Budget model evaluation and revision

Isho Tama-Sweet, PhD, CPA

Department Chair of the College of Business, University of Montana

The views and opinions expressed are those of the author and do not necessarily represent the views or opinions of EAB. 

Topic and problem

The University of Montana experiences a decline in enrollment of about 40% from 2011 to 2021. The general fund revenue (adjusted for inflation) declined by about one-third during that period. In the past three years enrollment has grown slightly, revenue is increasing, and we have cut our deficit and have a balanced budget. We are using this period of stability to reconsider our academic affairs budgeting considering the demographic, political, and financial challenges facing all higher education.

Current budget model and process

The University of Montana uses an RCM model that was designed in 2018-2019 with support from EAB. It distributes student tuition and state appropriations to colleges based on three factors: student credit hours, majors, and externally funded research expenditure. Colleges have margin targets and return the remaining to the institution for university-level expenses. However, this process has not aligned resources equally with college-level faculty expenses. As a result, the provost adjusts college-level funding, usually by 10-20% for each college. This has made financial planning difficult for deans and led to general distrust and frustration with the budget model.

Solution

This is a year-long project that is currently in process. The fall semester was an “inquiry phase” of information gathering, including extensive meetings with each college, all vice presidents, and several other key administrators. Based on the feedback, I am making recommendations to the deans in mid-January on potential adjustments to the budget model and process. The spring semester will be used to work through the proposed adjustments with all the deans and complete details.

Our revision of the budget model will occur concurrently with an innovative approach to program review that is implemented by our vice provost. The desired outcomes are a budget process that is more credible and engenders greater trust among deans and faculty. The new model should provide clear mechanisms for supporting new program creation, incentives for growing new programs, and work in conjunction with program review to address financially struggling programs.

Resources

The fellowship included a session on budget models. In addition, the EAB Business Affairs Forum has extensive resources on budget model creation and implementation. The EAB Compendium of Budget Models supplied particularly useful comparisons to other institutions. The people at EAB were incredibly supportive, including my EAB sponsor Logan Morris, and several other professionals with experience in budget models.

From the University of Montana, support from my sponsor Kelly Webster, AVP of strategic planning, and Provost Adrea Lawrence, were key to getting participation from the Deans and other VPs. Overall, the Rising Leaders fellowship was a great professional development experience. The perspectives, information, and insight were useful. At least as important is the realization that all higher education is dealing with a similar set of challenges. While the details of the solutions are specific to the institution, there is a lot to be learned from other institutions, and a lot of support from EAB.