The University of Montana (UM) faces a budget crisis due to a steep decline in student enrollment in recent years. The obvious way to address this decline is through improved student recruitment and student retention. While UM's Administration has made some progress in addressing student retention, it has overwhelmingly failed in the more important area of student recruitment. Budget cuts to the University are the inevitable result of this failure.
Since the budget peaked in FY 2015, the Administration has cut the total budget of the University's colleges and schools by over 18%, for a figure in excess of $15 million dollars (see Table 1). These cuts have disproportionately targeted the University's central college, the College of Humanities and Sciences (CHS). CHS has received over 68% of the cuts imposed to date, amounting to over $10.4 million dollars. This is a 28.92% cut to CHS's budget and represents over 73% of the cuts imposed on the Mountain Campus.
The Administration is now proposing a new budget model that would make even deeper cuts to CHS and that would further increase CHS's share of the cuts made since FY 2015 to the total budget of the University's colleges and schools. If the new budget model is adopted, CHS will receive over 75% of the total cuts imposed, amounting to over $13.1 million dollars (see Table 2). This is a staggering 36.32% cut to CHS's budget since FY 2015 and represents over 82% of the cuts imposed on the Mountain Campus.
If the new budget model is adopted, it will do deep and irreversible damage both to CHS and to the University as a whole. Many tenured faculty in CHS will be fired, entire CHS departments may be eliminated, and every CHS department will be severely weakened; this will weaken in turn the many departments outside of CHS that depend upon the essential courses that CHS provides. UM will acquire the stigma of a university that has abandoned its commitment to higher education. Promising or distinguished faculty will no longer seek careers at UM, and parents and their prospective students will look elsewhere for a place to obtain a strong university education. UM will no longer be the flagship university of the State of Montana, the place where Montanans can obtain an education that is grounded in the humanities, the social sciences, and the natural sciences.
The Administration cannot avoid making further cuts at this point, but it is impractical and irresponsible for it to continue to aim these cuts at CHS. CHS currently provides over 60% of the general education courses at UM (see Table 3). CHS also provides a number of University-wide service courses that are central to the education of students from every college and school on campus. Cuts to CHS will degrade the quality of education for every student attending UM, will make it more difficult for UM to retain these students, and will weaken UM's ability to recruit new students.
No additional cuts to CHS should occur. The Administration should instead commit to strengthening UM by strengthening CHS, and by strengthening more broadly the colleges and schools that provide the general education courses and other University-wide service courses that are central to the education of every student who attends UM. This means that in addition to strengthening CHS, the Administration should commit to strengthening the College of the Arts and Media (CAM), and Missoula College. Together these three colleges provide 89.3% of all the general education courses taught at UM (see Table 3). Yet it is precisely these three colleges that the new budget model targets, directing 94.47% of the total cuts since FY 2015 at CHS, CAM, and Missoula College (see Table 2).
The new budget model is not the result of clear strategic thinking or economic necessity. It possesses major flaws, which we explain below, and would do needless, certain, and irreparable damage to an institution that Montanans have loved and valued for generations. This damage to the University does not have to happen and should not happen. The new budget model must be rejected, and a better budget model put in its place.
The Administration should immediately commit to developing a new, more viable budget model built around two constraints:
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In the rest of this document we describe how the new budget model works and explain its flaws.
The new budget model uses three categories of data: (1) student credit hours (SCHs), (2) number of academic majors, and (3) external research funding. For each college or school, the University tracks the number of SCHs generated by the courses taught by its faculty, the number of students that major in one of its programs, and the amount of external funding that has been secured for research by its faculty. (Note: funding secured by faculty through a center is not considered part of their home college's research monies.) The model also keeps track of the overall university totals for each category. This allows the model to show what proportion of each category a given college or school contributes to the University's overall accumulation. The model then provisionally assigns resources to each college or school in proportion to its share of the total. So, for example, if a college generates 50% of the University's SCHs, then the model would provisionally assign 50% of the money available under this category to that college.
The three categories are weighted. That is, the model assigns different degrees of importance to the different categories. The assigned weights are: SCHs--70%; majors--20%; external research funding--10%. In simplest terms, this means that whatever total resources there are to be allocated, the model divides these available resources into three smaller pools of funds. The SCH pool is the largest; it gets 70 cents of every dollar. The majors pool is the next largest with 20 cents of every dollar, and the external research funding pool is the smallest with 10 cents of every dollar. By weighting the three categories in this way, the model takes the total revenue that it has to allocate, divides this into three smaller pools of revenue, and then allocates a portion of each pool of revenue for a given college or school, based on its proportionate share of each category.
The University has two main sources of revenue: tuition (and related student fees) and state appropriations1. The model takes the total tuition revenue, divides this into three parts (a 70% share, a 20% share, and a 10% share), assigns a portion of each part to each college or school, then sums the three parts, arriving at an overall portion of tuition revenue for each college or school. Each college or school now has an assigned percentage of tuition revenue. The model then takes that percentage and uses this to divide up the revenue from state appropriations. This means that the weighting that was used to divide up tuition revenue carries over to how state appropriations revenue is also allocated. The model then combines these two figures, arriving at a provisional total allocation of revenue for each college or school.
Once the model has determined how much of the available revenue should provisionally be assigned to each college or school, it then reduces that amount for two purposes:
The model reduces the provisional allocation of each college or school by 0.5% and places this money in a university contingency fund. Each college or school now has a revised-provisional allocation of revenue.
The model reduces the revised-provisional allocation of revenue of each college or school by an additional variable amount (that is, the percentage of reduction varies by college or school) and uses this money to fund the other, non-academic portions of the University (including such things as the Administration itself, building maintenance, utilities, athletics, etc.). The size of reduction is substantial and highly variable, ranging from 7.7% to 52.45% (see Table 4).
To determine the size of this reduction for a given college or school, the Administration assigns that college/school an expense/revenue ratio (E/R ratio). This is supposed to be based on past historical average expenses for that college/school, but according to the Administration may also reflect strategic priorities of the University. Within the model, the E/R ratio determines the percentage that a given college or school will receive of its revised-provisional allocation of revenue. For example, CHS's FY 2023 E/R ratio is 49.68 (see Table 4). This means that CHS will receive only 49.68% of its allocated revenue. The remaining 50.32% of CHS's allocated revenue is then appropriated by the Administration to fund non-academic University expenses.
In effect, the model imposes two administrative taxes on the provisional allocation of revenue for each college or school. Once these taxes have been subtracted, the remainder becomes the actual amount of total revenue that will be allocated to each college or school.
An allocation model that was based on SCHs alone would be transparent and have a clear justification. While using SCHs as a tool for allocating revenue is not perfect, there is a reasonably straightforward relationship between the tuition and state-appropriated revenue that is paid to the University and the SCHs that are awarded to students. In simple economic terms, students pay to participate in an academic marketplace, and the University provides students with a product which they purchase (a degree, made up of successfully completed courses, each of which is assigned a value in terms of SCHs). In such a setting, students can be viewed as economic actors who spend their dollars on the courses they choose to take, and the individual colleges or schools can be viewed as the vendors within the University economy whose products are purchased. While this economic analogy clearly has limits (students are not merely economic actors, nor are colleges and schools merely vendors which sell academic products), it does provide a transparent way to record how students in effect spend their money. The courses that students take are the products they purchase, and the colleges and schools that offer those courses are the vendors which sell those products. Of the revenue generated, each vendor is given a share of the total revenue proportionate to their share of the total products that were sold. That is, each college or school is allocated revenue based on its proportionate share of the total SCHs generated.
If SCHs were the only factor used, the amount of revenue allocated to a given college or school at UM would change significantly from the amount that the proposed new budget model recommends (see Table 5). By including the number of majors and external research funding as additional weighted factors in the model, two colleges (Forestry and Health) see a significant increase in funding, while the remaining colleges and schools all see a decrease in funding. Does the Administration have an unstated goal of directing resources to these two colleges and away from the remaining colleges and schools?
Why is the number of majors included as a weighted factor in the proposed new budget model? And why is the number of majors assigned the specific weight that it has been given (20%)?
While it is understandable that the University might want to identify and support programs on campus that have successful majors, it is not obvious that the University should allocate resources based on the number of majors to the detriment of other colleges and schools, many of which provide essential support for these programs through offering general education courses and other service courses that students need as part of their major, and by offering a variety of electives that students also want to take.
For a student majoring in a given subject to succeed at UM, he or she will require access both to courses for the major and to general education courses, service courses, and electives. A SCH-only model would track all of this, and would reward a given college or school for having a large number of majors since students in a given major would take a significant number of courses from that college or school as part of fulfilling the requirements of that major.
By including majors, however, as a separate weighted factor in the budget model, the net result is to treat non-major courses as less valuable than major courses. There is no clear justification for doing this, especially given the fact that both types of courses are essential parts of every UM degree.
Furthermore, given the University's historic mission of serving Montana as the flagship liberal arts university, there are in fact strong reasons for reversing the effect of this part of the model. Major courses should not be more heavily weighted than non-major courses. Rather, UM should more heavily weight its general education courses and other University-wide service courses, those courses that are central to every degree offered at UM and that help to ensure that a quality, well-rounded education is available to every UM student regardless of major.
By including the number of majors as a separate weighted factor in the budget model, three colleges (Business, Forestry, Health) see a significant increase in funding, one sees no change (Missoula College, which does not have majors), while all the remaining colleges and schools see a decrease in funding (see Table 6).
Why is external research funding included as a weighted factor in the proposed new budget model? And why is external research funding assigned the specific weight that it has been given (10%)?
While it is understandable that the University might want to promote research as something of central importance to a flagship campus, there is no clear connection between a program's ability to secure external research funding and its ability to complete significant research. Nor is there any guarantee that by securing external research funding programs will increase University revenue. In many cases programs that secure external research funding also require additional resources from the University (for overhead costs, such as maintaining expensive labs, etc.). That is, programs that secure external research funding can end up being a cost to the University, not a source of net revenue. In other cases, programs that do not secure external research funding nevertheless manage to complete significant research and are recognized nationally and internationally, by scholars at other institutions, through prestigious awards, publications in distinguished presses, etc., all of which bring valuable recognition to the University and increase the quality of education that is available to students. If the University wants to reward excellent research, it makes no sense to allocate revenue based on external research funding. This completely distorts the value of the research that actually takes place on campus, ignoring especially the research that is carried out in the humanities fields, which typically are not heavily dependent on external research funding for their successful completion.
What is more, the way that external research funding is incorporated into the budget model is baffling. While the model uses external research funding as a means of allocating resources among the colleges and schools, the model does not base this allocation on the proportion of external research funding that a given college or school secures of the total funding secured by the colleges and schools (as the model does with SCHs and the number of majors). Instead the model also includes external research funding that is secured by the University through other non-college/school means (such as centers, the Mansfield Library, etc.). Funding that a faculty member secures through a center, for example, is not credited to his or her college/school, but is included as part of the total pool. This non-college/school portion of external research funding represents 52% of the total pool (see Table 7). By including these other non-college/school sources of research funding in the pool, the net effect is to dilute the value of the external research funding that a given college or school has secured. This makes no sense.
By including external research funding as a separate weighted factor in the budget model (and by doing this in the irrational way that the model does), two colleges (Forestry and Health) see a significant increase in funding, while the remaining colleges and schools see a decrease in funding (see Table 8).
Conclusion: The proposed new budget model would be significantly improved if the number of majors and external research funding were eliminated as weighted factors. The new budget model would be improved further if general education courses and other University-wide service courses were more heavily weighted. These are the courses that students from every college and school take and upon which depends the general quality of education available to all students at UM.
In addition to the failings in the new budget model that are associated with including the number of majors and external research funding as weighted factors, the new model has an even larger flaw tied to its use of a non-transparent expense/revenue ratio (E/R ratio). This E/R ratio is used by the model to determine what share of provisional allocated revenue that a given college or school actually receives (see our discussion above of how the model determines reductions in allocation of revenue for non-academic University expenses). The model does not explain what determines a given college or school's E/R ratio (see Table 4). Are the same metrics used for each college and school? What principles does the Administration apply when it makes adjustments, for strategic purposes, to a given college or school's E/R ratio? None of this is disclosed.
This lack of transparency is striking since a given college or school's budget depends a great deal on the specific E/R ratio assigned to it by the Administration. For example, CHS's E/R ratio for FY 2023 is 49.68. This figure is lower than the recommended E/R ratio calculated by the Administration based on CHS's 10-year average historical costs (which equals 50.2), and significantly lower than the recommended E/R ratios based on CHS's 5-year and 3-year average historical costs (which equal, respectively, 57.1 and 58.5; see Table 9). If CHS's E/R ratio were determined by using either 5-year or 3-year average historical costs, the change in allocation of revenue would be significant, amounting to an increase in allocated revenue of between $3.4 to $4 million dollars (see Table 10). In such a case, instead of facing deeper cuts that will do permanent damage to CHS and to the University, CHS would actually see its FY 2023 budget allocation increase from between $0.76 to $1.4 millions dollars. As for what justifies the particular E/R ratio that the Administration has assigned to CHS, we are given no clue.
The new budget model's use of opaque E/R ratios gives the Administration carte blanche to set the budgets for every college or school as it deems appropriate, regardless of what the model initially allocates based on the three weighted factors of SCHs, number of majors, and external research funding. This is a model that the Administration can freely manipulate out of public view and without any sort of accountability.
We can and must do better. UM deserves a budget model that upholds the values of transparency and accountability. Montanans should be able to work together to protect and strengthen one of our State's finest institutions in these challenging times, ensuring that UM will be there for generations to come.
This document was created by UM faculty and staff. Thank you for reading it. We hope you will join us in defending the University of Montana.
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Data for tables derived from 2021-01-05 Budget Allocation Model spreadsheet.
|2015 Budget (Peak)||2021 Budget2||Increase/Decrease (I/D)||% Change of 2015 Budget||% I/D of Total I/D||% I/D of Total Mountain Campus I/D|
|Mountain Campus Total||$75,688,364||$61,434,138||-$14,254,226||-18.83%|
|2015 Budget (Peak)||2023 Budget (Proposed)3||Increase/ Decrease (I/D)||% Change 2015 Budget||% I/D of Total I/D||% I/D of Total Mountain Campus I/D|
|Mountain Campus Total||$75,688,364||$59,834,138||-$15,854,226||-20.95%|
|AY 2020 Percent of Gen. Ed. Student Credits Hours|
|Arts and Media||13.2%|
|FY 2023 Combined E/R Ratio||Percent Reduction of Allocation4||Reduction in dollars|
|Arts and Media||57.48%||42.52%||-$5,153,967|
|SCH-only Revenue Allocation||Proposed New Budget Model Revenue Allocation||% Difference|
|Arts and Media||$6,540,507||$5,478,577||-16.24%|
|SCH-only Revenue Allocation||Change Due to Majors (80% SCH; 20% Majors)||% Difference|
|Arts and Media||$6,540,507||$6,132,628||-6.24%|
|AY 2020 External Research Funding||% of Total|
|Arts and Media||--||0.0%|
|SCH-only Revenue Allocation||Change Due to Research (90% SCH; 10% Research)||% Difference|
|Arts and Media||$6,540,507||$5,886,456||-10.00%|
|CHS||Suggested E/R Ratio 5|
|1 Year||3 Year Ave||5 Year Ave||10 Year Ave|
|CHS E/R Ratios||Allocated Revenue||Difference||Change from FY 2021 ($25,715,518)|
|FY 2023 E/R Ratio||49.68||$23,040,518||--||-$2,675,000|
|10-year E/R Ratio||50.5||$23,422,728||+$382,210||-$2,292,790|
|5-year E/R Ratio||57.1||$26,476,958||+$3,436,440||+$761,440|
|3-year E/R Ratio||58.5||$27,131,186||+$4,090,668||+$1,415,668|
|2019 Program Home||2020 Program Home||2019 Budget||2020 Budget||Increase/Decrease|
|2019 Budget||2020 Budget||Increase/ Decrease (Includes Reallocation Due to Program Movement)||2021 Budget||2021 Increase/ Decrease from 2020 Budget||2021 % Change of 2020 Budget||2023 Budget (Proposed)||2023 Increase/ Decrease from 2021 Budget||2023 % Change of 2021 Budget|
1. Some colleges/schools also have additional, program-specific tuition that is addressed separately in the proposed new budget model.
2. Changes to the budgets of Education, Health, Forestry, and Law also reflect reallocation of resources due to the movement of four programs: (1) Health and Human Performance (now Integrative Physiology and Athletic Training); (2) Communicative Sciences and Disorders (now Speech, Language, Hearing, and Occupational Sciences); (3) Geography; (4) Public Administration and Policy (see Table 11). These changes took place between FY 2019 and FY 2020. A more accurate picture of the increases/decreases to the budgets of these four colleges/schools emerges if we treat FY 2020 as a new budget baseline and then compare FY 2020 figures to the increases/cuts put into effect in FY 2021, and to the increases/cuts that have been proposed for FY 2023 (see Table 12).
3. Changes to the budgets of Education, Health, Forestry, and Law also reflect reallocation of resources due to the movement of four programs: (1) Health and Human Performance (now Integrative Physiology and Athletic Training); (2) Communicative Sciences and Disorders (now Speech, Language, Hearing, and Occupational Sciences); (3) Geography; (4) Public Administration and Policy (see Table 11). These changes took place between FY 2019 and FY 2020. A more accurate picture of the increases/decreases to the budgets of these four colleges/schools emerges if we treat FY 2020 as a new budget baseline and then compare FY 2020 figures to the increases/cuts put into effect in FY 2021, and to the increases/cuts that have been proposed for FY 2023 (see Table 12).
4. This figure is determined by subtracting the expense/revenue ratio (E/R ratio) assigned to each college or school (1-E/R ratio=percent reduction of allocation for non-academic University expenses).
5. Based on CHS's inflation-adjusted cost per SCH.