Chapter 3: Budget Policy and Long-Term Planning

Chapter Overview

Many colleges and universities, particularly in the public sector, simply raise or lower budgets equally across units each year, depending on whether funding goes up or down. It is easy to agree that one can do better than that and make informed decisions regarding incremental increases and decreases across units. The challenge is to do that in a way that incentivizes behavior that benefits the institution, addresses student curricular demands, promotes student, faculty, and staff success, and minimizes negative unintended consequences. Furthermore, there are always actions to implement in both public and private institutions that improve the financial well-being of the institution, but they are not the same for all institutions. Leaders must address unfunded institutional aspirations.

• Implementing an incentivized distributed budget model.

Many academic institutions follow historical budgeting, incrementing and decreasing budgets equally to balance the budget. Rapidly changing career opportunities and choices by students often result in insufficient resources in the most dynamically growing programs in the university. Faculty and staff, teaching, research, and service support resource needs change over time. How can budgets match program demand and supply, as well as institutional goals and aspirations, while avoiding unintended negative consequences?

• Revenue growth and cost containment.

For the last forty years, state funding for public colleges and universities has remained flat or decreased in constant dollars. How can institutions generate alternative sources of funding and manage costs more effectively?