S T A T E U N I V E R S I T Y O F N E W Y O R K
Budget
Allocation
Process
June 1998
State University of New York
Budget Allocation Process
Implemented June 1998
INTRODUCTION
The State University of New York is a system that is larger and more diverse than any other
state system in the nation. Its 64 colleges include research universities, land grant colleges, health
science centers, comprehensive colleges, specialized colleges, technical colleges and community
colleges. These colleges offer programs as varied as ceramics engineering, philosophy, fashion
design, optometry, economics, maritime studies, and medical education.
The Budget Allocation Process, a combination of formulaic and non-formulaic measures,
distributes State support to the 34 State-operated and statutory colleges, System Administration
and University-wide programs (the 30 community colleges are funded by a different methodology).
The distributed State support, in combination with campus tuition and certain other revenue,
comprise the University’s operating budget fund. Other self-supporting funds (e.g., residence halls,
hospitals, most fee-based programs) are accounted for separately. The campuses have full
discretion in the use of both State and campus generated revenue within State and University fiscal
guidelines.
ALLOCATION HISTORY
Allocation Methods
For almost 40 years, the State University’s budget was defined by the appropriation of
relatively detailed categories within each campus. To support requests for academic program
initiatives, the University began in the late 1970's to use the “40-Cell Matrix,” a faculty/student ratio
model based on four instruction levels and ten discipline groups. In 1985, the “flexibility legislation”
provided the System and campuses more budgetary autonomy, and the “Benchmark” emerged as
the primary method for allocating appropriations. The Benchmark incorporated the basic structure
of the earlier FTE-based, 40-cell matrix, but also included funding in relation to headcount
enrollments, sponsored program activity, square footage of campus facilities and the actual cost
of utilities. Funding for the statutory colleges (Cornell and Ceramics) was not determined using the
Benchmark model.
The Benchmark focused on overall campus conditions and, through a process of phased
distribution of funding support among the campuses, brought the relative campus funding levels
closer to the total University average support condition. However, by 1994-95, the total funding
available to the University was out of line with the normative level indicated using the Benchmark.
Eventually, the Benchmark was perceived to be too complex and less effective in establishing
campus allocations, especially in light of changes in administrative regulations and funding
patterns; the need for a new methodology was evident.
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PROCESS FOR CHANGE
Allocation Methodology Committee
A committee of the State University Business Officers Association (SUBOA), in conjunction
with System Administration staff, was formed in 1992 to investigate the issues and concerns
surrounding the Benchmark. Three factors provided motivation for the initial work of the SUBOA
Allocation Methodology Committee:
C campus pressure for an allocation process that was simpler, easier to understand,
and more predictable over time
C the need for clearer demarcation of the funding support provided for the
fundamental missions of instruction, research, and public service
C an interest in treating State tax dollar support separately from tuition revenue,
opening the potential for campuses to retain their tuition and fee income
In 1995, the Committee was reconstituted as a joint effort of SUBOA, the Academic Officers
(ACAO) and System Administration (Budget and Finance, Provost’s Office, and Construction Fund);
later, a representative of the University Faculty Senate joined the Committee (see Attachment 1).
In Spring 1996, the Committee drafted a conceptual proposal, identifying specific issues for
further examination. After an initial presentation of the Committee’s deliberations and progress to
the Board of Trustees, the Committee was temporarily expanded to include four task groups
charged with reviewing several core issues: campus groupings and peers, organized research and
public service, geographic issues (i.e., salaries and utilities), and facilities investment (including
debt service, rehabilitation and maintenance and capital costs; this was not included in the final
version of the methodology). Additional campus staff members were asked to assist the Allocation
Methodology Committee in the work of the task groups as they examined relevant data, existing
practices and policies, and developed recommendations.
The Committee’s initial results were first presented to the Board of Trustees and then to the
Presidents’ Planning and Priorities Committee. Based on these meetings, adjustments were made
and a draft document was distributed to campus presidents for comment and discussion at a
Chancellor’s Forum held in December, 1996. In May, 1997, the Chairman of the Finance Committee
of the Board of Trustees was designated Board liaison to the Allocation Methodology Committee.
The Committee submitted a report to the Vice Chancellor for Finance in October, 1997, and
a series of meetings was held with the Board of Trustees, System Administration senior officers,
campus presidents and officers, Legislative and Division of the Budget staff and the Faculty
Senate. Based on the discussions and comments by the various University constituencies and after
consultation with the Committee, the Vice Chancellor for Finance and the University Provost
recommended a new budget allocation process in May, 1998. The new allocation process was
used as the basis for the State University’s Financial Plan adopted by the Board of Trustees in
June, 1998.
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BUDGET ALLOCATION PROCESS
Methodology Objectives
The new allocation methodology was developed to:
C relate the allocation of State support to campus missions and the results achieved
in the pursuit of those missions
C provide incentives to improve the quality of instruction and research, enhance
access and promote efficiency
C continue the sharing of financial responsibility between the System and campuses
C distribute State support to all State-operated and statutory colleges in an equitable,
open and predictable manner
C permit campuses to retain and manage their resources and assume responsibility
for the costs of local decisions
Methodology Structure
Under the new allocation process, funding for the University’s operating budget is allocated
according to five major components:
Campus Retention of Tuition
C Campuses retain all tuition and fee revenue currently pooled in the operating
budget.
Enrollment
C Total funded enrollment is categorized into a 12 cell matrix by student level and
discipline group.
C State support is based on the relative cost and percent of State support for each
cell.
C Core funding for a complement of basic staff is provided to campuses below 5,500
FTE students (funding is phased out for campuses between 3,000 and 5,500
students).
C A geographic adjustment is provided based on cost of living variances by campus
location.
C Graduate support and tuition support is provided.
Research and Public Service
C Campuses are encouraged to seek outside funding for research and public service
by the provision of a 20% State match for both direct and indirect external support.
C Research and public service institutes currently supported in the campus budgets
that have a history of State-initiated funding, select programs, and land grant and
forestry activities are funded in the new allocation process.
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Mission Adjustments
C Program-related mission adjustments are provided to a limited number of campuses
with unique and extraordinary resource needs.
C Campus-specific adjustments include statutory mandates or unique costs that
constitute a significant portion of the campus budget.
C University-wide activities and System Administration are supported based on
statutory requirements or levels set by the Board of Trustees.
C Mission Review funding provided assistance to campuses implementing changes
in their missions.
Performance
C The new allocation process incorporates performance incentives within the previous
components.
C In addition, a separate performance component will provide “bonuses” for
achievement and improvement in campus quality.
The greater simplicity reflected in the new methodology’s funding components compared to the
Benchmark is consistent with the movement toward greater campus autonomy in the internal
distribution of resources. As campuses exercise more authority in academic and fiscal matters, they
also assume greater responsibility for the cost variations which result from local decisions.
In addition to the direct State General Fund support appropriated to the University, the new
allocation process treats as State support for distribution, moneys collected from self-supporting
operations (hospitals, residence halls and other activities) for the payment of their fringe benefit
and debt service expenses. Interest earnings that can not be attributed to a specific campus are
also distributed under the new allocation process.
Campus Retention of Revenue
With the implementation of the new budget allocation process, campuses:
C are credited with all tuition revenue
C retain all fee revenue previously pooled in the University Income Fund in support
of campus operations. Such fees include those for late registration, late payment,
bad check charges, add/drop, transcript, library fines, graduate and professional
admissions
C collect or pay interest based on individual campus fund balances
The new allocation process was developed based on the current tuition policies which require
standard, system-wide tuition rates for each degree. While campuses are credited with their own
revenue, State law requires that the revenue be deposited in the State treasury and expended
through the Office of the State Comptroller.
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The Enrollment Component
Annual Average FTE Generated Support (Enrollment Matrix) - The new allocation process
includes recognition of high, medium and low cost factors for four levels of instruction (12 cells) and
separate factors for health-related professional degree programs. Relative weights and State
support percentages are assigned to each cell:
Level Weight State Support
Lower Division-Low Cost 1.0 20%
Lower Division-Medium Cost 1.1 30%
Lower Division-High Cost 1.4 40%
Upper Division-Low Cost 1.2 30%
Upper Division-Medium Cost 1.4 40%
Upper Division-High Cost 1.8 50%
Beginning Graduate-Low Cost 1.4 30%
Beginning Graduate-Medium Cost 1.8 40%
Beginning Graduate-High Cost 2.4 50%
Advanced Graduate-Low Cost 2.0 55%
Advanced Graduate-Medium Cost 3.2 65%
Advanced Graduate-High Cost 4.1 75%
Medical 12.9 75%
Dental 8.0 75%
Pharmacy 5.7 75%
Optometry 6.8 75%
Vet Medicine 6.0 75%
The relative cost of each cell is based on the combination of the cell’s direct instructional costs
and a flat amount per student for academic and institutional support costs. These relative costs are
indexed to the lower division, low cost category (index value of 1.0) to generate the weights
reflected in the above chart. The weights will be reviewed periodically, possibly every three years,
to ensure that they continue to reflect accurately cost relationships within the cells and the
University. However, the relative costs for the cells will be updated annually to reflect collective
bargaining agreements and inflation. These revised costs are multiplied by the State support
percentages, resulting in a net State support per cell which includes the increases.
State support percentages reflect the approximate tax dollar support levels required to
maintain tuition rates at current levels. By including the State support percentages, the new
allocation methodology recognizes both the differences in instructional costs and the university-
wide standardization of tuition rates. The assigned State support percentages approximate the
remaining support levels required after tuition and fees.
An academic discipline is placed in a high, medium or low cost group based on the average
cost per FTE student for that discipline throughout the University. The grouping of disciplines is
specific to student level, making it possible to have the same discipline listed as high cost at one
level and low cost at another level. Attachment 2 lists the distribution of disciplines into the 12 cells
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used in the new allocation process. The health-related first professional values were developed
using both campus data and, where available, information from collegiate associations in each field.
The academic and institutional support cost included in the 12 cells is calculated as a uniform
amount throughout the University and covers libraries, student support, organized activities,
maintenance and operations, administration and institutional services based on the National
Association of College and University Business Officers (NACUBO) classifications.
The campus funded enrollment is distributed into each cell based on the campus’s most
recent actual percent distribution by student level and discipline. The funded annual average full-
time equivalent (AAFTE) enrollment is a weighted, average enrollment for three years. Year one,
weighted at 50%, is the planned enrollment for the year to which the new allocation methodology
is being applied. Year two, weighted at 30%, is the official enrollment for the preceding year. Year
three, weighted at 20%, is the official enrollment for the year prior to year two. In order to temper
enrollment fluctuations, in years two and three of the funded enrollment calculation, actual
enrollments will be limited to 2% above the planned enrollments. Campuses will retain the tuition
benefit from enrollment which exceeds the planned enrollment, but additional State support to those
campuses will be limited in future distributions by the 2% cap.
The new allocation methodology is sensitive to enrollment fluctuations and trends; therefore,
sound fiscal management will require effective enrollment management. The new allocation
process requires close campus attention to enrollment planning but allows for modest fluctuations
in achieving enrollment targets. Significant shortfalls from planned enrollment levels are
discouraged through subsequent adjustments in State support the following year. Enrollment
planning occurs in a collaborative manner between the campuses and System Administration.
Core Institutional Support - Every institution of higher education has administrative and
institutional costs required to support the educational activity of the campus. Such expenditures
include the salaries of a president, vice-presidents, clerical support staff, etc. Most campuses can
support the core staff once the campus has reached an appropriate level of enrollment or total
budget; the new allocation methodology recognizes this enrollment level at 5,500 AAFTE.
Campuses below 5,500 AAFTE, but greater than 3,000 AAFTE, receive a partial level of core
support in direct proportion to the enrollment above 3,000 AAFTE. Campuses below 3,000 AAFTE
receive full core support (set at $1.7 million for 1998-99). However, if the core funding represents
less than 5% of the campus operating budget, its value is not considered significant in relation to
the overall campus budget; in this case the core adjustment is not provided. The core support is
in addition to the support generated in the enrollment-based component.
Geographic Differential - A key part of the University’s mission is to provide the broadest
possible access to students across the State. This results in campuses being located in a variety
of regions, with significant differences in costs of living and wage levels. A consultant was engaged
to establish a cost of living index for each campus. Based on the report, a geographic adjustment
is applied to campuses whose cost of living index is at least 10% above the lowest campus index,
but caps the differential at 23% above the lowest campus index (resulting in a maximum adjustment
of 13%). The enrollment generated support and core funding are increased by the appropriate
campus percentage since these are derived from system averages. The other components of the
new allocation process are not adjusted since their costs are campus-specific and already reflect
the impact of geographic differences.
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Graduate Support / Tuition Support - The State support percentages assigned in the
enrollment component assume that campuses collect all tuition revenue; however, tuition waivers
currently provided to many graduate students, and to other categories of students and staff,
diminish the amount of tuition revenue collected by the campuses. The new allocation process
provides graduate tuition support at a level determined by the Provost’s Office to offset the impact
of waivers. In addition, since the State support percentages assume a baccalaureate level tuition,
this category includes support to eliminate the impact of the lower tuition rates charged for
associate degree students at campuses with a substantial portion of enrollment in associate degree
programs.
The Research and Public Service Component
Research, scholarship and creative activity are essential components of the University’s
mission, and provide critical learning experiences for both graduate and undergraduate students.
They are essential to the success of the nation’s leading universities, and contribute significantly
to the State’s economic, cultural and social development. The new allocation process supports
research and public service through incentive-based funding and the recognition of certain existing
programs.
Support for Sponsored Programs - Success in attracting external funding for research and
other sponsored activity is an indication of the academic strength and vitality of our campuses. The
new allocation process, therefore, encourages this activity and the pursuit of external funding. As
an incentive to reward both the expansion of sponsored activity and the maximization of indirect
support, the new allocation process provides a State support match at 20% of the total direct and
indirect expenditures from sponsored funds. The level of sponsored activity is determined based
on a three-year weighted average of expenditures. Year one, weighted at 50%, is the most recently
published data. Year two, weighted at 30%, reflects the expenditures for the prior year. Year three,
weighted at 20%, is the year prior to year two.
Campus Budgeted Research & Public Service - Many campuses have designated
programs or institutes that have been supported in the operating budget. Eventually, such critical
work will be funded through a combination of mission funding and a richer level of overall support
for sponsored research. The shift to incentive-based support has the potential of changing existing
levels of support for campus research and public service operations. This is especially the case
for existing programs that are supported primarily by internal University funds, such as those
previously distributed in the Graduate Research Initiative. To minimize this impact, the first year
of implementation continues to support the direct cost of a number of these activities and provides
indirect support at an additional 30% of direct support. It is anticipated that the mission review
process will consider the performance and funding of these programs. In addition to these internally
funded programs, a number of programs within the campus budgets have legislative, executive or
statutory origins. The direct support for these institutes has been continued as well, with an
additional 30% for indirect support.
Funding for specific research and public service programs is categorized as follows:
C University Research Initiative - Programs or institutes that had received at least
partial funding from the Graduate Research Initiative. The Provost’s Office, with
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assistance from the University Research Council, will examine the most effective
application of these funds in the future.
C State-initiated Funding - Programs or institutes initially supported by the State as
Governor’s initiatives, legislative programs or member items, or recognized as
University-wide programs.
C Land Grant and Forestry Missions - The Statutory Colleges at Cornell are
designated as New York State’s land grant institution as authorized in the Federal
Morill Act. In a similar manner, Environmental Science and Forestry and Cornell
receive federal funds for forestry programs under the McIntire-Stennis Act. These
institutions have specifically chartered research and public service programs which
are included in their operating budgets. These specific mission-based programs are
designed to address critical State needs that often are not priorities for sponsors
that provide external support.
Mission Adjustments
Mission adjustments and Mission Review funding provide a means of recognizing the
reasonable and appropriate support requirements of campuses within a system as diverse as the
State University of New York.
C Mission Adjustments - A limited number of campuses have academic programs
which require extraordinary educational resources to meet their academic
requirements. The allocation process supports these expenses, but restricts them
to reasonable costs which are not supported in the enrollment-based calculations.
An example is the maintenance costs of the training ships at the Maritime College.
In addition, a number of University-Wide activities are budgeted separately and
distributed to the campuses in the financial plan process (e.g., academic
equipment, student financial aid, programs for disadvantaged). These programs
and support for System Administration are funded at levels set by the Board of
Trustees.
C Mission Review - The Mission Review process, launched in April, 1998, is intended
to achieve clarity and consensus on the mix and level of teaching, research and
service on each campus. Some campuses may require ongoing support, others may
need assistance in implementing changes in their missions. The University’s
financial plan includes a pool of resources which will be used to support funding
adjustments identified during the Mission Review process.
The Performance Component
Linking performance and outcomes to funding should be a fundamental characteristic of a
planning and resource allocation method. In public higher education, attempts to incorporate
performance funding in resource allocation are relatively new and have met with varied success.
The major components of the new allocation process already incorporate performance in
several elements of the methodology. For example, by offering a high quality educational
opportunity, a campus enhances its ability to meet enrollment goals and is then rewarded both in
the new allocation process enrollment component and by the retention of the tuition revenue.
Moreover, by providing State support for sponsored program expenditures (a 20% State match),
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the new process encourages campuses to attract these outside dollars. Finally, effective campus
management is encouraged by allowing campuses to retain any savings generated by cost
containment.
In addition to these elements, a distinct performance component will be introduced beginning
in 1999-2000. It will include measures to identify and reward:
C student achievement
C faculty achievement
C academic robustness
C quality of campus services and environment
New State support is recommended for the first phase of performance funding. This introduces
performance review in a positive manner, and is an effective means of rewarding current levels of
achievement and encouraging significant improvements yet to be attained. The second phase,
incorporating the use of some existing funds with new funding, would demonstrate the University’s
commitment to a higher level of performance. The Office of the Provost has recommended a set
of performance indicators and will collaborate with the Vice Chancellor for Finance, with the advice
of the University Allocation Methodology Committee and the Performance Indicators Task Force,
in determining the most effective way of introducing performance in the total resource allocation
process.
IMPLEMENTATION PROCEDURES
Implementation is a crucial aspect of any change to a new allocation method. To avoid major
disruptions in campus funding, a “collar” has been established so that no campus’s allocation is
reduced by more than 2% in any one year due to the new budget process (1% in the first year).
Initially, it is proposed that the new allocation process be phased in over a three year period.
However, the “collars” will be evaluated periodically to ensure that movement towards targeted
campus allocations will occur within a reasonable time frame. Since the new budget allocation
process distributes State support, which in total can vary from year to year, the desired enhanced
predictability is in the application of the process, not in the specific amount of State support
provided to campuses. Therefore, the phase-in of significant changes is essential.
The annual budget request process will continue to seek State funding for negotiated salary
increases, inflationary price increases and specific University initiatives. The methodology will then
be used to allocate the State funding enacted in the State budget. Initiatives which are restricted
for a specific use will be held as university-wide programs and will be distributed based on the
designated purpose or intent. The structure of the new allocation methodology, with its various
components, provides the University with a mechanism to request additional State support related
to enrollment increases, research growth and improved performance.
The new allocation method will be carefully reviewed to ensure that it is operating in a manner
consistent with the overall policy direction of the University. It is expected that further refinements,
within the existing overall structure will occur over the next few years, especially as the University
completes the Mission Review process.
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CONCLUSION
The five components of the new budget allocation process -- campus retention of tuition,
enrollment-based funding, research and public service, campus and mission related adjustments,
and performance -- constitute a balanced allocation method that recognizes both the similar and
unique characteristics of the most diversified university system in the nation. Taken as a whole, the
new allocation process recognizes quality, encourages management decisions at the local level,
rewards effective stewardship and provides access to all students.
The State University wishes to thank the following for their support and advice during this
effort.
C The Allocation Methodology Committee
C SUBOA and ACOA leadership
C The Task Groups
C The Performance Indicators Task Force
C The Office of Vice Chancellor for Finance and Business and Staff
C The Office of the Provost and Vice Chancellor for Academic Affairs and Staff
C The Faculty Senate
C The Presidents’ Planning and Priorities Committee
C The Campus Presidents
C The Finance Committee of the Board of Trustees
C The Board of Trustees
October 30, 1998
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Attachments
Attachment 1
ALLOCATION METHODOLOGY COMMITTEE MEMBERS
Campus Representatives
Georges E. Berube, Former Director of Business Affairs and Information Services, Canton
Ram L. Chugh, Distinguished Professor of Economics, Potsdam (representing University Faculty
Senate)
John A. Falcone, Former Vice President for Administration, Utica-Rome
Nathan Fawcett (Co-Chair), Director of Statutory College Affairs, Cornell
Leif S. Hartmark, Vice President for Finance and Administration, Oneonta
Voldemar A. Innus, Senior Associate Vice President for University Services, Buffalo Center
Stanley Kardonsky, Vice President for Finance and Management, Buffalo State College
Thomas Leamer, Former Vice President for Academic Affairs, Morrisville
Ivan M. Lisnitzer (Co-Chair), Senior Vice President for Administration, Health Science Center,
Brooklyn
E. Thomas Moran, Vice President for Academic Affairs, Plattsburgh
Rollin C. Richmond, Provost & Vice President for Academic Affairs, Stony Brook
Michael A. Scullard, Vice President for Administration, Binghamton
Barbara P. Sirvis (Co-Chair), Former Vice President for Academic Affairs, Brockport
Mary Ann Swain (Co-Chair), Provost & Vice President for Academic Affairs, Binghamton
William P. Tully, Provost & Vice President for Academic Affairs, Environmental Science and
Forestry
System Administration Support
Tommy Annas, Assistant Provost for Institutional Research
Gary L. Blose, Associate for University Financial Analysis
David M. DeMarco, Assistant Vice Chancellor, Finance and Management
Wendy C. Gilman, Associate for University Financial Analysis
Sherwin L. Iverson, Former Assistant Provost, Academic Planning, Policy & Evaluation
William Messner, Former Vice Provost
Barbaraann H. Owad, Director of University Budget
Charles A. Thompson, Assistant Vice Chancellor, Finance and Management
Kathryn VanArnam, Assistant Vice Provost
Attachment 2
LEVEL AND DISCIPLINE GROUPS
Lower Division (Freshman & Sophomore Levels) Upper Division (Junior & Senior Levels)
Low Low
Business, Management, Law Business, Management, Law
Other Data Processing Technologies
Psychology Education
Social Sciences Education Technologies
Food, Home Economics Technologies
Medium Health Services & Paramedical Technologies
Biological Sciences and Health Professions Other
Business, Commerce Technologies Psychology
Education Technologies Public Service Technologies
Fine and Applied Arts
Languages and Letters Medium
Math and Computer Science Agriculture and Natural Science Technologies
Public Service Technologies Business, Commerce Technologies
Languages and Letters
High Math and Computer Science
Agriculture and Natural Science Technologies Social Sciences
Communication, Media, Design Technologies
Data Processing Technologies High
Education Biological Sciences and Health Professions
Food, Home Economics Technologies Communication, Media, Design Technologies
Health Services & Paramedical Technologies Fine and Applied Arts
Mechanical & Agricultural Engineering Technologies Mechanical & Agricultural Engineering Technologies
Physical Science and Engineering Physical Science and Engineering
Beginning Graduate Advanced Graduate
Low Low
Education Education
Other Other
Medium Medium
Biological Sciences and Health Professions Biological Sciences and Health Professions
Business, Management, Law Fine and Applied Arts
Psychology Languages and Letters
Social Sciences Psychology
Social Sciences
High
Fine and Applied Arts High
Languages and Letters Business, Management, Law
Math and Computer Science Math and Computer Science
Physical Science and Engineering Physical Science and Engineering
Health Related First Professional
Medicine
Dentistry
Pharmacy
Optometry
Veterinary Medicine
