By SUSAN JONES
The new budget model that Pitt officials have been working on for the past year is finally starting to take shape.
Chancellor Patrick Gallagher approved the Budget ReSTART — Revenue Sharing to Accelerate Responsive Transformation — in November, and now deans and their schools are working to figure out how to implement it.
The new approach — commonly called a responsibility center model — shifts all revenue from tuition, fees and grants to the schools and then each school will pay a 16 percent “participation fee” — sometimes called a tax — back to the central administration to pay for strategic development and other initiatives. The schools also must pay fees to support shared services, such as Human Resources and IT.
“This is really putting schools at the center of the budget, like they are at the center of the University,” said Hari Sastry, Pitt’s chief financial officer. “That's where the innovation for the ideas all needs to come from.”
“Going forward, we hope that deans become more entrepreneurial and they find ways to optimize their budgets,” said Provost Ann Cudd.
Sastry and Cudd headed the Budget ReSTART steering committee, which has been meeting regularly since last December. The group had focus group meetings with 40 responsibility centers and more than 50 meetings with the deans, regional campus presidents, and responsibility center directors of administration.
The schools will soon be using the budget figures from the 2021-22 fiscal year to create a parallel budget to the actual operating budget and then will go live with the new budget model for 2022-23.
Participation fee
The 16 percent participation fee will be used to support different University-wide initiatives, particularly those in line with the Plan for Pitt, and to reinforce the schools that currently aren’t breaking even — called subvention.
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5 percent: Research initiatives
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11 percent: Strategic initiatives and subventions
The committee looked very carefully at the budgets and gross revenues from the last few years, Cudd said, to see how each school would come out after paying the participation fee and found some would be in the red and some in the black.
Cudd said it’s the nature of a university that, “We are going to have some things that are essential parts of our mission — to be a university and to have good teaching and research across all of these different fields. Some are going to be in high demand at some points, and some are not, and yet, you can't just cut off the things that this year are not in high demand and still have a university.”
The hope is that over time, the schools learn how to optimize their budgets and they need fewer and fewer subventions over time — leaving more money in the central pool to use for strategic incentives.
Sastry said the 16 percent figure may change slightly after they do a more detailed analysis during the first year under this new plan, but “we're going to do everything we can to keep it consistent. We can't move that every year, because that defeats the purpose of having some level of certainty for the schools and allowing them to plan. It has to be in place for at least several years.”
Where does the tuition go?
One of the big issues the steering committee had to resolve was how tuition money is split when a student is enrolled in one school but taking classes in another.
For instance, if a student is enrolled in the College of Business Administration and is taking a business class, then 100 percent of the tuition for that class will go to Pitt Business.
But if that same student is taking an English class in the Dietrich School of Arts & Sciences, then the Dietrich School is paying the salary of the instructor, but the business school is advising the student and giving them other support. In that case, the school providing instruction (Dietrich, in this case) would get 85 percent of the tuition for that class and the school of enrollment (Business) would get 15 percent.
“It means that no school loses out,” Cudd said. “They don't have an incentive to teach courses that aren't really in their realm, because they're still getting part of the tuition, even though they're not spending on the instructor.”
Supporting the support units
In addition to the 16 percent participation fee, schools will have to provide money for the non-revenue-generating support units at the University, such as HR and IT.
The amount paid for each support service is determined by different metrics, Sastry said. For instance, the metric for Human Resources would be based on the number of employees in each school.
“You could imagine at some school that has a lot of employees, but maybe has low grants and contracts, they would pay a lot in HR, but maybe a lot less for research administration,” Sastry said.
While the budgeting process won’t change much for the support units, there will be a new committee that oversees those budget requests. “You can imagine the primary units — now that they're getting directly billed for this — they're going to be saying, ‘Well, what am I paying for here?’” Sastry said.
The support responsibility center committee will have members from the primary, revenue-generating units who will oversee the budget requests from the support units. This committee won’t officially participate in the process until work begins on the 2023-24 budget, he said.
Schools also will have to pay for maintenance based on square footage. Sastry said there is a space system now in which schools “own” specific spaces, and they will pay a fee based on that.
If a school wants to expand its programs and maybe add more students, then there will be a cost to that in space and faculty and other areas.
“Is that going to be able to be supported in the revenue? If the answer is yes, that's an easier discussion to have,” he said. “If the answer's no, we still might want to do it because it’s the right thing to do but requires an investment. Everything's kind of transparent at that point.”
Oversight
One of the big issues raised as the new budget model was being developed was who will oversee the process at the school and university level.
Each of the schools has a planning and budgeting committee, but they have varying levels of control and involvement.
In May, Senate Council and Staff Council approved a resolution about shared governance’s involvement in the budget process that included language encouraging schools to build up planning and budgeting committees at the unit level so they are actively involved in the budgeting process.
These committees are mandated under the Planning and Budgeting System document, but Tyler Bickford, chair of the Senate Budget committee, and others on the committee reviewed some of the school-based budget committees and found that many were not very active in the budgeting process. Also, many of the members were appointed and not elected.
Sastry said the steering committee and CFO’s office are in “100 percent agreement” that the school-based budget committees need to be as strong as possible.
“They really need to be what's driving the discussion at the school level, recommending budget programs to the dean,” he said. “I think some schools are fairly strong and other schools are probably not quite as strong and I think we said absolutely, this should be something that the Senate Budget Policies committee tackles. To the extent we can help, we will help, but to be honest, we've also understood that this is much more of the purview of the schools and the RCs.”
He said that if those committees aren’t strengthened then there’s a potential that you won’t “see all the ideas kind of bubbling up to the dean like you would hope to do.”
The CFO’s office is working with the deans and directors of administration at the schools to guide them through this new budgeting process and they also are willing to train the school budget committees.
On the university level, the Senate Budget Policies committee continues to ask questions about the new budget model, some of which have been complicated by the faculty union vote last month.
“My hope is we’ll be brought back into discussions around the responsibility center model, how that looks, how it's going to be implemented, what feedback the schools have given on to the CFO’s office around this and any troubleshooting that arises as it relates to that feedback,” committee member Mackey Friedman said at the Dec. 10 meeting.
Steve Wisniewski, vice provost for budget and analytics, said they are working through how the union vote will affect what they can and can’t discuss with the committee, but they do plan to circle back on the issue.
The budgeting process will use existing committees — another request in the resolutions from Senate and Staff Council — with the addition of the Support Responsibility Center Committee and a space management committee, which will determine what units are charged for space utilization.
What’s next
Sastry said the schools will soon get enrollment figures for the spring and income statements for the 2021-22 budget, which they can use to start mapping out the parallel budget. This will show what the unit signed up for at the beginning of the fiscal year, and how it looks in the new model, and then how the unit is performing against it.
“The goal is to be able to give them both of those,” he said. “Usually they don't need it this early in the year. … As they get into the new year, we want them to be able to see it and be able to see how well they're performing against it and then be able to plan for the rest of the year.”
“We're telling the schools please trust that we're getting the stuff out as quickly as we can as we figure it out,” he said, “And we're here to support their understanding of it and their execution of it.”
He said they’ve sent out training modules to the units, with videos, templates and directions, and they’ve held a couple training sessions this month.
“We're trying to walk them through each piece of this — understanding 'what does this mean to build your budget?' And then 'what does it mean to operate your budget,' ” Sastry said.
Support units need to submit their budget requests by mid-January, so the primary units can use that to determine how much they need to pay for those services. Then in March, the primary units will submit their budget plans, which will start the review process.
Susan Jones is editor of the University Times. Reach her at suejones@pitt.edu or 724-244-4042.
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