In a video released today, Provost and Executive Vice Chancellor Ralph J. Hexter discusses the campus’s new budget model, an incentive-based system that is being partially implemented with the provost’s 2012-13 allocations to departments and units.
The new model is more transparent and provides faculty and administrators with a greater understanding of and control over their budgets.
“An incentive-based budget model will let units see that if they improve or increase their activities in certain areas, they will see a flow of dollars come to the unit that is in relation to the increased activity,” Hexter says in the video interview.
Hexter would like to see everyone in the campus community take time to understand this new approach to budgeting and its implications: “Right now, we are all stakeholders. We’re stakeholders in the need to see that our revenue is maximized and that we’re efficient in our use of resources.”
Importantly, in this first year of the new incentive-based model, the campus is not assigning new base, or permanent, reductions beyond the multiyear strategies that took effect in 2011-12.
However, in a Sept. 24 letter, Hexter acknowledged “significant uncertainty” over the 2012-13 budget. It assumes that the state’s voters on Nov. 6 will approve Proposition 30, Gov. Jerry Brown’s tax-increase proposal.
If it fails, the UC system faces a “trigger” cut of $250 million, which, when divided up among the campuses, could cost UC Davis up to $40 million.
“In the meantime, it is important to communicate baseline budget allocations for 2012-13,” Hexter wrote in his September letter to deans, vice chancellors, vice provosts and the university librarian. Those allocations are due to be posted soon.
In his letter, Hexter said the campus estimates total revenue of $3.6 billion from all sources for 2012-13, “a modest increase over prior years demonstrating the continued successes we continue to experience even as we grapple with fiscal challenges.”
Still, the campus “continues to face a substantial shortfall” of approximately $49.6 million to $55.8 million in the state- and tuition-funded portion of the budget (generally referred to as 19900 funds). The shortfall breaks down as follows:
• $25.4 million — the portion of the 2011-12 shortfall that the campus addressed with one-time funds.
• $5.3 million — new state cuts.
• $18.9 million to $25.1 million — fixed-cost increases for salaries and benefits, and employer contributions to the UC Retirement Plan.
Ongoing strategies to bring in more revenue, cut costs and be more efficient (for example, the Shared Services Center) are expected to generate about $7.5 million in 2012-13, leaving a shortfall of $42.1 million to $48.3 million to be addressed with reserve funds or other, short-term strategies.
Hexter’s letter shows how the incentive-based model will work in the distribution of undergraduate tuition: $196.5 million. The deans will receive about 70 percent, or $136.4 million, based on the following formula:
• Student credit hours — 60 percent
• Degree majors — 30 percent
• Degrees awarded — 10 percent
The rest of the undergraduate tuition money, $60.1 million, goes into the provost allocation fund, “to ensure prior-year base budget spending authority is maintained for 19900 general funds.”
In the video interview, Hexter said that looking forward, a unit that over time increases student credit hours or the number of students who major in the programs in that unit will see more money come its way.
Provost’s budget allocation letter (Sept. 24, 2012)
Campus Budget Overview (Oct. 4, 2012)