Source: EAB, Aligning the Budget Model to Strategic Goals: Executive-Level Decision Points to Ensure Impact on Cost, Growth, and Strategy, 2016, p.5

Incremental budget allocations presume the existence of a stable base budget, adjusted for inflation, and appropriate to the mission charged to the unit. The FY07 budget allocation establishes such base budgets for academic and support units. Future base budgets need to be adjusted for inflation to remain viable and to preserve the principles used in establishing the base budgets. Incremental revenue is then defined as the funds available after the needs of the base budget have been met.  

The first step in allocating incremental revenues each year should be a review of operations and allocations between the Provost and Dean or Director of major units, and other appropriate participants.  The review would take place late in winter term and should include:

a. Income-expense analysis for the prior fiscal year, to assess progress on the goal for all units that any imbalance between direct revenue and direct expenses plus overhead be less than 10% of the total revenue;  

b. Review of the metrics for each unit for the prior five years, to assess trends and changes.  These metrics might include (not all metrics would be relevant to all units):

• Lower-division, upper-division, graduate student credit hours

• Graduate and undergraduate majors and minors

• Outcomes of instruction for student engagement and success

• Total grant and contract dollars (Federal, State, private)

• Effective indirect cost return

• Transactions managed or people served (for service units)

• Average cost of service per appropriate metric

c. Assessment of unmet demand or essential service shortfalls. These might be assessed based on waiting lists for classes, required core courses that were not offered, key support service gaps or failures, missed opportunities, or other metrics.

The Provost will make allocations of incremental budgets based on these meetings and the guidelines noted below for various kinds of revenue. For Forestry/FRL and CAS/AES it might make sense to do the review based on aggregate productivity, because most of the faculty members in those programs hold joint appointments. The same would hold true for units in which Extension Services provide a major budget contribution. The incremental budget decisions should be shared with the Provost Council and University community. The goal of such transparency is not to create opportunities for micro-management and argument but to provide accountability to the community. 

The general concept of the RCM model is that operating fund revenues are attributed to the academic divisions that generate them, primarily through tuition and operating grants largely determined by student enrolment. Each academic unit contributes to a University Fund for institutional strategic priorities. The decanal units also bear their proportionate share of the indirect costs of the University (for example, library services, information technology, student services, occupancy costs, and administration).

The remaining net revenues of each decanal unit plus any allocation of the University Fund (either for new strategic investments or to partially mitigate the impact of changes during the transition to RCM) support their direct costs, including instructional staff and resources for the provision of their academic programming.