Understanding the Budget
Overall responsibility for development and administration of the Miami University budget rests with the Senior Vice President for Finance and Business Services, in collaboration with the President, other vice presidents and academic deans. Budget approval ultimately resides with the University Board of Trustees.
In FY 2014, Miami University changed its method of budgeting from traditional incremental budgeting used in many public sector organizations and universities to a performance based budget known as responsibility centered management (RCM). In incremental systems, budgets are generally fixed based on the prior year’s allocation, decision making is highly centralized and budgetary changes are based on the incremental growth in revenues compared to the prior years. In the RCM environment, all unrestricted revenues are allocated to the academic colleges and schools (including the regional campuses) or responsibility centers. Administrative units supporting the university’s operations are identified as support centers and funded through a cost allocation to the academic colleges and schools. With revenue generation and cost management decentralized into the colleges and schools, the economics of the institution are more transparent and accountability is more diffused across decision makers.
Under the RCM system, 75% of the instructional revenues are allocated to the colleges and schools based on credit hour production and 25% of the instructional revenues are allocated based a count of student majors in each academic division. Under the model, allocated undergraduate net instructional revenues are averaged over four years to limit swings in the financial performance of the school and colleges. The model also includes a subvention process to create a level starting point for each division. The state subsidy (SSI described below) is allocated consistent with the state formula. Other revenues are allocated proportionally to the divisions.
Development of the budget is shared across the institution. Key assumptions around the salary increments, level of institutionally funded financial aid, strategic investments are shared with and vetted through within the President’s Executive Cabinet, the academic deans and their representatives to university budget committee, the University Senate’s Fiscal Priorities Committee, and the Finance and Audit Committee of the Board of Trustees. Overall financial performance for the each area of the university during the current fiscal year is also shared with these groups. However, operational decisions are decentralized under in the new budget model.
As a member of the University System of Ohio, Miami University is allocated operating subsidy by the State of Ohio through State Share of Instruction (SSI). The SSI formula allocates state appropriated funds to institutions based on degree completions (50%), course completions (30%), medical and doctoral set asides and other earmarks (20%). The level of the award to Miami is a function of the university’s size and performance relative to other institutions in the University System as well as the overall financial condition of the state of Ohio’s budget. For the last several fiscal years the SSI awarded by the state has been approximately 10% of university’s total revenues.
Auxiliary enterprises operate as independent cost-centers. Each of these units are responsible for generating their own revenue from fees and user charges and maintain an annual budget that is balanced. Some auxiliaries may also receive a share of the general fee revenue. Auxiliary revenues must be sufficient to cover all costs of operation, including salaries and wages, staff benefit allocations, supplies, materials, utilities, capital acquisitions, and debt service. In addition, auxiliaries remit a payment for centralized administrative services to the Educational & General (E&G) budget for services such as accounting and financial services, personnel, and budgeting. Auxiliary enterprises fund their own capital projects and maintain their own reserves for contingencies, repairs and replacements.
Funding for the university’s facilities and infrastructure are supported by operating resources set aside for plant renewal and replacement (CR&R), bonded indebtedness, and the State of Ohio. The physical plant of the university is monitored each year through the facilities condition index. The index provides a guideline on the age and over all condition of each building. Long range renovation plans, and funding allocations are made based the condition of the physical plant and infrastructure relative to the available CR&R, debt capacity, gift funds, and the availability of state funds.
Under the state biennial capital funding process, campuses request funds from the State of Ohio for capital improvements. The University must submit an institutional profile stating programs, goals and objectives; major program services offered; a brief narrative describing general change in program services over the past six years and planned changes in the next six years; an explanation of how program services are responding to the changing character of client populations served by the institutions. The funds may be used to construct new facilities or renovate existing facilities. Only projects relating directly to the university’s academic mission are eligible for state funds. Capital funding requests are authorized through an appropriation bill adopted by the Ohio General Assembly.
Due to state limitations, new construction and renovation of buildings operated for auxiliary enterprises must be funded from CR&R, gifts or debt.