1. Reflections on RCM/ABB
As we enter year three of the “new” budget model, it seems like a good time to reflect on how it has impacted the university. Of course this would be extremely complex, as there are many data points, both subjective and objective, and without broad campus input it would likely be subject to the bias of the author. But luckily, at least related to the Activity Based Budgeting (ABB) portion of the model, there are facts that can be commonly known about how resources were deployed and consumed, particularly in comparison to the pre-ABB era. This report will focus on sharing these facts, not the impact of them on any particular part of the university’s operations. It is important to note again that the ABB model applies only to the four colleges in the State and Tuition Fund, which represents only about one fourth of our total operating budget. The remaining three fourths of operating expenses continue operating under either the incremental budget model or a common commercial budget model. Revenue Allocations A significant distinction between ABB and incremental budgeting is that in ABB budgeting, revenues are allocated based on an activity, in our case that activity is student credit hours (SCH). Revenues are allocated to each responsibility center (College) that generates SCH, in the proportion that those SCH are generated; expense budgets are created based on available revenues. Under the incremental budget model, revenues are held centrally, and expense budgets are rolled forward from the prior year with incremental additions for wage and salary increases. Under both models, if revenues exceed expenses then funding of new initiatives is possible. If revenues are less than expenses, either cuts occur or the university spends its reserves. It is also possible to fund new initiatives by reallocating funds away from other areas. CWU has experienced all of these scenarios since 2013. One common critique of the ABB model is that the colleges received less funding than they would have under the incremental model. This is true in the aggregate, at least in FY18 and FY19. There are two other factors to consider: in FY18 it is also true that the non-college support functions took a permanent $1.2-million cut to mitigate the impact of the college shortfall. Initially $1.5 million was removed from the college budgets and set aside for equipment replacement. The following chart tells this story in the aggregate. Note that references to Fund 149 mean the State & Tuition fund and Fund 148 represents summer and other non-mandatory or course fees.
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