoff between simplicity and accuracy. Incentive for units not utilizing these services would be for them to start doing so.

38. Administrative Overhead Costs • Administrative costs include President, Provost, VP Finance/Administration, Advancement, and IT. • $46.6M cost (budget, space, waivers, etc) represents a 20% “tax rate” on $236.3M in academic unit revenues – comparable to the OSU 19% rate. • These costs could be allocated to academic units in proportion to their percentage of the total academic revenue (comprised of tuition, subsidy, IDC).

39. General Fee – Total Picture • With allocations for space (if done on NASF) and waivers, we could identify general fee related expenditures equal to the amount collected. • This will always be an inexact calculation. • Under cultural activities we could add part of WOUB • Splitting units between general and instructional fee sources is more accurate but creates two funding systems with two budget processes. There is a tradeoff between simplicity and accuracy. • In general, there are more than enough services offered to justify the current level of general fee. • Connecting these major areas to this funding stream will help facilitate a strategic use the fee.

40. Outstanding Issues • Should part of VP Research costs be allocated in proportion to grant activity – problem with Grant Accounting being mixed in with VP Finance & Admin? • What to do with mixed service / academic areas like Wellworks, Child Development Center, Voinovich Center, WOUB. Could be shared across colleges in proportion to revenue like other overheads or allocated in some other proportion? • Should supported academic units (Honors Tutorial College and International Studies be shared across colleges in proportion to revenue like other overheads or allocated in some other proportion? • Should both need-based and merit scholarships be shared across the board or should merit scholarships be linked to programs differentially?

41. Units “Outside” the Model • Residence and Dining Hall (R&DH), University Outreach and Regional Campuses (UORC) Parking Services and Osteopathic Medicine pay overheads into the Athens General Fund Budget. • These overhead rates need to be reviewed in relationship to the Budget Model – perhaps using a new overhead cost study to determine the impact of each of these units on various parts of the Athens operation (facilities, library, administration, enrollment services, etc) • Should subsidy and tuition associated with LifeLong Learning continue to be allocated directly to that unit? • The distribution of tuition and subsidy from Resource Distribution Programs (regional graduate programs) needs to be reviewed to determine relative contributions from UORC and Academic Colleges and their roles in the programs.