Budget Recalibration: Budget Videos and Frequently Asked Questions
View Provost Jerry Baldasty's Talk to UW Bothell on ABB (Activity Based Budgeting) and Lessons Learned:
View State Budget Overview of Sources of Funds:
View State Budget Overview of Uses of Funds:
1. What is Responsibility Centered Management (RCM)?
RCM is an acronym for Responsibility Centered Management. RCM is a budget management tool that can be used for budgeting, decision-making and strategic planning at various levels, viz., Schools, administrative units and the entire campus. RCM provides the financial and non-financial data that is necessary for evaluating choices and courses of action in making decisions.
The goal of RCM is to provide an incentive-based, transparent, and decentralized approach to budgeting. This will facilitate outcomes that align with the mission of the institution while maintaining flexibility to adapt to evolving strategic priorities.
2. Why do we need RCM now?
Over the last ten years, UW Bothell has grown from a campus with about 1600 (FTE) student in two buildings largely supported by state funds to a heavily tuition-dependent, multi-building, multi-location campus with nearly 5600 (FTE) students. Over this time, the number of our faculty and staff has more than doubled and we now have five schools plus the FYPP program. With the increase in size and complexity of our operations, we need a budgeting approach that will help us make more informed, strategic, thoughtful decisions about allocation of scarce resources. Based on a survey of the budgeting systems used across US Universities, the Budget Recalibration working group set up by the Chancellor at UW Bothell endorsed the adoption of the RCM model in 2017 and recommended a three-year phase in plan for adoption.
The RCM model will help us accomplish three primary goals, consistent with our core mission and values:
- Enhance transparency about both revenues and the costs of operating our institution
- Place greater and clearer authority and accountability at the level of Deans, Vice Chancellors and Unit heads
- Strengthen motivations to achieve and optimize revenue generation and cost-effective practices
3. How is RCM different from what we have now?
The budgeting system we have historically used is an “incremental” budgeting system wherein a School or an administrative unit is allocated a budget based on their previous year budget/expenditures along with additional money to allow for higher costs and new projects in the budget year. In this system there is no direct linkage between budget allocations and levels of activity. Instead, Deans and unit heads negotiate with the VC’s and the Chancellor for incremental additions to their budgets over and above the previous year’s budgets.
In the RCM model, the budgets for Schools will be based on the tuition and other revenues they generate. These revenues will be distributed using transparent formulas based on measurable levels of activity such as the number of student credit hours taught, the number of majors in the School, and the amount of research grants received. Under RCM, Schools will have the flexibility to manage their revenues and expenditures.
4. What is Modified RCM as adopted by UWB?
In a strict RCM model, all the net tuition revenues would flow to the Schools. The Schools would then pay for all their operations and the costs of common campus operations such as student services, library, security, IT, building maintenance, and central administration. This strict RCM model requires complex cost-sharing mechanisms and has the potential to pit Schools against each other in a competition for students and services. To avoid these negative impacts, and to allow for increased accountability, flexibility and incentive-based decision making, the UWB Budget Recalibration committee recommended that we adopt a modified version of the RCM Budget model.
In modified RCM (the model adopted at UWB), a major portion of the net tuition revenues will flow to the Schools as their budget allocations, based on the student credit hours (SCH) and the number of majors (headcount) in each School. The schools will use these funds to pay for their direct costs such as salaries and operations. A small portion of the net tuition revenues and all state allocations will be retained centrally at the campus level and used to pay for the common campus operations as well as new campus initiatives.
5. How will RCM affect School budgets? Will some School budgets decrease?
To maintain stability as we transition to RCM, all School budgets at UWB will be protected at the current 2017-18 level. That is, no School budget will fall below the amounts approved for 2017-18. RCM will only be applied to new net tuition revenue generation going forward from now. In other words, while current budgets are protected, future increases in School budgets will be based on increases in student credit hours and number of majors in the School.
6. How do funds flow in RCM at UW Bothell?
Under RCM, all new net tuition operating fee revenue at UW Bothell will be divvied up into two major buckets, each with their own set of allocation/distribution rules/purposes. The first bucket is allocation to the Schools and is comprised of 70% of the new net tuition operating fee revenue, and the second bucket is the remaining 30% which will be allocated to administrative (non-school) units, utilized for fixed costs, and/or held for institutional purposes. Additional General State Appropriations not tied to a specific program or cost may also be held at the institutional level.
Within the new net tuition distributed to Schools, funds will be distributed based on student generating activity in schools. It is expected that 80% of the pool will be weighted towards the total FTE production in the schools, with the remaining 20% weighted towards major headcount in the schools.
The percentages indicated above will be reviewed periodically and may be changed after consultations with the Chancellors, Deans, and the GFO.
As for the administrative (non-School) units, their portion of new net tuition operating fees will be allocated under the direction of Chancellor and Vice Chancellors, based on the needs of the units and their planned contributions to the campus mission and goals.
7. How can schools prepare for RCM?
The RCM environment empowers Schools and administrative units to optimize their costs and increase efficiency in order to free-up resources to pursue new ideas or programs. To do this, Deans, administrators and unit leads should become familiar with their internal cost structure and understand their budgets and costs so that they can make informed, financially sustainable decisions.
8. Will RCM lead to competition between Schools?
Given the increased autonomy of Schools within an RCM environment, it is conceivable that a School would operate in a School-first approach rather than a UWB-first approach. To mitigate this concern and to deal with related issues, the UWB Chancellor set up a Process Development & Policy (PDP) planning group (with wide representation across the campus from leadership, faculty and staff) to establish collaboration principles and practices across Schools and units that would prioritize campus values and goals. These collaboration principles and practices will guide School and campus leaders as they work together and adopt holistic decision-making processes that will help achieve our goals at the School and campus levels.
9. How is RCM tied to strategic planning?
Resourcefulness, a component of the 21st century Campus Initiative, calls for building a culture of institutional sustainability through sound, creative use of financial and human resources. The RCM framework facilitates Schools and Units in continuing their stewardship of scarce financial and human resources and adopting financial practices that are sustainable and lead to long-term success. As we begin creation of UWB’s next strategic plan, we will assure funding is available for selected goals.
10. Have other universities used RCM?
Yes. RCM is both an emerging trend and has been widely used across all types of educational institutions, both private and public. UW Seattle has used a version of the RCM that they call ABB in setting their School budgets for the last five years. The primary reason Universities use RCM models is to help navigate financially constrained environments that are prevalent in university systems.
11. Is RCM different from the ABB model used on the UW Seattle campus?
The ABB (activity-based budget) model used at UW Seattle is very similar in principle to Bothell’s RCM model. At UW Seattle, School budgets are determined by activity levels rather than the incremental costs model that was used in the past. However, there are slight differences in the percentage allocations and the methodology between Seattle’s ABB model and Bothell’s RCM model. To avoid confusion between the two models, we are using the “RCM” moniker for our model. See the Seattle Office of Planning & Budgeting’s website for a description of the ABB model.
12. How will the integrity of academic programs and course offerings be maintained under RCM?
RCM will provide School leadership with more autonomy, so academic program considerations will get an even greater priority as decisions will be made by those closest to the impact of those decisions. At the same time, the collaboration values established for the RCM model at Bothell will act as guidelines to ensure that program offerings are evaluated to fit with the stated goals of the institution and the need to sustainably align future funding.
13. Is RCM linked to the pause in enrollment growth at UWB?
No, the pause in enrollment growth at the Bothell campus was primarily driven by the lack of building space. Using a common metric, the Bothell campus has less than 100 square feet of space per student (against a recommended standard of 150 sft per student) and our classroom utilization rate exceeds 95%, so there is no space to grow till we get another academic building. However, the pause in enrollment growth does place pressure on campus revenues, so the adoption of the RCM model will allow us to manage our resources more efficiently and creatively.
14. What does the 60:30:10 faculty composition ratio mean? When does it take effect?
The 60:30:10 ratio refers to the desired faculty (FTE) composition at Bothell: 60% tenure track, 30% full-time lecturer track and 10% part-time faculty. At the end of FY 2017, the actual faculty FTE composition at UWB was 46% tenure track, 26% full-time lecturer track, and the remaining 28% part-time/grad student/other faculty. (In comparison, the percentage of tenure-track faculty FTE at the Seattle campus is around 70% in most of the large schools). Over the coming years, the intent at UW Bothell is to increase the composition of tenure-track faculty (to 60%) and full-time lecturer-track faculty (to 30%) and reduce the reliance on part-time faculty. This will be a gradual process and may take several biennial cycles.
15. Is the 60:30:10 ratio driven by the move to RCM?
No, the 60:30:10 faculty composition ratio is not linked to the move to the RCM model. It is an aspirational target and is intended to increase the number of tenure-track and full-time lecturer track faculty in our ranks and reduce the reliance on part-time faculty.
16. What is the 20:1 student/faculty FTE ratio? Is this driven by RCM?
The 20:1 ratio refers to the desired ratio of students to faculty at UW Bothell. To maintain financial sustainability at a time of increasing costs of operations and less-than commensurate increase in state support and tuition revenues, the campus needs to have an average of 20 FTE students per FTE faculty. This desired 20:1 ratio is not driven by RCM. Put simply, the campus will need to get to 20:1 in the near term to stay financially sustainable, with or without RCM. If anything, RCM is a tool that will help the campus to get to this desired goal. The good news on this front is that the number of FTE students per FTE faculty has grown from 16.5 in 2015-16 to 18.3 in Autumn 2017. If this trend is maintained, the campus can get to 20 students per faculty in a couple of years.
For more information or questions, contact the IPB team.