Topic: Other options considered for a budget system adjustment
Goals: Provide additional funds to central as proposed by the Budget Review Committee
Better align resources with strategic goals of the University
Retain appropriate incentives for colleges
Keep the model simple and transparent
Options considered:
- Increase the tax charged to colleges on their marginal revenue
The current tax is 24%, 5% of which provides funding for the discretionary distribution by the provost. Increasing the tax by 5% historically generates approximately $2M per year, including taxes on reconciliations from the previous year. If reconciliations are excluded from the tax, an additional 5% tax on FY2010 budget model would have generated ~$1.1M for the Provost to distribute to the colleges based on the strategic objectives.
This option did not provide sufficient funds to the Provost.
- Limit the net marginal resources generated by each college to 2% or 3% of PBA beyond their needs for salary and benefit increases
Using FY10 budget data, a 2% cap over salaries and benefits results in central funding of ~$10.2M, while a 3% cap over salaries and benefits results in central funding of ~$7.6M.
This option provides sufficient funds to the Provost but does not retain the appropriate incentives for the colleges.
- Rebase all colleges, providing additional annual rate to the center.
A 2% rebasing reduction would generate $12.7M in PBA to Central, while a 3% rebasing reduction would generate $19M in PBA to Central.
This option provides sufficient funds but does not provide sufficient time for colleges to adjust to the impact on their budgets.
- Apply the standard 5% tax to revenues previously not taxed.
New revenues generated by the differential, program, and technology fees for all colleges during the FY2010 budget process totaled ~$7M. The standard 5% provost tax applied to these fees would generate ~$350K in PBA to Central.
This option does not provide sufficient funds to the Center. In addition, it applies a tax to revenues paid by students above the traditional fees. Historically, students have been told that these fees would not be taxed and that the revenues generated from these fees go directly back into their programs.
Impact to Colleges:
The impact of the options considered is illustrated by college on Attachments 1 and 2.