Shaping What Comes Next: Implementing Our Budget Model

Continuing my posts on the new resource allocation model (RAM) – and building on the work led by our VC for Finance and Facilities, Camy Broeker, along with fiscal officers and deans across campus, our new RAM is ready for implementation next fiscal year. This model will be a critical tool that enables IU Indy to invest in activities related to our mission – student success and research and creative activity in ways that serve the needs of our citizens.

How the model allocates resources

• Revenue: Units will receive 70% of the income from student credit hours, with 30% retained centrally to support mission-focused investments.
• UA Costs: IU system-level administrative costs (University Administration, or UA costs) are charged to each campus – using the same basis for allocation, we will charge each campus unit their proportionate share of the UA costs.
• Campus Administrative Costs: Costs tied to campus administrative functions (Offices of Enrollment Management, Student Affairs, HR, Finance, Workforce and Community Engagement, Provost, Chancellor) will no longer be charged to units. Instead, they will be funded through the centrally retained 30%.
• State Appropriations: We will begin transitioning from a historical model of allocation to performance-based metrics, aligning with ICHE recommendations that are moving toward a model based on student success, particularly graduation rates. 

Is this model an improvement over the current RCM?
The new model directly addresses longstanding concerns with the current RCM system (described in a previous post):

• Mission vs. Revenue: Centrally retained funds will be used to support student retention and graduation efforts, ensuring units aren’t driven solely by credit-hour production.
• Risk Sharing: The new model reduces risk in two ways:
  • Credit hours used to calculate the 70%-unit allocation are now based on a three-year rolling average rather than a single point-in-time estimate.
  • Units no longer bear the full effect of enrollment declines; risk is now shared between the units and the campus.
    • Consider an example: A unit that generates $10 million in revenue through its credit hour generation currently receives the full amount under RCM. Under the new model, it would receive 70% of that revenue, or $7 million. Now, assume a 10% drop in enrollment and corresponding revenue. Under RCM, the unit’s allocation would fall by $1 million. Under the new model, the reduction would be limited to 70% of that amount, or $700,000. In this way, the new model cushions units from sharp swings in their income stream, with the campus absorbing a portion of the risk.
• Social Good: Central resources will support major multidisciplinary initiatives that require large-scale investments and have a bigger impact. Some examples include cluster faculty recruitment across multiple departments and colleges, investments in new initiatives that need seed funding, and initiatives related to student success. 
• Better Incentives: Credit-hour incentives remain, but are less extreme, reducing pressure to generate credit hours in ways that conflict with institutional needs.
• Cost Control: By funding campus-level costs centrally, we ensure that administrative costs are managed responsibly. Since the centrally retained funds must pay for our central administrative costs and allow for investments in mission-based priorities, the new model should enable units to focus on academic priorities while ensuring that our administrative costs do not overwhelm our ability to invest in mission-critical areas. 

Why this model is essential for IU Indy’s future

We must invest where it matters most: advising, student services, competitive compensation for faculty and staff, and toward the development of unique campus assets that are to be found in every college.

No resource allocation model succeeds on structure alone. It succeeds when paired with wise leadership. I want to thank all of you for reading these posts and for those who reach out to me via email to comment on what you read. As always, remember, your feedback is vital, your input is critical.

Go Jags!

Latha Ramchand
Chancellor