Volume 35 Number 1
Spring 2013
School Appears to be Positioned Well for New University Budget Model Numerous cuts in state funding for the University have prompted senior UK officials to develop an alternative to the current incremental budget model, and the new model, referred to as “incentive-based” and “value-based,” could reward the School of Library and Information Science for increasing enrollment and developing new programs. Reductions in state support have become a persistent reality for the University. In his message to accompany the University’s 2009 financial statements, then-President Lee Todd referred to “a mid-year [state] appropriations reduction for the sixth time in eight years.” The following year President Todd noted: “State support for the University in fiscal year 2009-10 … was $9.4 million below the state support for UK originally enacted by the General Assembly. This is a decrease of $24.5 million compared with the originally enacted fiscal year 2007-08 budget.” In April 2012, as the General Assembly finalized the state budget for the next biennium, UK President Eli Capilouto reported: “For Fiscal Year 2012-13, UK’s general fund budget will be cut 6.4% or nearly $20 million – one of the largest single cuts in our institution’s history. For 2013-14, our appropriation from the state is flat. Since December 2007, we have experienced cuts of $50 million to our general fund budget….” In January 2012, following release of Governor Beshear’s budget in which he proposed the reduction in UK funding the General Assembly incorporated in the adopted budget in April, President Capilouto appointed a University Financial Systems Accountability Committee, charged “with developing a guiding set of budgeting principles and a framework for a new University of Kentucky Budget Model (‘Kentucky Model’).” In its report the Committee recommended a set of five “guiding principles for the new model.” Three of the five, having to do with mission, strategy, and transparency, “can be achieved with any variety of budget models. … The two remaining principles, however, guide the creation of a new customized Kentucky Model.” The two are: • Authority/Responsibility – The University should ensure the alignment of authority for financial management decisions and responsibility for the outcomes of those decisions … and determine the right balance between centralization and decentralization and between units. • Rewards/Entrepreneurship – The budget should support
a culture that responsibly rewards performance, collaboration, and entrepreneurship. A September 2012 message from President Capilouto and Interim Provost Timothy Tracy, in which they discussed “making decisions about our budget,” has numerous references to “reallocations” and relates “these reallocations” to making “the right strategic investments in education and research.” In October 2012 Interim Provost Tracy sent an email to the UK community in which he discussed the new financial model. After noting, “our current incremental model has served this institution well for decades,” he added: “But in a world where economic uncertainty and challenge are the norms rather than the exceptions, we need a financial system that puts more authority and responsibility in the hands of colleges and units where research and teaching are conducted.” “[O]ur current financial model doesn’t do enough to align the expenses we incur with where and how revenues are generated.” In Town Hall meetings Dr. Tracy said under the current budget model “Units don’t have much control over their revenues and don’t know that if they do x, y will happen.” In contrast, the new model “promotes entrepreneurship, because now your revenues are attributed to you.” Dr. Tracy created a Financial Model Steering Committee, “To develop guiding principles for the implementation of the value-based financial model and to provide input on key strategic questions.” SLIS Director Jeff Huber is a member of the Steering Committee. As the head of an academic unit, Jeff has been very interested in the general discussions about a new budget model. As a member of the Steering Committee, he is one of a small number of people whose recommendations will translate the general principles of the new model into the specific budget allocations, beginning July 1, 2014. The newsletter asked Jeff to share his thoughts about the new budget model – the thinking behind it, and how he sees it affecting the School: “The new financial model should provide a more transparent approach to the UK budget process. It is intended to allow resources to follow growth and reward entrepreneurship initiatives. I am hopeful that SLIS will benefit from our efforts to grow enrollment in the LIS master’s program and anchor the School more broadly by launching new academic programs at the undergraduate and graduate level.”