Future-focused budget

In a higher-education environment that’s become crowded and capriciously funded, it’s more imperative than ever for universities to differentiate themselves and invest in their strengths. That’s the backdrop for a movement occurring across higher education. Institutions are becoming more intentional, more focused on identifying the students they seek to serve and delivering the most relevant academic programs possible.

An incentive-based budget model being created at CU Denver and other universities recognizes that this new environment – reduced state funding, greater competition for students, increasing costs to deliver education – demands future-focused, strategically integrated financial planning.

“Historically, most institutions – this is not unique to CU Denver – have used incremental budgeting in which budget proposals and allocations are based on funding levels of the previous year,” said Todd Haggerty, CU Denver senior budget director. The incremental approach served the university well when revenue was steadily climbing, allowing for equal percentage increases for all units.

Strategic-oriented approach

However, state appropriations for higher education have dropped dramatically in Colorado in recent years, prompting universities to bridge the funding gap through increased tuition. “The market can only handle so much in the way of tuition increases, so these forces have combined to lead us to this moment where an incremental budget model can no longer service the institution,” Haggerty said. “We have to be as strategic as possible, aligning and reallocating resources to support our strategic priorities.”

Chancellor Dorothy Horrell has established five strategic priorities for CU Denver’s long-term success:

• Student success
• Scholarly preeminence
• Community impact
• Inclusive excellence
• Long-term financial sustainability

The budget redesign directly supports the fifth priority, as the new approach gives the university more control and transparency around its resources to plan for the long term. It also indirectly supports the other four strategic priorities. Jennifer Sobanet, CU Denver chief financial officer and vice chancellor of Administration and Finance, notes that without a strong financial core, the university cannot meet the needs of our students, support our faculty and staff or create a vibrant campus community.

Incentives for growth

Built into the incentive-based model are, among others, incentives for:

• Growth in enrollment – through increased recruitment, retention and graduation of our graduate and undergraduate students. This also includes growth in non-traditional students like continuing and professional education, such as executive education and corporate trainings.
• Increases in sponsored research, creative works, and grants and contracts.
• Increases in opportunities for fundraising/advancement.
• Student-centric, research-oriented and faculty led interactions in the community, thereby increasing revenue to a school or college through enrollment growth and sponsored research.
• Collaborations that break down silos and promote a more inclusive university culture.

Overall, the model provides incentives for the entire university community to take advantage of new markets and opportunities for growth in any kind of revenue – including enrollment, research and donations. The new approach allows the schools and colleges that outperform their budget to retain those additional funds, which can lead to a chain reaction of increased one-time funds and ongoing funds.

“You start to see a how a budget model promotes an entrepreneurial way of thinking. It unleashes a level of creativity that I think can be very healthful for a university,” Sobanet said. “It becomes a virtuous cycle and helps drive the other four main strategic priorities.”

Collaborative process

Along with the incentives built into the model, the Budget Office is developing a planning and budgeting process that creates a forum for schools, colleges and central support units to discuss strategies and work together to achieve our priorities.

A steering committee worked on the redesigned budget model over the last year and currently the Budget Office is transitioning into development of a new planning and budgeting process. A governance structure is being created along with a Chancellor’s Advisory Committee on Budget which includes representation from the Faculty Assembly (including the Budget Priorities Committee), school and college deans, and the Chancellor’s Cabinet. Haggerty said discussions will continue this fall to determine if the incentive-based model is ready to be implemented for the next fiscal year, beginning July 1, 2018.

With coordinated goals, actions and incentives that are married to guiding priorities under an incentive-based budget model, the university is poised to thrive in all strategic areas, Sobanet said. “We’re trying to manage this in a way that’s not disarming or alarming,” she said. “Instead, it’s exciting. It’s giving the university community a view into the impact we will have in the future.”

If you have questions about the redesigned budget model, please send them to todd.haggerty@ucdenver.edu