1.1 What is the new Bruin Budget Model (BBM)?
The Bruin Budget Model (BBM) is the main component of a new system for establishing annual and multi-year budgets for academic and administrative organizations at UCLA. It is a hybrid of commonly used budget models since it utilizes activity-based, historical/incremental, and priorities-based factors in order to determine budget allocations. While the model is informed by the best practices of peer organizations, notably a model used at the University of Michigan for the past 25 years, it has been tailored and designed specifically to support academic excellence at UCLA.
1.2 Why is UCLA transitioning to a new budget model?
The budget context for UCLA and peer public universities has changed. For UCLA, the levers that enabled budget growth in the past decade are no longer available. We expect the future to have low revenue growth with relatively flat enrollment, low/modest tuition increases, unpredictable State support, and a cap on nonresident enrollment.
UCLA currently uses an incremental budget model, which works well during periods of high revenue growth. High revenue growth makes it possible to centrally fund annual inflationary increases for all units as well as invest in high priority needs such as faculty retention, student aid, diversity initiatives, research, deferred maintenance and cyber-security, to name a few.
However, incremental models do not perform well during low revenue growth periods. Our current model is primarily incremental and does not provide transparent incentives for units to pursue revenue growth opportunities, to find efficiencies, or to exhibit strong expense management.
In brief, the status quo is no longer suitable for UCLA.
1.3 Is the new model RCM?
Responsibility Center Management (RCM) has been around for 50 years and is defined by extreme decentralization, with Schools operating within their own revenue generation. The national trend shows a move toward hybrid models with partial decentralization. The Bruin Budget Model (BBM) is not RCM. It is a hybrid.
1.4 Is the new Bruin Budget Model similar to the UC-wide budget model?
Yes. With the adoption of “funding streams” in 2011-12, UC effectively adopted a similar hybrid model for all of UC. Tuition is kept by the local campuses, State funding is held centrally and allocated by UC-decided metrics, certain State funds are allocated directly to support research programs, and the central services of the Office of the President are funded by a simple assessment.
At a recent Regents meeting, UCOP reported that the change in models was a success in that it does a better job of aligning revenue with workload and providing incentives for the campuses to be innovative and efficient. Since the adoption of funding streams, the academic rankings of UC campuses have risen steadily.
1.5 Why will the new model work better than the legacy incremental model?
The new UCLA budget model is designed as a hybrid system that includes components of activity-based, historical/incremental, and priorities-based models to determine budget allocations. We believe this system will perform better than the legacy incremental model in four areas:
- Better align resources with activity cost drivers (such as student credit hours);
- Create transparent incentives and support for units to be entrepreneurial where there is opportunity;
- Restore and establish a stronger central investment fund for the EVCP to make strategic investments (priorities-based) in academic and research programs; and
- Cap growth rates in non-academic budgets while replacing the complex internal recharge system that funds central budgets today.
1.6 How will we know the new model is working better and supporting academic excellence?
UCLA’s Office of Academic Planning and Budget (APB) is working with the Senate’s Council of Planning and Budget to design an oversight and assessment plan. While not final, example metrics to assess could include student/faculty ratios, total investment in faculty, time-to-degree, course duplication, and course size. This plan will be shared with all campus stakeholders for input. To support the evaluation process, APB will be creating a new set of dashboards available to the entire UCLA community that will present all of the key data associated with the model and UCLA’s budgets. There will be an unprecedented level of transparency on UCLA’s budget that has not existed previously but is appropriate for the nation’s #1 public research university.
If the assessments of the new model shows that it is not working or can be improved, there is a commitment by senior leadership to make adjustments.
1.7 How is revenue allocated under the new budget model?
Academic units will have two components to their annual funding:
- An activity-based component that is determined by the School/Divisions’ own activities such as teaching (tuition) and research (indirect cost recovery); and
- A supplemental fund provided by the center to create stability, help fund inflationary costs, and to invest in shared priorities. The supplemental fund is initially set to an amount to get each School to today’s General Fund level. This means that the new model will influence future changes in budgets, not current funding levels.
A central fund will be established from State funding, investment income, and a campus assessment (aka “tax”) that largely replaces recharges for campus-wide central unit services and the UCOP tax. The non-core funds tax has been set equal to what campus units pay today in January 2021 3 recharges. Uses of the central fund will be decided by the EVCP and include supplemental funding to academic units, funding to non-academic units, and investments in campus priorities.
Non-School units will be funded primarily from an annual allocation from the central fund. Campus recharges will be limited to “premium services” that will be identified in service-level agreements that organizations will share with the campus (see “Flow of Funds” graphic below).
1.8 Will budgets change July 1, 2021 when we go live with the Bruin Budget Model (BBM)?
All units will maintain their current baseline (permanent) budget on day one of the new model as the model is designed to be budget neutral on 7/1/21. Similarly, the tax assessments have been set to be equal to what organizations are paying today in assessments and recharges. So, there will be no change in net funding when we go live with the new model.
Going forward, the new model will better align future years’ incremental allocations to activity trends such as increases in teaching student credit hours, new graduate programs and enrollments, increased research grants, and indirect cost recovery.
1.9 Are the budget reductions that are being planned a result of the new budget model?
The budget reductions assigned to administrative organizations and academic departments are the result of the global pandemic and recession – not the new budget model.
Campus funding has been impacted by revenue losses in State funding; health system and auxiliary revenue; flat enrollments and deferred tuition increases; and declines in investment income. Other impacts include non-reimbursed expenditure increases such as those for faculty merits, represented staff, pension and health, and COVID-related expenses. We have translated this financial loss into a planning scenario that will be implemented over three to four years. There is still a great amount of uncertainty and the final cuts we implement will be informed by actual permanent financial impact.