Oregon Budget Model Primer

    This document is a brief introduction to the overall structure of the Oregon Budget Model. Questions that arise from this document should be addressed to Brad Shelton, Vice Provost for Budget and Planning.

     

  1. Responsibility and Responsibility Units
    The responsibility units for the Oregon Budget Model (OBM) are the Schools and Colleges, each headed by a Dean. Individual departments within a School or College, such as Architecture, Mathematics or Finance, are not responsibility units within the Budget Model. Some of the Schools and Colleges may wish to adopt the principles of RCM internally, others will not. The Library and the Graduate School are not responsibility units. The responsibility units are:
    • School of Architechture and Allied Arts.
    • College of Arts and Sciences.
    • Lundquist College of Business.
    • School of Law.
    • School of Music and Dance
    • College of Education
    • School of Journalism and Communciations
    • Clark Honors College
    As well as determining the operating budgets of these responsibility units, the OBM determines the overall budget of Central Administration and specifically the budget for Tuition Remissions (as administered under the Vice Provost for Enrollment Management). The OBM does not affect the operations of the University's auxiliary units such as Housing or Athletics.

    In addition to the definition of Responsibility Unit, the OBM requires a clear realignment of historical responsibility. For example, under the OBM, the Responsibility Units are given responsibility for funding Academic Support Accounts and GTF tuition remission. Prior to the OBM, both of these were partially the responsibility of the RU and partially the responsibility of the central administration.

    (Added 9/20/11) Another reallignment of responsibilities begins in FY12, when the Schools and Colleges will assume responsibility for any faculty salaries in their unit that fall under the Tenure Reduction Program.  To ease this transition, half of these salaries will be paid centrally in FY12.  In FY13 the Schools and Colleges will pick up the full cost.  TRP appointments related to administrative areas will continue to be paid centrally.

  2. Large scale distribution of resources.
    The operating revenues of the University come from many sources, including but not limited to: state appropriation, gifts and endowments, grants, contracts and indirect cost recovery, overhead assessments and, most importantly, tuition. The Oregon Budget Model determines the distribution of the state appropriation and tuition. All other revenues flow in the traditional manner.

    Tuition Revenue is defined to include the foregone revenue associated to GTF tuition waivers and other tuition remissions. Tuition revenue is therefore somewhat greater than actual revenue realized on tuition payments. Academic Year Tuition refers to tuition associated to the regular academic year and does not include any continuing education or summer session tuition revenues.

    There are three components to the budget of each responsibility unit: (a) Tuition Distribution, (b) Taxes and (c) General Fund Supplement (GFS). Each of these is described fully below. In the large scale the OBM distributes resources as follows:

    • Tuition Remission Budget = 9.2% of Academic Year Tuition Revenue

      This budget does not include any GTF tuition waivers.

    • Responsibility Unit primary budget = (RU share of Tuition) - (RU Taxes) + (RU GFS)

      This budget does include GTF tuition waivers.

    • Central Administration Budget = (State Appropriation) + (All Taxes) + (Central GFS)

      This budget also includes GTF tuition waivers (accounted for in the Graduate School).

     

  3. Academic Tuition Distribution Formulas.
    • Undergraduate Tuition - The 50-30-20 rule.
      All academic year undergraduate tuition, less undergraduate tuition remissions, is pooled, regardless of source (resident vs non-resident). That pool of revenue is then distributed to the RU's as follows:
      • 50% is distributed by Undergraduate Student Credit Hours (SCH)
      • 30% is distributed by Undergraduate Majors
      • 20% is distributed by Undergraduate Degrees.
      For this calculation Multiple Majors and Multiple Degrees are pro-rated. (For example, an Economics-Business double major would count as 1/2 a major in CAS and 1/2 a major in Business.) Premajors count as Majors. All undeclared students are counted as CAS Majors.  The differential tuition charged to Honors College students, less 9.2%, is distrubuted to the Honors College.
    • Graduate Tuition
      Graduate academic year student tuition is never pooled. Each RU unit is credited with the tuition revenue associated to each full or part-time student enrolled in the unit, regardless of where the student takes credit hours. Any (non-GTF) central tuition remissions associated to students enrolled in the unit are deducted from this distribution. (Note: RU units are also charged for any GTF positions for which they are the hiring unit, but this does not affect revenue distributions.) This Rule was modified beginning fall 2011 to include a 30% distribution of graduate income whenever a student is formally admitted and enrolled in a graduate certificate program. 
    • Summer Session Tuition
      Undergraduate Summer Session Tuition is pooled and then distributed to RU's strictly by student credit hours. Graduate Summer Session Tuition is also pooled and distributed by student credit hours.  (Revised:  1/26/11)

     

  4. Taxes and the Tax Rate. (revised 8/23/11)
    Each RU's tuition revenue distribution is reduced by taxes. Taxes are meant to represent the RU's share of central University costs - the unit's share of the library, student services, physical plant, legal services, etc. Rather than utilize a complicated cost accounting system, the Oregon Budget Model uses total expenditures as a proxy for the relative size of the RU's central costs. As of July 1, 2011, the Tax Rate for the Tax calculation is 35%. (The tax rate for Fiscal Year 2011 was 30.5%.  The tax rate increase is associated with a substantial decrease in state appropriation.) The RU tax bill for fiscal year N is defined to be 35% of the RU Expenditure Base from fiscal year N-2. There is a two-year lag on taxes. The RU Expenditure Base is defined to be all expenditures from all sources with the exception of:
    • Expenditures on Grants and Contracts,
    • GTF tuition remissions,
    • Other tuition remissions
    • Other taxes (such as overhead on service center revenue).
  5. Note: Designated Operations are taxed at 8% at the time of expenditure. When OBM taxes are calculated, this tax will be returned to the RU to avoid "double taxation."

     

  6. The General Fund Supplement.
    Each RU has a General Fund Supplement (GFS), as does the Central Administration. At the startup of the Oregon Budget Model, the GFS in each RU equaled the difference between the historical budget of the unit, and the budget produced via Tuition Revenue Distribution minus Taxes. The base year for this calculation was fiscal year 2010. In some cases the GFS is positive, in others it is negative. The GFS of Central Administration is defined so that the sum of all GFS values is zero. An accounting of the FY2010 General Fund Supplement can be found here. (Notes: these calculations were revised, January of 2011, to account for changes in designated operations taxation and costs associated to Graduate Teaching Fellows.)  GFS amounts were adjusted in FY11 and at the beginning of FY12 to account for a substantial decrease in state appropriation.

    The General Fund Supplement serves three simultaneous purposes:

    • It seeds the OBM so that RU's are initially held harmless from sudden dramatic decreases in budget.
    • It provides a rough measure of the cross subsidies amongst the RU's.
    • It provides an accounting mechanism for recurring budget changes that are not directly tied to revenue production.

     

  7. Strategic Initiative Process.
    An integral part of the Oregon Budget Model is the annual Strategic Initiative process. Proposals for one-time and recurring projects are solicited from across the campus, then compared and prioritized. This process takes place between March and July each year.

     

  8. Calendar.
    The base budget revenue calculations used in the Oregon Budget Model are based on projections of total enrollments, student credit hours, degrees and majors. Communicating and analyzing these projections is a year-round partnership between the Schools and Colleges, the Vice Provost for Budget and Planning and the office of Budget and Resource Planning. The calendar for major decision points in the budgeting cycle is maintained at BRP.

    At the end of each fiscal year, SCH, Major and Degree projections are converted into actual values and the associated revenues are recalculated. The difference between projected revenue and actual revenue is then credited (or charged) to the Responsibility Unit. This settle-up process allows for substantial flexibility in financial planning.

     

  9. Comparing the Oregon Budget Model to other RCM budget models.
    RCM budget models around the United States vary enormously in complexity and scope. Some (most) budget models incorporate research, the OBM does not. All RCM budget models have formulas for revenue distribution based on student credit hours and (usually) majors. The OBM appears to be the first RCM budget model to incorporate degrees, but the proposed budget models at University of Washington and University of Arizona also both incorporate degrees. All RCM budget models use some form of taxation, but the formulas for this taxation are often much more complicated, incorporating extra parameters such as space and energy consumption.