Campus Conversation: New budget model mere months away

University budget leaders detail incentive-based approach

April 3, 2018

Strategic PrioritiesThe March 29 Campus Conversation focused on the new university budget model, drawing an audience that nearly filled the room. Held at the usual time in the Lawrence Street Center Second Floor Terrace Room, the event featured a Q&A-style presentation by the Budget Office, the chair of the Faculty Assembly Budget Priorities Committee (PBC) and the vice chancellor for Administration and Finance.

Provost and Executive Vice Chancellor for Academic and Student Affairs Roderick Nairn facilitated the conversation, which showcased the strengths of the new incentive-based budget model – and included prizes for attendees and a cowbell for added effect.

Beginning in October 2016, the New Budget Model Steering Committee began meeting regularly to discuss a new budget model to enable long-term financial stability, a key university priority. After a review process with the chancellor and other university leaders, the incentive-based budget model was approved in October 2017, with plans to go live July 1, 2018.

“The new budget model creates an environment that incentivizes growth of all campus units and, as campus revenues grow, provides for investment in strategic initiatives,” said Jennifer Sobanet, chief financial officer and vice chancellor for Administration and Finance. “We want all of our university to grow.”

Why we need a new budget model

Like many other institutions of higher education, CU Denver has used an incremental budget model, in which allocations are based on the previous year’s funding levels. But increasing market pressures have led to problems under this model, said Senior Budget Director Todd Haggerty.

CU Denver Campus Conversation
Todd Haggerty, senior budget director, talks about the new budget model as Jennifer Sobanet, chief financial officer and vice chancellor for Administration and Finance, looks on.

Funding from the state has decreased while university expenses have increased. The university is relying more heavily on resident undergraduate tuition – but enrollment can vary from year to year, and there are limits to tuition hikes. To address these issues, university budget experts have recommended shifting from incremental to incentive-based budgeting.

“Right now, we’re squeezing the piggy bank to see what we can get out of it,” Haggerty said. “We need to make structural adjustments, and at this point, that’s very achievable for us.”

Because 70 percent of the university’s budget is invested in people, providing for increased compensation depends on a healthy budget. Sobanet reminded Campus Conversation attendees of budget cuts in recent years that affected salary increases.

“Because there is volatility in revenue streams but expenses continue to grow, we’re facing financial pressure as a campus,” she said. “We have to think about how we adapt to this new environment.”

What an incentive-based budget means

Under the current incremental budget model, both new revenue and budget cuts affect campus units equally. With the new incentive-based budget, units can reap rewards through responsible, proactive financial practices, such as:

  1. Growing revenue
  2. Containing costs
  3. Reallocating resources

The new budget model is not intended to solely reward growth, Sobanet said. There are safeguards and school- and college-specific guide paths to allow units to recognize their growth. They will be able to strategically support other units with higher-cost programs or less growth – and all of this with more transparency around resource allocation and decision making.

“You can gain more for your unit, but we’re all in this together,” Nairn said. “One unit doesn’t win at the expense of another unit. We’re one campus.”

Budget Office staff are preparing reports to enable transparency and developing planning resources to launch the new budget in July. Future budget governance will fall to the Executive Budget Committee and the Chancellor’s Advisory Committee on Budget – made up of representatives from across campus, including the BPC chair.

Sobanet said the process can be tricky during this first year of implementation.

“In a transition year, there are a lot of structures to put in place to allow us to have information flow in all directions,” she said. “We’re flying the airplane while we’re building it.”

How culture can support the budget

The presenters at the Campus Conversation agreed that culture will play a key role in the success of the new budget.

“If we really want change, people have to begin to think and act differently,” said Diana White, associate professor of math, who served on the New Budget Model Steering Committee and chairs the PBC. “We succeed by thinking as broadly as we can for the sake of the university.”

White praised the new budget development process as being inclusive of people and units throughout the university – including the Student Government Association, Staff Council and Faculty Assembly. White believes the university needs to build a cadre of faculty and staff who have a common understanding of the budget and serve as a resource for the university.

“Even though we have many units in our organizational structure, at the end of the day, everything overlaps,” she said. “The way we’re going to be successful with the new budget is if we’re thinking more collaboratively, as one institution.”