UNL Budget Redesign Campus Forum 1

College of Business Author

07/23/2019 Added

108 Plays

Description

Vice Chancellor for Business & Finance, Bill Nunez, and Budget Redesign Steering Committee Co-Chair, Dr. Kathy Farrell, Dean College of Business, give an overview of the campus’s budget redesign project, review progress made to date, explain the various components of the model, and review the timeline.

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[00:00:04.309](upbeat music)
[00:00:06.690]Thank you for takin' the time
[00:00:08.050]to become engaged and educated
[00:00:10.060]about the University of Nebraska-Lincoln's budget redesign.
[00:00:13.354]Part of the implementation process includes
[00:00:16.349]making certain the campus community has the opportunity
[00:00:19.695]to provide feedback.
[00:00:21.392]I encourage each of you to ask questions and to give input
[00:00:25.252]following this presentation today.
[00:00:28.022]Again, thank you for your participation in what,
[00:00:31.271]as I said at the State of the University address in January,
[00:00:34.682]to be one of the highest short-term priorities
[00:00:38.010]for our great university.
[00:00:39.585]Thank you,
[00:00:40.418]and go Big Red.
[00:00:42.115](uplifting music)
[00:00:47.002]Thanks for ya'll being here today.
[00:00:48.490]It's great to see so many faces
[00:00:49.670]around the university present.
[00:00:51.248]My job is pretty straightforward today:
[00:00:53.373]to give you a little bit of the background,
[00:00:54.940]some foundationary concepts about university budgeting
[00:00:58.400]and how we got here,
[00:00:59.670]and our next steps going forward.
[00:01:01.422]Just a little bit of history.
[00:01:03.400]In late 2016,
[00:01:04.810]Chancellor Green outlined his strategic planning task force
[00:01:07.456]and the initiatives set forth
[00:01:09.514]for the planning of the university going forward
[00:01:11.475]in the next few years.
[00:01:14.157]One of the task forces created was for budget model
[00:01:17.350]and to explore budget models across the United States,
[00:01:20.550]different variations, how they use, what's successful,
[00:01:22.750]what's proven successful.
[00:01:23.583]Then to put forth a recommendation
[00:01:25.976]for the University of Nebraska-Lincoln.
[00:01:29.002]In April 2017,
[00:01:30.506]that document was circulated and it recommended
[00:01:33.010]that we shift toward an incentive-based allocation model.
[00:01:37.110]This report was affirmed by the chancellor,
[00:01:38.935]by the cabinet.
[00:01:40.080]It was vetted through campus constituency groups,
[00:01:42.117]and basically affirmed in its construct.
[00:01:44.752]But the goal of the model,
[00:01:46.480]the real goal,
[00:01:47.313]was greater transparency, simplicity,
[00:01:49.183]and really, distributed decision authority
[00:01:50.848]of how resources are allocated
[00:01:52.253]and spent across the university.
[00:01:54.740]As we just saw,
[00:01:55.573]it became the chancellor's
[00:01:56.860]top short-term priority going forward.
[00:01:58.782]From this graphic,
[00:01:59.950]you can see that we're not...
[00:02:00.963]This is not new to hire education.
[00:02:02.916]Matter of fact,
[00:02:04.120]it dates back about 45 years.
[00:02:05.275]Penn State put forth a responsibility centered-management,
[00:02:08.760]or an incentive-based model back in '74.
[00:02:11.979]The trajectory shows that over time,
[00:02:14.662]more and more universities have focused in
[00:02:17.025]on this kind of budget modeling.
[00:02:18.772]It's not anything that's a secret,
[00:02:20.870]but higher education's experiencing dwindling resources,
[00:02:24.420]more competition for state pools,
[00:02:26.014]so forth.
[00:02:27.338]So you have to be more creative.
[00:02:28.920]You have to look at ways of incentivizing,
[00:02:30.570]becoming more entrepreneurial,
[00:02:31.403]efficiencies with how you spend your limited resources.
[00:02:35.411]This graphic is kind of interesting.
[00:02:37.210]It shows its more front-loaded.
[00:02:38.950]We're not quite done yet.
[00:02:39.900]We're seeing more and more universities shifting
[00:02:41.930]to this type of modeling.
[00:02:42.946]If you look at this graphic,
[00:02:44.370]you can also see a lot of our Big 10 peers,
[00:02:47.240]lots of Research 1 institutions.
[00:02:49.963]Basically, it's a way of looking more creatively
[00:02:51.752]at how we allocate and expend our resources.
[00:02:54.916]What is incentive-based budgeting?
[00:02:57.748]Simply put,
[00:02:58.900]it's a management tool.
[00:03:00.150]It decentralizes budget authority
[00:03:01.791]and takes the central method,
[00:03:04.020]but delegates it through the colleges.
[00:03:06.479]It's a different way of approaching...
[00:03:07.782]It's a philosophical change to what we do today.
[00:03:10.535]Most of you know,
[00:03:11.690]if you don't,
[00:03:12.523]we are an incremental-based budget,
[00:03:13.920]very traditional,
[00:03:14.790]where the base starts again next year.
[00:03:16.739]Some increases might be salary-based or incremental.
[00:03:20.742]But the funds flow to administration,
[00:03:23.390]who then allocates it out to the campus.
[00:03:26.270]It's important to note that incentive-based budgeting
[00:03:28.440]really isn't an end all be all.
[00:03:29.852]It's a tool.
[00:03:31.160]It's a way to look at the university
[00:03:32.550]and allocate accordingly.
[00:03:33.492]The goal, though,
[00:03:35.090]the primary goal is to incentivize the colleges
[00:03:37.691]and schools to take ownership of their mechanisms
[00:03:40.464]of revenue-generation and cost containment.
[00:03:43.814]It also needs to be accomplished in tandem
[00:03:46.910]with the needs of the university.
[00:03:48.322]Our university has a mission.
[00:03:50.154]We're right now investing in the strategic planning process.
[00:03:53.197]From that,
[00:03:54.210]we'll have strategic priorities identified.
[00:03:56.300]So, the model needs to account for incentivization,
[00:03:58.870]but also,
[00:03:59.703]the needs of the greater university
[00:04:00.890]and the centrality piece,
[00:04:02.050]the strategic initiatives that we have as a university.
[00:04:05.020]Here's the timeline.
[00:04:06.888]This is the project timeline.
[00:04:08.798]It starts today.
[00:04:09.631]We started in the early spring semester
[00:04:11.639]with the selection of a steering committee
[00:04:13.430]that Cathy just introduced,
[00:04:15.050]and we have some names next,
[00:04:16.333]with the selection of our consulting firm, Huron.
[00:04:19.482]As you can see,
[00:04:20.620]we have a fairly aggressive timeline,
[00:04:23.100]but we have purposely taken time to build an engagement,
[00:04:26.292]building communication,
[00:04:27.848]look at stakeholder groups,
[00:04:28.998]present to stakeholder groups,
[00:04:30.597]have open lines of communication
[00:04:32.780]for frequently asked questions.
[00:04:34.170]We embed that content in our website.
[00:04:35.729]That's where we are today.
[00:04:37.228]Where we are today is looking at the engagement
[00:04:39.939]and the ways of promoting the model
[00:04:41.980]so you all become more knowledgeable
[00:04:43.760]about where we are,
[00:04:44.593]what we're doing,
[00:04:45.520]and have the ability to ask questions to engage
[00:04:47.248]with Cathy, me, the steering committee,
[00:04:49.337]and the university at large.
[00:04:51.354]The goal is have a baseline model to shadow
[00:04:55.770]for fiscal 2020.
[00:04:56.900]That starts in July 1st of this coming month,
[00:05:00.340]but full implementation,
[00:05:01.723]in fiscal year '21.
[00:05:03.930]That means we have a year to assess, to talk,
[00:05:07.305]to communicate, to reevaluate, and to calibrate
[00:05:11.033]according to the findings of this shadowed year.
[00:05:13.980]As we go through this,
[00:05:16.480]your engagement is a critical element to that process.
[00:05:20.670]We're really fortunate.
[00:05:22.102]We have a great group of individuals who were nominated
[00:05:24.910]by the chancellor to be on the steering committee.
[00:05:27.295]It's been a really wonderfully engaged group,
[00:05:30.697]very intellectual folks,
[00:05:32.190]who bring a very high-level prospective to this group.
[00:05:36.794]They've also been not just engaged with the committee,
[00:05:39.777]being conduits to their stakeholders,
[00:05:41.980]but really,
[00:05:42.813]to the entire university
[00:05:44.070]and carried the information of the process forward.
[00:05:47.501]We're very thankful for this group for their service.
[00:05:51.046]Guiding principles.
[00:05:52.482]This is one of the things that the steering team could
[00:05:56.140]accomplish right away.
[00:05:58.330]It's very common that this is part
[00:05:59.826]of a responsibility-centered
[00:06:01.834]or incentive-based budgeting model process.
[00:06:04.910]It's common,
[00:06:05.743]but it's an imperative
[00:06:06.690]because it sort of grounds us,
[00:06:08.364]gives us some targets for our decisions,
[00:06:10.291]for our discussions,
[00:06:12.057]for our points moving forward
[00:06:14.330]and grounds us as we had discussions
[00:06:17.023]around different model elements.
[00:06:19.034]The key elements that are listed here are pretty clear:
[00:06:21.557]to support the university's mission,
[00:06:23.246]a strategic agenda,
[00:06:24.592]to incentivize the units to empower their leadership,
[00:06:27.726]provide resources for university strategic priorities,
[00:06:31.460]support data-driven decision making,
[00:06:34.936]and probably,
[00:06:36.180]what's one of the more important,
[00:06:37.350]most discussed one is
[00:06:38.460]a transparent and clear model.
[00:06:40.240]The word that keeps coming back up in our steering team
[00:06:42.682]and in national literature around this is the word simple.
[00:06:47.150]Well, simple?
[00:06:48.190]Okay, we're a very complicated organization.
[00:06:49.790]How do you get to simple?
[00:06:51.658]Really, the thrust here is,
[00:06:54.586]if we can't understand as a campus community,
[00:06:56.270]how can it could be effective?
[00:06:57.750]If it's not simple enough for all of us to see in a room
[00:07:00.420]and sit down and understand how budgets are being allocated,
[00:07:03.230]how will it ever be effective?
[00:07:04.730]It won't.
[00:07:05.563]So we keep coming back to that premise.
[00:07:07.250]It comes up
[00:07:08.755]in every steering committee meeting,
[00:07:09.588]but is that to the guiding principle?
[00:07:11.530]So it's been a very helpful exercise for our team.
[00:07:16.910]The genesis of this process came
[00:07:19.072]from the task force budget modeling.
[00:07:22.370]But the overarching theme was that
[00:07:23.580]our current incremental model is predicated
[00:07:27.060]on legacy decisions.
[00:07:27.893]It's very complicated and lacks transparency.
[00:07:31.312]But this is very common.
[00:07:32.497]It's very common in institutional budgeting,
[00:07:35.331]but as you saw in a previous slide,
[00:07:36.910]that's starting to shift a little bit.
[00:07:39.020]As we move towards incremental to more strategic,
[00:07:42.933]the next 150 needs to really build in more incentives,
[00:07:47.150]more entrepreneurship,
[00:07:48.097]and better use of our limited resources,
[00:07:50.756]but more importantly,
[00:07:52.480]empowering leaders to make great choices
[00:07:54.600]about how we spend our finite resources.
[00:07:56.811]It's important to note
[00:07:58.180]that there are many forms of budgeting.
[00:08:00.062]Incremental, as I've mentioned.
[00:08:01.921]Formula funding, performance model, and incentive-based.
[00:08:05.183]Some schools use many of these, concurrently.
[00:08:08.650]Some states have formula
[00:08:10.019]and performance-based models how they allocate
[00:08:12.920]their resources to state universities and colleges.
[00:08:17.500]Nebraska's not one of those states,
[00:08:19.000]but we do have an incremental.
[00:08:22.532]The recommendation of the task force is, obviously,
[00:08:25.441]to the right of this model and look
[00:08:27.560]at incentive-based budgeting.
[00:08:29.020]Along with this, though
[00:08:29.898]there are many variations
[00:08:31.290]and different ways of implementing.
[00:08:33.195]If you look at the far right of this,
[00:08:34.920]every tub on its own bottom,
[00:08:36.297]that's probably the most extreme version
[00:08:38.592]of an incentive-based,
[00:08:39.796]where, a college, a school is responsible
[00:08:42.456]for its fiscal wherewithal,
[00:08:44.762]its revenue generation,
[00:08:46.035]and its full expense allocations.
[00:08:48.974]That's pretty extreme,
[00:08:50.140]and a very few universities do that.
[00:08:52.630]Most, are finding their way into the traditional
[00:08:55.579]and customized because
[00:08:57.832]we as a university have missions,
[00:09:00.390]we have value systems,
[00:09:01.223]we have strategic priorities.
[00:09:02.286]So, it really isn't unilateral.
[00:09:05.046]It's multiple.
[00:09:06.569]We as a steering team have really struggled
[00:09:08.920]with the idea of,
[00:09:09.980]do we want to be between this?
[00:09:12.310]More customized?
[00:09:13.143]What is centrality?
[00:09:14.390]What is our value system?
[00:09:15.223]What is our mission as a university?
[00:09:18.100]And find a model that incorporates those kinds of tenants.
[00:09:21.323]An incentive-based model basically considers
[00:09:23.531]four main elements:
[00:09:25.377]revenue decentralization, cost allocations,
[00:09:29.542]subvention and strategic funding,
[00:09:31.800]and really, accountability around the entire model.
[00:09:34.370]Revenue centralization is basically what it sounds like.
[00:09:37.823]Revenues come into the institution.
[00:09:39.681]They pass through the units that generate those revenues.
[00:09:43.171]Then they're allocated accordingly.
[00:09:46.090]Also, there's a subvention or a strategic investment that's
[00:09:49.330]taken away for that for-centralized funding.
[00:09:52.099]It's important that as a university we understand our costs
[00:09:55.665]because the costs have to be allocated accordingly
[00:09:58.221]to those that generate the revenue.
[00:10:00.460]Cathy will get into more of the detail about that, too.
[00:10:03.003]It's also well known
[00:10:04.684]that not all colleges, schools, whatever,
[00:10:07.534]generate enough revenue to fund all their expenses.
[00:10:12.131]To offset that,
[00:10:13.373]the term is subvention,
[00:10:14.800]subvention funding is a pool allocated to account
[00:10:17.840]for such differences.
[00:10:18.777]Like I mentioned earlier,
[00:10:20.290]we have a mission,
[00:10:21.123]we have a strategic plan.
[00:10:22.095]We have different strategic priorities
[00:10:24.340]that need to be funded, too.
[00:10:25.316]So funds need to be created,
[00:10:26.949]pools need to be created for those strategic allocations,
[00:10:31.445]and most importantly,
[00:10:33.094]financial accountability.
[00:10:34.763]We all then become accountable
[00:10:36.680]for how we allocate our resources,
[00:10:38.778]how we expend our resources,
[00:10:39.994]and becoming financial stewards
[00:10:42.732]of our limited pool of resources.
[00:10:45.038]I like this 'cause it's a very simple model
[00:10:48.663]that shows the differences between what we have today
[00:10:52.600]in an incremental world,
[00:10:53.433]a traditional budgeting model,
[00:10:55.012]and that of an incentive-based model.
[00:10:57.584]On the left,
[00:10:59.355]you see that the revenue sources flow
[00:11:03.201]to what we call the central administration.
[00:11:05.130]That's really U and L administration,
[00:11:07.200]or my office, business, and finance.
[00:11:09.148]Then allocated to colleges and schools
[00:11:11.485]and units across the enterprise.
[00:11:14.700]In an incentive-based model,
[00:11:17.040]the funding flows differently.
[00:11:18.540]It's inverted.
[00:11:19.690]The same revenue streams flow to colleges and schools.
[00:11:23.714]Those revenues are then taxed for subvention
[00:11:28.062]or central funding priorities.
[00:11:30.230]What is a central funding priority?
[00:11:31.500]Well, that's anything like facilities,
[00:11:32.699]police, academic services,
[00:11:35.030]and a whole multitude of other kinds of things.
[00:11:37.127]So the funds flow is quite different,
[00:11:40.720]but you see in this model how it empowers the decisions
[00:11:42.980]that are made at the college and school level.
[00:11:45.496]As Bill mentioned,
[00:11:47.320]the funds flow shows a situation where we distribute
[00:11:51.377]further down into the organization.
[00:11:54.111]So you're basically trying to connect authority
[00:11:56.938]and responsibility closer to where the academic units are
[00:12:01.800]that are performing the function.
[00:12:04.300]That's the basic premise.
[00:12:06.019]The idea isn't that the model drives strategy.
[00:12:10.410]The idea is that the university's strategic plan should be
[00:12:14.160]driving the model.
[00:12:15.640]That's the other underlying premise
[00:12:17.310]that we always have to remember,
[00:12:18.810]is that that's the ultimate goal.
[00:12:21.944]The other goal here is
[00:12:23.510]to provide a more transparent view of operations.
[00:12:27.580]So that we actually can identify new priorities
[00:12:30.881]and strategic decision-making that's going
[00:12:34.130]to benefit the university as a whole.
[00:12:36.949]That's kind of the underlying goal
[00:12:39.690]The way in which we do that
[00:12:40.962]is the executive leadership team.
[00:12:42.992]They're gonna be focused in more
[00:12:45.170]on the strategic decision-making.
[00:12:46.583]Then we're gonna push down the distribution
[00:12:51.123]of revenues and costs to the academic,
[00:12:55.075]we're gonna call them primary unit.
[00:12:56.980]I'll define that in just a second,
[00:12:58.715]which allows for more transparency
[00:13:01.339]in terms of how we're making those decisions.
[00:13:04.534]At the same time,
[00:13:05.989]we're gonna be able to look at support units
[00:13:09.535]that are providing services to the campus,
[00:13:11.764]but in a way that's more transparent
[00:13:14.390]and allows us to connect resources to service levels.
[00:13:21.800]That's kind of the goal here.
[00:13:24.420]In terms of the budget redesign and the stages
[00:13:28.304]of the decision-making,
[00:13:30.320]this picture is really designed
[00:13:32.514]to help you see what the steering committee has been doing
[00:13:35.380]for the last few months.
[00:13:37.930]Basically, we started at the philosophy level, here.
[00:13:42.300]The philosophy is really
[00:13:44.680]where the guiding principles came from.
[00:13:46.720]What is the University of Nebraska's overall philosophy
[00:13:49.554]with regards to centralization, authority,
[00:13:53.520]accountability, and responsibility.
[00:13:55.540]That's what the steering committee outlined
[00:13:58.099]in those guidelines.
[00:13:59.517]Then we began looking at structure.
[00:14:02.657]Within the structure,
[00:14:03.490]we're trying to look at what elements
[00:14:05.890]of the model do we want to focus on to drive behavior?
[00:14:10.030]Also, how do we want to present the data?
[00:14:11.981]So, really looking at overall structure
[00:14:15.316]and then you have to start defining some rules.
[00:14:17.940]How are we going to actually allocate revenues?
[00:14:21.813]How are we going to actually allocate costs?
[00:14:24.727]Truly looking at the rules
[00:14:26.417]and what are the appropriate metrics.
[00:14:28.450]The steering committee has essentially come up
[00:14:31.297]with some, at least,
[00:14:33.456]first point of reference
[00:14:35.184]of how we're gonna attempt to do that
[00:14:37.120]to give us the ability to create a baseline model.
[00:14:42.730]Along with that,
[00:14:44.290]the next step is then gonna be the customization piece.
[00:14:47.514]I think one of the concerns that I have,
[00:14:50.210]is when I hear individuals talking about other universities
[00:14:54.262]that have incentive-based models.
[00:14:56.850]I think one of the really important things to remember is
[00:14:59.156]one of the advantages we have of being where we are
[00:15:02.040]in the timeline of this process,
[00:15:03.554]is we have the advantage to learn
[00:15:05.470]from the best practices of others.
[00:15:07.600]We also have the advantage of learning
[00:15:08.790]from the worst practices of others.
[00:15:10.607]So if we're smart about this,
[00:15:12.520]we can try to avoid some of the common pitfalls
[00:15:14.376]that are associated
[00:15:15.808]with what is often referred to as an RCM.
[00:15:18.539]We're not adopting a pure RCM.
[00:15:20.571]We're looking at incentive-based modeling.
[00:15:23.094]That's kind of where we are in this processes.
[00:15:25.399]We're at the point where we're starting to look
[00:15:27.660]at the customization.
[00:15:29.156]What I'm gonna do now,
[00:15:30.330]is kinda focus on trying to give you a general sense
[00:15:33.446]of how the model is gonna operate.
[00:15:35.720]I have the hard part of the presentation.
[00:15:37.962]At least,
[00:15:38.795]that's what I told Bill.
[00:15:40.125]The incentive-based models focus, initially,
[00:15:42.920]on differentiating revenue units and support units.
[00:15:46.558]You need to have a basic understanding of what that means.
[00:15:49.293]We refer to a primary unit as a revenue unit.
[00:15:53.198]Revenue units have the ability to generate revenues.
[00:15:57.840]They can actually influence revenues.
[00:15:59.684]They also have very identifiable,
[00:16:01.514]direct costs that are generating those revenues.
[00:16:04.490]The most typical example of course,
[00:16:06.397]is a college.
[00:16:08.300]We have the ability to generate tuition dollars.
[00:16:10.856]We also have very obvious direct costs,
[00:16:13.056]our salaries associated with our faculty and staff.
[00:16:16.980]Then we also rely on other units on campus for support:
[00:16:22.250]academic affairs, student support.
[00:16:24.323]So those aren't direct costs that we incur,
[00:16:26.984]but we do benefit from those units and what they perform.
[00:16:34.622]The idea here is these units have the ability
[00:16:38.010]to generate revenue and direct costs.
[00:16:42.010]That's where we're gonna start in defining primary units.
[00:16:44.840]Your auxiliaries will also fall in this category.
[00:16:47.043]Your housing, your athletics,
[00:16:49.100]those are gonna fall as a primary unit.
[00:16:52.120]Support units have a very limited ability
[00:16:54.443]to generate revenue.
[00:16:56.040]They may have some,
[00:16:57.080]but it's gonna be small.
[00:16:58.200]To give you a quick example: libraries.
[00:17:02.100]We have a library fee,
[00:17:03.410]but that's not gonna generate enough revenue
[00:17:05.810]to cover their costs.
[00:17:08.150]The idea is,
[00:17:09.210]they provide service to the campus.
[00:17:14.950]By defining these support units,
[00:17:16.675]we also then can look at the service
[00:17:19.950]being provided by those support units,
[00:17:23.194]in terms of from a transparency perspective.
[00:17:27.470]That's the basic design,
[00:17:29.820]or I should say the categorization.
[00:17:32.270]Then the model also has common elements as it relates
[00:17:35.188]to the flow of revenues and expenses.
[00:17:37.886]We have direct revenues,
[00:17:40.980]direct expenses.
[00:17:41.813]We have general revenues.
[00:17:44.740]And then we have the support unit cost pool allocation.
[00:17:48.500]I'm gonna discuss each of these different types
[00:17:51.064]of revenues and expenses.
[00:17:54.780]On the direct revenue side,
[00:17:56.315]these are the revenues that we can explicitly attribute
[00:18:02.683]to a unit.
[00:18:04.630]For example,
[00:18:05.900]I'm gonna use the College of Business.
[00:18:07.357]We have differential tuition.
[00:18:09.360]That's attached to College of Business courses.
[00:18:11.760]It's directly related to the College of Business.
[00:18:14.460]So it's a direct revenue that's defined
[00:18:16.089]to this primary unit.
[00:18:18.550]Student fees,
[00:18:19.510]like a course fee.
[00:18:20.860]That's directly attributed to a specific course,
[00:18:23.149]so we have a direct line for that revenue
[00:18:26.300]to that course or that unit.
[00:18:28.605]Those are gonna be examples of direct revenues.
[00:18:32.197]Also, goods and services,
[00:18:33.840]that's why your auxiliaries fall in here.
[00:18:36.584]Sales and services...
[00:18:38.043]Your general revenues are where we collect revenues that's
[00:18:41.330]kind of a general pool,
[00:18:43.116]but they still relate to the primary unit.
[00:18:45.595]So for example,
[00:18:46.890]undergraduate tuition.
[00:18:48.250]The university collects undergraduate tuition,
[00:18:50.971]even though primary units are the ones
[00:18:52.879]that are a key player in that,
[00:18:54.920]but there's not a direct line to the unit.
[00:18:57.957]The question becomes:
[00:18:59.314]How do you allocate those general revenues to those units?
[00:19:04.729]That's where the steering committee
[00:19:06.920]has made some initial decisions.
[00:19:08.970]How do we allocate undergraduate tuition?
[00:19:11.055]How do we allocate state appropriations?
[00:19:13.455]State appropriations comes in
[00:19:15.500]as a big lump sum to the university.
[00:19:17.802]How do we allocate that out to these primary units?
[00:19:21.702]Then, finally,
[00:19:22.730]indirect costs recovery.
[00:19:24.160]Those are the three broad categories.
[00:19:26.870]Initially, the steering committee for undergraduate tuition
[00:19:31.170]has set the metric as student credit hours.
[00:19:36.860]Initially, we're measuring it at six-day census.
[00:19:40.007]We're allocating 75% of the tuition revenue,
[00:19:44.280]based on the instructor of record who teaches the course.
[00:19:49.110]It goes to that unit.
[00:19:50.280]So, in the College of Business
[00:19:51.950]a class one of my faculty member teaches,
[00:19:54.209]75% of the credit hours associated with that class,
[00:19:58.311]comes to the College of Business.
[00:20:00.454]Twenty-five percent follows whatever student
[00:20:03.564]is taking the class.
[00:20:05.370]So, if the student's a College of Business member,
[00:20:07.961]then I also get that 25%.
[00:20:10.657]Not I, the college.
[00:20:12.380]The college gets that 25%.
[00:20:15.360]But if the student was actually an arts and science student,
[00:20:19.640]then arts and science would get 25%.
[00:20:22.240]The idea there is that,
[00:20:23.870]again, there's other support that comes
[00:20:25.850]along with the enrollment.
[00:20:27.860]You have advising support that the college provides.
[00:20:32.090]It also suggests that if the College of Arts and Sciences
[00:20:35.250]recruits a lot of students,
[00:20:36.520]they should get some benefit from that enrollment growth.
[00:20:39.670]But by the same token,
[00:20:40.670]we wanna support the colleges
[00:20:42.080]providing the actual coursework.
[00:20:45.321]We're starting at 75-25.
[00:20:47.790]That was the initial determination.
[00:20:49.850]Again, that was based on some of our peer institutions
[00:20:53.670]and how they allocate it.
[00:20:55.380]For state appropriations,
[00:20:57.677]the steering committee recommended allocating state
[00:21:01.227]appropriations based on the university's mission,
[00:21:04.020]research, teaching, and outreach.
[00:21:06.625]The way in which we defined that,
[00:21:08.668]however, is for research,
[00:21:11.210]we're looking at grant and contract revenue.
[00:21:14.246]We defined teaching across both instruction
[00:21:17.530]and student success.
[00:21:18.950]So we're allocating a portion based on instruction,
[00:21:21.501]which is related,
[00:21:23.230]at least initially,
[00:21:24.180]to gross tuition receipts.
[00:21:25.706]Then for student success,
[00:21:27.622]we're looking at degrees awarded.
[00:21:30.662]The idea that we want to reward retention
[00:21:33.182]and completion of the degree.
[00:21:36.370]Again, these are very high-level metrics
[00:21:39.150]but trying to recognize that these are goals
[00:21:42.350]and consistent with the university mission.
[00:21:44.859]We're gonna take questions at the end.
[00:21:47.990]The indirect cost recovery,
[00:21:50.260]the initial determination for that,
[00:21:52.580]is to to be allocated directly to the college,
[00:21:57.440]the primary unit where the faculty resides.
[00:22:03.770]That will be the initial focus for passing through
[00:22:08.837]indirect cost recovery.
[00:22:11.890]Those are the direct revenues and the general revenues
[00:22:15.210]and the initial determination
[00:22:16.299]on how to allocate those general revenues.
[00:22:19.553]We'll answer questions at the end.
[00:22:21.267]I promise.
[00:22:22.910]In terms of cost allocations,
[00:22:24.732]we're looking at the support units.
[00:22:27.120]One of the things the committee looked at was:
[00:22:30.150]How do we group together different functions
[00:22:32.969]into broad cost pools.
[00:22:36.408]We came up with five cost pools.
[00:22:38.356]Academic affairs, facilities, general administration,
[00:22:42.490]research, and student support.
[00:22:45.010]Then we pulled together some different areas
[00:22:49.450]into those costs pools.
[00:22:51.188]Then the question becomes:
[00:22:52.620]How do you allocate those costs?
[00:22:53.813]You need some type of metric,
[00:22:55.740]again, to allocate the cost out to those primary units.
[00:23:00.063]What we have up here is our initial metrics
[00:23:02.940]that we're using to model.
[00:23:04.152]Academic affairs,
[00:23:05.555]which would include the EBC office.
[00:23:07.764]It would include the senior international office,
[00:23:10.413]graduate studies, libraries, television and radio.
[00:23:14.530]The initial metric will be the FTE for faculty,
[00:23:17.966]plus the student headcount.
[00:23:20.416]The total of that headcount will then be used to allocate.
[00:23:23.865]To give you an illustration
[00:23:26.229]of how this allocation would work,
[00:23:28.893]think about student support.
[00:23:32.174]The initial metric that we're using
[00:23:34.534]to allocate student affairs cost pool is student headcount.
[00:23:39.901]Of course, this is a fictional example,
[00:23:41.937]assume that the net expenditures
[00:23:44.530]for student affairs was $10,000,0000
[00:23:46.297]and we have three primary units,
[00:23:47.991]colleges A, B, and C.
[00:23:49.683]Their student headcount was distributed based
[00:23:52.528]on the overhead there.
[00:23:55.040]College C has 50 percent of the student headcount,
[00:23:58.122]so they're going to have to absorb 50 percent
[00:24:00.658]of Student Affair's cost.
[00:24:03.237]That would be how we would allocate that cost metric
[00:24:06.431]across the different primary units.
[00:24:10.860]One of the things to note is
[00:24:12.879]this amount could vary based
[00:24:15.073]on how you approve student support's budget.
[00:24:20.190]The idea is,
[00:24:21.560]I'm a primary unit.
[00:24:23.810]Student Affairs is providing a service.
[00:24:27.510]So there's going to be a level of transparency here.
[00:24:29.580]I'm gonna know what their costs are now.
[00:24:32.595]I haven't in the past,
[00:24:33.960]but now I'm gonna know what their costs are.
[00:24:35.590]And I'm getting a certain level of service.
[00:24:37.910]I'm gonna hold them accountable for that level of service.
[00:24:41.360]That's the idea behind the transparency piece.
[00:24:44.049]There's this level of transparency.
[00:24:46.220]If I'm having to absorb facilities,
[00:24:49.630]I'm gonna look
[00:24:50.463]at what facilities cost that I'm being allocated.
[00:24:52.960]What am I getting for that?
[00:24:54.650]Similarly, those units are gonna say,
[00:24:57.537]"Well, this is the baseline service."
[00:24:58.695]"If you want more,"
[00:24:59.586]"I might charge you more."
[00:25:03.090]There's gonna be some give and take here.
[00:25:04.770]The point is transparency,
[00:25:06.706]having conversations that we've never had
[00:25:08.221]before on this campus.
[00:25:10.960]You've never had these conversations
[00:25:12.960]because of a black box,
[00:25:16.000]an incremental budget model
[00:25:17.380]that doesn't really foster these types of conversations.
[00:25:23.063]That takes you through the revenue allocation,
[00:25:26.180]direct revenue, direct expenses,
[00:25:27.996]general revenue, cost allocation.
[00:25:31.390]What's left?
[00:25:32.223]Well, one of the most critical elements
[00:25:33.691]of an incentive-based budget model is the creation
[00:25:37.020]of a pool of resources
[00:25:38.526]that allows the university leadership team to focus
[00:25:42.155]on some of those strategic objectives.
[00:25:44.342]That's what Bill was mentioning early on.
[00:25:48.620]The whole idea that the university,
[00:25:51.540]the value of the university as a whole,
[00:25:53.880]is greater than the sum of its parts.
[00:25:57.091]It's that idea of that collective,
[00:25:59.290]and we have overall university goals.
[00:26:04.780]Here, what the funding principle is
[00:26:07.570]is that first,
[00:26:11.060]when we initially implement this model,
[00:26:13.910]every unit,
[00:26:15.130]primary unit,
[00:26:16.193]will be,
[00:26:17.180]at a minimum,
[00:26:18.270]a break-even entity.
[00:26:20.850]So, we do a hold-harmless.
[00:26:22.272]The first year of implementation you do a hold-harmless,
[00:26:25.548]and you basically,
[00:26:26.826]assess a participation fee that brings the units
[00:26:30.700]that are operating at a negative deficit,
[00:26:33.669]the primary units at a negative deficit,
[00:26:36.750]to a baseline of zero.
[00:26:38.900]That's the initial point.
[00:26:40.949]Then we assess a additional tax,
[00:26:46.350]which we don't really like to call it a tax,
[00:26:48.632]but instead,
[00:26:49.761]the Strategic Initiative Pool.
[00:26:52.530]The Strategic Initiative Pool is the intent
[00:26:55.640]to allow central administration
[00:26:58.117]to actually support the strategic initiatives
[00:27:00.966]of the campus as a whole.
[00:27:03.590]One thing that I think is really critical to recognize,
[00:27:07.100]however, is it's not intended
[00:27:09.440]to be an annual entitlement, okay?
[00:27:12.970]That's what essentially happens with incremental budgeting
[00:27:15.720]because you get what you got last year.
[00:27:17.844]This is intended to incent you to try new things.
[00:27:22.341]If they fail,
[00:27:23.466]abandon, right?
[00:27:26.660]The idea is,
[00:27:27.493]it isn't supposed to necessarily provide permanent funding,
[00:27:31.480]but to provide a mechanism to be more entrepreneurial
[00:27:34.994]and strategic in terms of the decision-making.
[00:27:39.230]Based on all of these decisions
[00:27:41.300]that the steering committee has helped us arrive at,
[00:27:46.740]our consultants have built a baseline model that takes
[00:27:50.810]into consideration all of those different initial metrics.
[00:27:55.430]So, where we are in the process now is,
[00:27:58.870]the consultants have actually been meeting
[00:28:01.310]with the individuals deans
[00:28:02.980]and sharing the baseline model application
[00:28:07.320]and what that would look like then for our individual units.
[00:28:11.034]It lays out what are direct revenues are,
[00:28:14.214]what are direct expenditures are,
[00:28:16.081]what our general revenue allocation would look like
[00:28:19.130]under the current metrics,
[00:28:21.380]what our cost pool allocation would be,
[00:28:24.030]what our participation fee would be,
[00:28:26.510]to help all the units come to a minimum
[00:28:29.580]of a baseline of zero.
[00:28:30.998]Then, also, the Strategic Initiative Pool.
[00:28:34.249]We've actually begun the process
[00:28:36.857]of building that baseline.
[00:28:39.180]I say begun the process because
[00:28:40.950]through the conversations with the deans,
[00:28:43.020]we come up with things.
[00:28:43.990]Oh, did you think of this?
[00:28:45.720]Or what about that?
[00:28:47.260]So we're gonna be bringing those back
[00:28:48.660]to the steering committee to say,
[00:28:50.067]"Okay, how do we handle this type of situation?"
[00:28:52.870]Some of those nuances that are associated
[00:28:55.474]with our processes.
[00:28:58.470]Basically, this slide summarizes all
[00:29:02.340]of the key model decisions that we've made
[00:29:04.619]to this point.
[00:29:05.960]The model philosophy,
[00:29:07.050]being our guiding principles,
[00:29:08.530]the initial structure,
[00:29:09.740]in terms of how we're going to set up the model
[00:29:14.060]in terms of primary units versus support units.
[00:29:17.010]Then we also made decisions,
[00:29:18.107]as I said,
[00:29:18.990]around tuition allocation, state appropriations,
[00:29:21.619]research, support, and costs pools.
[00:29:26.870]Where we're still working,
[00:29:29.033]is the subvention funding.
[00:29:31.060]What is that gonna look like?
[00:29:32.400]And model sensitivity.
[00:29:35.190]From a model sensitivity perspective,
[00:29:37.250]what we mean there is,
[00:29:38.410]how sensitive are we gonna allow the model to be.
[00:29:40.402]Is it gonna be based on two years of enrollment?
[00:29:43.200]Is it gonna be based on one year of enrollment?
[00:29:46.630]Basically, how much smoothing,
[00:29:49.690]for lack of a better way to say it,
[00:29:51.780]may we do in terms of the model.
[00:29:53.878]That's kind of where we're at.
[00:29:55.640]We're in discussion.
[00:29:57.510]We haven't made final decisions in terms
[00:29:58.876]of where we're gonna land there.
[00:30:02.374]Basically, the steering team members
[00:30:04.691]have been actively engaged,
[00:30:06.980]hopefully, providing feedback to all of you
[00:30:09.325]in terms of where we are in terms of engaging
[00:30:12.110]with the stakeholders.
[00:30:13.420]We've basically been exploring the benefits
[00:30:16.939]and considerations along with this incentive-based model.
[00:30:20.550]We're looking at a hybrid model.
[00:30:22.310]It's not a pure RCM.
[00:30:24.070]We actually were talking about that
[00:30:25.326]as we put this forum together,
[00:30:27.740]that we didn't want to call it the RCM Open Forum
[00:30:31.110]because we don't wanna perpetuate the idea
[00:30:33.700]that it's a pure RCM.
[00:30:35.060]It's an incentive-based model.
[00:30:37.951]We have the initial model structure,
[00:30:40.208]at least, outlined.
[00:30:41.345]We're beginning to look
[00:30:44.130]at what the baseline model would generate.
[00:30:47.379]Our next steps are to continue to meet
[00:30:49.695]with the deans.
[00:30:50.910]The consultants are working
[00:30:51.778]on the third round
[00:30:53.270]of dean meetings and department chairs.
[00:30:57.860]They've extended the offer to meet with department chairs,
[00:31:00.119]as well as the deans.
[00:31:01.730]I know in my college,
[00:31:02.810]I've met with every single department in a faculty meeting.
[00:31:06.540]I've also presented at a faculty meeting.
[00:31:08.815]We're really encouraging the dialogue.
[00:31:13.630]The whole idea here is to create transparency,
[00:31:16.321]and dialogue helps create that transparency.
[00:31:21.000]We'll hold our second forum in August,
[00:31:25.164]and hopefully be able to provide you
[00:31:27.200]even more details regarding the structure.
[00:31:31.860]We have a deans retreat that is scheduled
[00:31:34.060]for September 11th.
[00:31:35.745]Finally, we need to think
[00:31:37.820]about how the university is structured
[00:31:40.640]to implement this budget over time.
[00:31:42.270]How do we model it?
[00:31:43.170]How do we delegate modeling authority to the colleges?
[00:31:45.373]How do we,
[00:31:46.410]as a university administration,
[00:31:48.013]understand the funds flow?
[00:31:50.280]What will be our availability of resources?
[00:31:52.366]This is a core infrastructure
[00:31:53.634]to operationalize a budget
[00:31:56.140]that we've been doing the same way for 150 years.
[00:31:58.887]That's the next steps.
[00:32:01.660]That'll be a iterative process as we go to the next year.
[00:32:04.367]Hopefully, we'll have most of it figured out,
[00:32:06.172]if not all of it figured out.
[00:32:08.750]Along those line,
[00:32:09.720]one of the things
[00:32:10.553]that we already are looking at
[00:32:12.030]is creating a committee around data.
[00:32:15.330]Because what often happens
[00:32:16.261]when you start trying to create such a model,
[00:32:20.163]is you learn what your data limitations are,
[00:32:23.074]or data challenges are.
[00:32:25.593]That's one of the things that were also
[00:32:28.260]in the process of looking at.
[00:32:29.900]I think there's also a longer-term strategy, too.
[00:32:32.470]We have an RCM steering team,
[00:32:34.990]steering committee,
[00:32:36.170]but a lot of institutions,
[00:32:37.377]and it shows in the literature,
[00:32:38.520]have a standing group of campus stakeholders
[00:32:41.005]that reviews the model on an ongoing basis,
[00:32:44.070]provides feedback for recalibration.
[00:32:47.890]I'm positive that's something
[00:32:49.430]the University of Nebraska-Lincoln is going
[00:32:50.940]to pursue as well.
[00:32:51.930]'Cause it can't work in a vacuum.
[00:32:53.230]It's gonna need to continue,
[00:32:54.600]evolve as our needs change and evolve too.
[00:32:58.630]Well, thank you all so much for your time and attention.
[00:33:00.840]We really appreciate ya'll being here
[00:33:02.140]and thanks to everybody online through our Zoom interface.
[00:33:05.311]We appreciate ya'll being engaged in the process.
[00:33:07.773]We can't do this without you,
[00:33:09.370]so keep those questions coming.
[00:33:11.120]As we hear questions that have not been addressed
[00:33:12.810]in our website,
[00:33:13.926]the FAQ section,
[00:33:15.147]we'll keep adding content
[00:33:16.950]as these things are uncovered.
[00:33:18.600]So thank you everyone.

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UNL Budget Redesign Campus Forum 1

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