Funding Process Academic Units

The new budget model is set up to encourage growth and activities that align with fundamental expectations of the institution such as sustained or growing enrollment, increases in scholarly works or research expenditures, student success such as degrees conferred, and more. The Budget Model Working Group identified and tested a variety of formulas that capture the essence of the higher education mission of the university and also respects the diversity of activities across disciplines.

Under KU's Priority Centered Management model, funding is allocated through a 3-step process:

• Step 1: Budget allocated to foundational priorities
• Step 2: Budget allocated to institutional strategic priorities
• Step 3: Budget allocated to academic units and support units. This step includes funds set aside to subsidize units and uses separate formulas for academic units and support units

Step 3

Every year, the academic units — the Schools and the College of Liberal Arts & Sciences — will be evaluated based on objective and subjective metrics in four categories. Each category will account for a percentage of a unit’s total allocation.

[enlarge image]

[accessible version]

Several of these revenue allocation categories will have objective metrics and subjective valuations that determine allocation. Roughly 82% of the funding is related to centrally generated metrics and measures (65% to SCH and another 17% to centrally generated metrics related to research, student success, and other strategic priorities). Peer-reviewed and provost scored categories account for the remaining 18%. See the section on about evaluation/scoring for additional detail.

Provost and Peer-Reviewed Scoring

Every year leaders of academic units will work with AIR, the Office of Research, the Center for Faculty Development & Mentoring, and within their own programs to assemble information about their activities and successes – basically documenting progress toward their unit’s strategic plans.

In February, deans will deliver short presentations covering the subjective portions of the larger academic unit formula (portions of the research, student success and other strategic priorities categories, which account for 18% of the annual allocation). Currently, the duration of each presentation is based on the size of the unit.

• 30-40 minutes – The College of Liberal Arts & Sciences.
• 20-30 minutes – The schools of Business, Education, Engineering, and Pharmacy.
• 10-20 minutes – The schools of Architecture & Design, Journalism, Law, Music, and Social Welfare.

The presentations will be evaluated and scored by other senior leadership at the university and will be observed by governance leaders at KU. A score sheet will help guide reviewers in their evaluations. Results from the scoring will guide allocations on areas that make up to 18% of a unit’s annual budget allocation.

Current version of the score sheet:

[enlarge image]

[accessible version]

Step 3a - Subsidy

All Responsibility Centered Management models and KU’s Priority Centered Management (PCM) Model include some relationship between revenue generated through tuition and the resources provided to a unit. However, if budgets were based purely on revenue generated, some units would not have a sufficient budget to operate. Subsidy is used to support these units and are based on a variety of factors including high-instructional and/or research costs as well as foundational importance within the university.

Subsidy is a budgetary pool of funds that allows rebalancing of revenue to guide the university’s direction. The allocation of the subsidy pool is guided by metrics as well as the discretion of the provost. Some academic units may require long-term subsidy, while others may require a short-term subsidy due to enrollment shifts or other market changes.

The subsidy will be based:

• 50% on a unit’s instructional costs, (which will also be compared to average instructional costs of peer institutions to ensure KU’s costs are in line with discipline and geographic norms).
• 50% through the provost’s discretion. This will be informed by metrics and the best interests of the institution.

The provost will set the total subsidy budget using the following guidelines:

• Support degree programs in strategic areas to ensure a portfolio of programs appropriate for a research university of KU’s stature.
• Recognize that there is a variance in the instructional cost of delivering programs by discipline. This variance must also consider efficiency levels relative to comparator data and the ability of a school to generate differential tuition.
• Reinforce the central role of research in KU’s mission, with emphasis on maintaining research capabilities in high-potential areas.
• Units cannot receive subsidy that increases their current budget beyond their prior year budget.

The subsidy pool of funds will initially be set at $20 million for FY20, roughly 10% of the overall academic unit allocation. The amount allocated to the subsidy pool will be reevaluated and determined each year by the provost in consultation with other senior leadership.

Step 3b - Guardrails

“Guardrails” are a strategy to reduce the impact of budget fluctuations due to model implementation.

Smoothing parameters have been set to help units prepare for changes in their year-to-year allocations. During the first few years of the budget model, gains or losses for each school or the College will be governed by the chart:

• FY20: Historical budget model
• FY21: +/- 1% (as compared to the prior year)
• FY22: +/- 2%
• FY23: +/- 2%
• FY24 & beyond: Continuation and setting of the smoothing guardrails will be re-evaluated every 3 years.

The extended time-frame of guardrail of use in the new budget model helps unit leaders ease into appropriate budgetary adjustments. Unit leaders can make more modest adjustments that either serve to limit distress or avoid wastefulness.

Special Notes About Guardrails and Subsidy

Guardrails
It must be stressed that guardrails are only in relation to the allocation model itself. If less money is put into the allocation due to campus-wide budget cuts, provost discretion, or other reasons, the units' overall budget change may be greater than that indicated by the guardrails.

Subsidy
The working group ran a variety of scenarios through the model and identified a possible, though unlikely, condition. It was noticed that certain situations (one example, an exceptional surge in research funding brought in by a single faculty member) could create a budget-related “windfall” for an academic unit. During the implementation years of the budget model, guardrails (Step 3b) will limit substantial swings in allocations, both up and down. During and after the implementation period, the model will be monitored for potential windfall anomalies. Absent of guardrails, the working group contemplated methods to constructively reduce the adverse effects of large unanticipated budget increases for isolated units. In such cases, one possibility might be using a levy that caps a unit’s budget allocation at 110% of the previous year’s budget. Excess funds would be diverted to the subsidy pool. The Budget Office and senior leadership will work closely with academic unit leaders when considering this possibility.

Order of Operations

[enlarge image]

[accessible version]

Members of the working group made efforts to test the model under multiple scenarios as well as how different order of operations might affect the final allocation amount each unit receives. 

• The process begins with a look at the current fiscal year distribution for each academic unit.
• The model formula (Step 3) is applied.
• Subsidy (Step 3a) is applied as necessary. The allocated funds for the coming fiscal year are compared with the allocation for the current year to determine subsidy levels.
• Guardrails (Step 3b) are applied, limited to 1% increase or decrease for the first year of the new budget model implementation.
• Incremental money, such as merit increases, are then distributed to the units.

Through these steps, academic units will know their allocations for the coming fiscal year months before it begins.

Contingency Funds

Despite all planning and review, unexpected events and influences can affect units in dramatic fashions. Contingency funds set aside in Step 1 – Foundational Priorities may be applied as a one-year relief effort in the event budget reduction is needed. Some situations where contingency may be called into play are an unexpected cut in state funding, or a rejected tuition proposal.

Contingency funds, part of centrally held reserves, will be capped at $5 million. Units needing contingency funds will be held harmless for 1 year and will be expected to develop a plan for budget reduction. Contingency funds must be repaid by the unit during the next fiscal year.