Joint Task Force on Resource Allocation (JTFRA)

2/13/14

Attendees - T. Anderson (co-chair), E. Chilton (co-chair), A. Mangels, MJ. Peterson, D. Evans, M. Fuller, E. May, B. Harvey, Y. Jimoh, A. Shabazz, J. Normanly, L. Briggs, M. Malone, D. Gould, T. Sutton. HURON: Maggie Burger, Glenn McLaurin, A. Butterfield, P. Kelly, J. Buehler.

This meeting was conducted remotely via webex since the campus was closed due to snow.

Opening Remarks

Huron began by describing what they hoped to accomplish in the meeting. They are at a point where the task force needs to start discussing the details about allocations and cost drivers. They planned to start this conversation by reviewing revenue distribution and, time permitting, discussing the allocation of indirect expenses.

Key Decision Points of Model

Huron reviewed the two key decisions that have been made:

 Agreement on an all-funds model approach; and

 The selection of primary units.

They then asked the task force to consider how they wished to address the distribution of the following revenue types: Tuition & Fees, Scholarship Costs, Appropriations, and F&A Recoveries. Huron explained that scholarship costs are included in the revenue category since they net against tuition and fee revenue. They then pointed out that this discussion will focus on the allocation of revenue to schools and colleges. Auxiliaries are not part of this discussion since their revenues generally post directly.

Tuition & Fees Revenue Distribution

Huron suggested that tuition and fee revenue should be distributed in a way that closely aligns with authority for teaching and enrollment. In addition to aligning with authority, the method should provide transparency to decisions around enrollment and retention. Members of the task force pointed out that most tuition is not retained at the campus and, therefore, it may be misleading to call this category “tuition and fees.” Associate Vice Chancellor Mangels explained that the model currently allocates tuition fully to the schools and colleges. The tuition that is remitted to the State is netted out of the state appropriation.

Under the current budget methodology at the University, only very small piece of tuition and fee revenue is directly assigned to the academic units. . Huron proposed distributing tuition and fees based on a combination of instruction and student majors. They recommend using instructed credit hours (based on unit of employment for the instructor) as the basis for instruction and major FTEs as the basis for majors. Using a combination of these drivers helps to reflect both the cost of instruction and the cost of enrollment. Huron reviewed how other institutions, who have instituted an incentive-based model, have split the allocation between major and instruction. The task force questioned how this type of model would encourage and support schools and colleges that have expenses in co-curricular entities that may not tie directly to instruction or majors (i.e., corporate relations, career services). Using instruction and enrollment as the sole drivers for tuition and fees would adversely affect schools and colleges that have academic expenses that go beyond the typical advising and recruitment of majors. Huron suggested that incentives for this type of activity could come in other ways, such as through the strategic investment pool.

To help frame the discussion around the split between instruction and major, Huron showed an analysis of the University’s financial statements. Based on the financial statements for the past five years, the percentage split between instruction and academic support for the University has averaged 83.9% instruction and 16.1% academic support. This percentage split reflects the University as a whole - the actual split by school and college varies. Huron demonstrated what the distribution of tuition and fees would look like in FY2013 using the 83.9/16.1 split. The same split was applied to both undergraduate and graduate tuition and fees. It was suggested that this split does not have the same impact on graduate tuition and fees as it does on undergraduate since most of the graduate instruction is occurring in the same unit as the major.

The task force discussed the proposed split and how the calculated percentages from the financial statements may not fully capture academic support costs. The costs categorized as academic support in the financial statements generally include expenses incurred at the Dean’s level but not necessarily the academic support provided by faculty. The task force agreed that using a driver that reflects both instruction and major allows for more cross-collaboration. It was suggested, however, that this alone is not sufficient to promote collaboration and the University will still need governance in place to ensure this strategic goal is accomplished.

After much discussion, Huron mentioned that the campus does not need to maintain this current 83.9/16.1 split in any model ultimately chosen by the University. They would like to use it as a starting point for their scenario building. One of the scenarios will be to vary this split.

Scholarships and Waivers

Huron suggested that distribution of scholarships and waivers should generally follow the distribution of tuition and fees. One goal of this distribution is to prevent discrimination against students with financial need. For the University, Huron recommends that the cost of undergraduate scholarships and waivers follow the distribution of undergraduate tuition and fee revenue while the cost of graduate GEO waivers follow the graduate FTE employment. This approach more closely aligns the authority for the costs and revenues associated with hiring graduate students with the waiver expense. Huron clarified that the model is not assuming any change in the way grants are currently charged for graduate waivers.

The task force discussed how the suggested method for allocating graduate waivers may impact hiring a graduate student from another school or college. Some members pointed out that the cost and benefit of hiring a graduate student under this model is the same regardless of the school or college of enrollment. The cost to hire a graduate student from another school/college is no different than hiring an internal graduate student. Likewise, any revenue generated by the courses that student teaches will accrue to the employing school/college regardless of enrollment. The proposed solution would also fix the fact that non-academic units that hire graduate students don’t currently pay for the waiver.

State Appropriation

Huron moved on to discuss how the state appropriation could be distributed in the model. Huron proposed that under the new model, all money will be the same color for the primary units. The central offices will still be required to insure that state appropriations are spent according to state regulations but within the model, the state appropriation can be allocated for various purposes.

Huron illustrated how numerous institutions have split appropriations between research and instruction. Most of the institutions fall within the range of 0- 50% allocated to research. High research institutions landed closer to the 50% end of the spectrum. Huron generally helps institutions identify this split by looking at negotiated, effective and calculated rates for F&A recovery. The difference between the effective rate and calculated rate represents the institutional support of research. The University can use state appropriation to cover the support for this research. Huron suggests setting a target recovery rate of 35% (current effective rate is 30%). They then used the difference between the target rate and the calculated rate to calculate the pool of state appropriation to be used in support of research. Based on these calculations, this pool would allocate 19% of the state appropriation to research. This method would at least cover all of the overhead not currently recovered in the effective F&A rate. Task force members pointed out that not all research done by the schools and colleges is sponsored and therefore the necessary support for that research would not be captured in the percentage calculated by Huron and will require continued strategic investment.

Huron also recommended allocating the full F&A recovery to schools and colleges, rather than using the current 30% (of the 70-30 split). This would simplify decision making around the impact of effective F&A rates. Task force members pointed out that cost sharing would need to be negotiated at the Dean’s level which would require training for the Deans.

Next Steps

Since the meeting topics generated a great deal of discussion, task force members were encouraged to continue to comment and ask questions via the listserve. At the next meeting, Huron will follow up on revenues and the allocation of indirect costs then begin to work through how costs are allocated.