On Jan. 14, University of Alberta Provost Steven Dew and Vice-President Gitta Kulczycki (Finance and Administration) hosted a town hall meeting to share general information on the new budget model. This new model will come into effect during the 2020-21 budget year, with actual funds distributed Apr. 1, 2020. This next academic year will see  the new budget model being fine tuned. Work will be done on the algorithms that drive the new model and the hope is that in the 2019-20 budget year, the new budget model can operate in the background.

The current model is an Incremental Budget Model, which means that each new academic year’s budget is based on the previous year’s budget. According to the U of A’s strategic plan, the budget is used as a “starting point and the current budget is adjusted up or down relative to this starting point according to the change in available resources.” 

As Dean Allen Berger puts it, “The current budget model is based on decisions that were made at some point in the distant past and in many instances, there is no record of why the decision was made, what the rationale was. So each year, budgets go up a certain percentage and go down a certain percentage and everybody’s adjusted based on whatever that was.”

Berger notes that this can become problematic because as time goes on “the budget becomes not just a reflection of an overall allocation from years ago, but also an accumulation of special deals that are not transparent to anybody except the people that were involved in making the special deals.”

There are many other weaknesses associated with the current model; the budgets were typically based on history and habit, it was overly complicated, had limited transparency and limited accountability.

The strategic plan says that such a plan “limits the university’s ability to implement institutional strategic priorities and to integrate strategic planning with multi-year budget planning and reporting.”

In order to correct the weaknesses with the budget model, a Budget Model Working Group (BMWG) was created to develop and implement a new budget model under the sponsorship of the Provost and Vice-President (Finance and Administration). The BMWG found several principles that were to be the core of the new budget model: supremacy of academic priorities, transparency, accountability, simplicity, consistency, and predictability. To summarize: the university will be moving from an incremental budget model to the new model that focuses more on the university’s core: teaching and research. 

The new budget model, as outlined below, presents all of the principles the BMWG found were necessary in a model in visual way.

During an interview with Dean Berger on Jan. 18, he described the new model as being activity driven.  “The idea with this new model is that tuition and fees follow the students,” he said. “In other words, your tuition will now be specifically designed to support the costs of your education; funds going to the faculties who are offering the instruction.”

However, as can be seen from the visual representation of the new budget model, tuition is just a relatively small part of the overall revenue of the university. The biggest part of revenue for the university is the Campus Alberta Grant. The first chunk goes to support central administrative costs.

“Notice that administrative units are funded upfront so that means all of the faculties have an interest in making sure that the administration of the university is efficient and delivers good quality service,” said Berger. “If administration is inefficient, they are spending more money than is appropriate and there’s not as much left over for the faculties.”

Berger noted that part of each Dean’s job is to “make sure they have an efficient administration that’s not running at costs that are any greater than appropriate and that is delivering good service.” He added that the new budget model will “ This means the incentivize benchmarking how the UofA’s expenditures for administrative services compare to what other universities pay – and how does the level of satisfaction of all of the people who are customers of central administration feel about the quality of the services they’re getting.”

In an effort to make sure the University of Alberta is on par with other universities, it will be joining an international benchmarking group that will allow the university to assess whether it is getting good quality and effective administrative service form all of those central units. These central units include everything from the Registrar’s Office to the Advancement Office, to Facilities and Operations, etc.

After the Campus Alberta Grant funds administrative units, money is set aside for “whatever is deemed likely necessary for the subvention fund, with the remainder of the Campus Alberta Grant going to the faculties.” Berger described the subvention fund as  “a band-aid fund” which will cover university activities that are not captured in the algorithm of the new budget model. For example, how does the Devonian garden fit into the new budget model? Funds for that and other special activities might come from the subvention fund, which requires administrative decision making whereas every other part of the budget model is pretty much formula driven.

The remainder of the Campus Alberta Grant goes to faculties, with 70% of it distributed to teaching activities and 30% to research activities, in a formula driven way.

As seen on the visual representation of the new budget model, the 70% allocation of the Campus Alberta Grant has a multiplier, the BRU. The multiplier is used to ensure that “higher cost instruction and lower cost instruction are treated in an appropriate manner,” according to Berger, who added that,  “to look at the average cost of instruction is an imprecise method of running the model as the costs of instruction vary tremendously.”

To better understand, consider a chemistry course with a lab component and an English course. The English course tends to be cheaper than the chemistry course because of the chemistry’s lab and chemical components. Due to data shortage in the initial years of the model, the BRU will help with those discrepancies at the faculty level. For research activity, the 30% funding is not just to recognize and reward research activity, but to incentivize faculty members to be applying for grants. One of the best ways to measure research activity is by the number of grant proposals. Two things that are not shown in the visual representation of the new budget model is the international student differential and the aspect that faculties and administration will be charged for the use of space.

“International students pay a higher tuition than domestic students. A significant percentage of the differential will come directly to the faculty because we’re the ones who have to provide the services to support those international students.

As for charging for the use of space, the thought is, “as we’re funding administrative unit, let’s not include in the costs of maintaining space. Let’s pass the costs of maintaining space onto the users of the space so they have an incentive to be efficient in how they use space,” explained Dean Berger. “Arguably that means up front, there’s more money for the faculties but then on the backside, the faculties are charged for the space.” Therefore, it really makes sense to incentivize careful decision making on how much space is required.

“Here at Augustana, it’s just us and in which space are they going to charge for? We’re told so far that these charge backs are primarily for labs, classrooms, offices, to encourage efficiency,” he explained. Berger hopes that the formula being used will not focus on common spaces, such as the whole Augustana forum.

“We have a generously sized forum because in 2010 or so, when those spaces were being built, everybody thought, ‘Well, we’re gonna grow Augustana and eventual enrollment to two thousand students. We don’t have the classrooms, the faculty offices that would support that size of enrollment.’ In the meantime, I want to be sure we’re not paying for, what were, generous decisions back in 2010: the size of these common spaces.”

He also pointed out the library, as technically the library is the space of the university libraries. He wonders, “Is it Augustana space or is it library space and who pays for that space?”

The University of Alberta’s budget backgrounder can be found here.