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Tuesday, October 24, 2006
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New budget model will link academic priorities, resources

Characteristics of the New Model Budget

Based on the recommendations of the Vision OHIO Resources Implementation Team, the new model will emphasize:

? Quality ? The purpose of the new model is to ensure that resources support the university?s academic priorities. A set of principles being developed by the deans prior to the new model will set quality standards and boundaries for resource allocations that will not permit actions such as shifting instructional load predominantly to part time or temporary faculty simply to reduce costs.

? Accountability ? Each college is responsible for its resource allocation decisions and must ensure that outcomes (goals intended to be achieved) are met. Having accountability at the college level encourages efficient use of resources, especially important as state subsidies continue to decrease.

? Transparency ? The funds that are allocated to each academic unit will be clearly outlined in the budget, and enrollment figures will be easily accessible through the Office of Institutional Research.

? Simplicity ? Some approaches to budgeting processes include complex formulas and accounting measures. Ohio University?s new model will focus on proportional allocations rather than specific fees for services or tracking of income earnings.

? Budget stability ? As the university moves into the new model, the budget will not be immediately adjusted and multi-year averaging of allocation metrics will be used so units have time to adjust to changes.

ATHENS, Ohio (Oct. 24, 2006) -- Ohio University has staked out its goals for the next decade in its strategic planning document, and beginning July 1, 2007, it will have a new budget model to help support its priorities.

The new budget model will connect the university?s fiscal processes with the priorities of the academic plan by allocating resources in direct line with the activities of academic units. It will encourage accountability and allow academic units to understand the link between their activities and the resources needed to support them. This approach will allow academic units to consider both fiscal and academic quality issues at the same time in an environment where a decreasing amount of the university?s budget is provided by state subsidy.

?The new model is a tool to support the academic priorities,? said Provost Kathy Krendl. ?It gives more information to the units than they have had in the past. It focuses on quality, but it also encourages entrepreneurial activity and generation of new revenue.?

The current budget process that Ohio University employs is known as incremental budgeting, in which a unit?s current budget is the basis for subsequent budget development. Incremental budgeting uses uniform reductions or increases that take away or add a fixed percentage of dollars for each unit across the university, a method that does not reward quality and effectiveness. 

The new budget model will work by flowing tuition and state subsidy revenues through the academic units based on their academic activities. Units also will be responsible for a portion of the total costs needed to fund academic support areas such as administrative and facility costs.

?In addition to considering fiscal issues, academic units will have to weigh quality issues in relation to academic priorities,? said Associate Provost for Academic Budget and Planning John Day. ?Before implementing the budget model, the academic leadership will be creating a set of principles that will reinforce the value of activities that might need resources compared to the resources they generate. Things like honors programs, general education and interdisciplinary programs are crucial and must be supported even if they require more resources.?

Proposed and researched in 2005 by the Resources Subcommittee of the Task Force for the Future of Ohio University, the new model was developed further by the Resources Implementation Team over the past year as they worked on the implementation of Vision OHIO.

Both groups were co-chaired by Faculty Senate Chair Phyllis Bernt and Terry Conry, Associate Vice President for Finance and Administration, and had university-wide representation. As the implementation team delved into the details of creating a new model, it looked to institutions nationwide for best practices. Four representatives, including Bernt, visited Ohio State University, the University of Michigan, and the University of New Hampshire as part of broader benchmarking exercises which were completed by the team. 

?The budget model isn?t the driver. The academic plan should be the driver and the budget model helps achieve that plan,? Bernt said, reflecting on the visits. ?That was the theme that kept coming up at every institution we visited.? 

?Moving to a more transparent and systematic way of budgeting is a good idea,? she added. ?It?s not clear what our current budget is based on. We?re looking at an activity-based budget, one in which resources are tied to activities. It?s a much more transparent way of doing budgeting.?

Auxiliaries, Regional Higher Education and the College of Medicine will not be part of the new budget model, as they have separate budgets. Those areas currently pay overhead for services they use, and that overhead rate will be updated through a new cost study.

Implementation is slated for the beginning of fiscal year 2008, though during the first year budgets will not actually change as the university evaluates and monitors the approach while determining what shifts in resources should occur and over what period of time.

Day said that plans to create a detailed draft of the model have been held up because the state is in the process of reconfiguring the formula it uses to assess how much each institution will receive in state share of instruction subsidy funds. The new formula ? which groups academic areas differently than previously so that disciplines are clustered with those that have similar costs ? will be available in November. 

?Each area will get the money they generate from SSI, so the new taxonomy affects our new budget model. To build a model at the beginning of fall quarter only to have to drastically change it by the end of the year did not make sense,? Day said.

The current plan is to have a draft model of the new budget ready at the beginning of winter quarter and begin gathering feedback from various constituent groups. Open forums will also be held to gather input on the draft.

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