Kathy Cutshaw February 18, 2015

• General Funds
• Allocated based on historical/incremental – legislative intent
• Tuition
• Regular Tuition
• Allocated based on historical /incremental
• All admin, instruction & research units have both a general fund & tuition fund component
• Summer Tuition
• Formula based allocation – 67% to Colleges, 30% Outreach expenses, 3% VCAA
• Outreach-Credit
• Formula based allocation – 70% to Colleges, 27% Outreach, 3% Chancellor
• Professional Programs
• Formula based allocation based on agreements with the respective college – typically 85% to Professional Program, 15% Manoa
• Fees
• 100% back to the program
• Course Fees (Natural Science, Art, CTAHR, Music, MBA programs)
• Professional Fees (Nursing, Dental Hygiene, Architecture, Shidler)
• RTRF
• Formula based allocation based on prior year extramural expenditures – 25/25/50

• Chancellor’s Charge
• Chancellor created a Budget Committee to recommend a new and transparent budget allocation methodology which more closely equates revenues with teaching
• Minimize initial disruption
• Membership – co-chaired by Reed Dasenbrock & Kathy Cutshaw
• Faculty (4)and student representation (ASUH and GSO)
• Deans and Directors of academic and research units (5)
• Vice Chancellors (4)
• Timeline - Recommendation to the Chancellor by the committee by end of
2014

• Quality education to students
• Importance of multiple missions: instruction, research, community service/extension
• Transparency of revenues, expenses, allocations, and decision making
• Accountability to the public and stewardship of public funds

• Allocations should be adjusted based on the performance of units
• Philosophy of the allocation should be evident in the structure of the allocation model
• Central reserves are necessary to fund cross disciplinary and new initiatives
• Recognizing and preserving legislative intent
• Allocation mechanism should aim for administrative simplicity

• The committee looked at many different budgeting models currently being used in higher education and decided to focus on the following:
• Responsibility Centered Management Budgeting
• Revenue Based Budgeting
• Activity Based Budgeting
• A sub-committee was assigned to each model and charged with evaluating the method for strengths, challenges and ease of implementation in consideration of our culture and institutional character.

• Delegation of operational authority and responsibility to the units to prioritize their mission
• Each unit is credited with all of their revenue
• Each unit pays their share of overhead costs either by
• Fixed costs off the top
• Taxed

• Budgets are based on the amount of revenue generated from all sources
• Attributes all revenue back to the earning unit
• Central support functions and campus discretionary activities are either taken off the top of the net revenue available or proportionally assessed.

• Allocates resources to activities based on their contribution to the
University’s mission and goals.
• Recognizes that not all activities done by the university are necessarily attributed to a revenue stream.
• Measures used for this model tied to the campus and system strategic plan
• Units that are most effective at strategic activities receive a significant share of those revenues.
• Rewards the units that are the most productive and efficient

• After review of all of the models the Budget Committee felt that adopting a pure RCM model was not feasible for Manoa at this time.
• Can lead to competition between units
• Is resource intensive to gather and analyze data
• Is a poor fit with Hawaii organizational constraints

Budget Committee will be recommending a hybrid model using revenue based budgeting as the foundation, incorporating certain aspects of the activity based model and ensuring transparency of overhead costs.
• Revenue Based
• % of revenues allocated back to the unit based on output metrics (i.e. SSH, majors, degrees awarded). % revenue taken off the top to fund central services and strategic initiatives
• Overhead costs are clearly identified for transparency (central services, utilities)
• Appropriate costs would be directly attributable to units
• Activity Based
• Allows for activities of the campus to be evaluated and rewarded
• Quality and effectiveness in achieving the strategic mission
• Efficiency measures (faculty/staff ratios per degree; space utilization; time to degree)

Budget Committee recognizes that the budgeting concepts being discussed could present a radical change in the way we allocate budgets.
The following things need to be considered:
• Identify revenue sources
• Agree on metrics & % weights (i.e. SSH, degrees awarded, declared majors)
• Agree on activity measures
• There should be factors encouraging collaboration
• Model should not disincentivize units from good behavior
• Linkage to strategic plan
• Identify cost centers and methodology for allocating/attributing costs
• Ensure data systems are designed to obtain information readily and timely
• May require realignment of administrative responsibility and budget authority
• Human capital expertise to analyze data
• Recognition that new methodology would be easier to implement in a period of growing resources
Final recommendation submitted to Chancellor: June 2015 Implementation: Starting July 2016

• Currently 38% of net tuition is returned to instructional units
• historical distribution - not based on metrics
• Proposed realignment of current instructional unit allocations
• Total base budget (G + S) does not change
• Proportion of G & S change. Aligns tuition with SSH production
• Going forward: A portion of the increase in tuition revenue will be allocated based on the following:
• SSH Taught
• Degrees awarded
• Majors
• Implementation: July 1, 2015