By SHANNON O. WELLS
Provost Ann Cudd and Chief Financial Officer Hari Sastry briefed the Faculty Assembly this week on the process of implementing Pitt’s new budget model, which Chancellor Patrick Gallagher approved last November.
Cudd highlighted the difference between the budget, which represents the money itself, and the budget model, which she described as the “framework” for allocating the budget.
“One thing that’s really important to understand is that a new model neither creates nor destroys wealth,” she said. “What we want our budget model to do is empower leaders to scale up or pursue new businesses that require financial investment.”
The ReSTART Budget – Revenue Sharing to Accelerate Responsive Transformation – is a modified responsibility center (RC) model, which transfers all tuition, fee, and grant revenue to schools, or RC. Each school then pays a 16% “participation fee”—sometimes called a levy—to central government to pay for strategic development and other initiatives. Schools must also pay fees to support shared services, such as human resources and IT.
Cudd described the budget model’s best goal as one that allows Pitt to align its “resources with the goals that we have,” she said. “So with our strategic plan, a budget model also embodies the management philosophy that we have, how we assign authority and responsibility to the various RC leaders.”
Strategic Advancement Fund
To create a source of “seed capital” from which RCs can borrow funds for one-time investments, a Strategic Advancement Fund was created from earnings exceeding the operating quasi-endowment distribution. , according to a statement from the CFO’s office.
This fund is intended to be self-sustaining to support one-time, non-capital initiatives that advance the University of Pittsburgh’s mission, brand, and Plan for Pitt. Responsibility centers will be responsible for reimbursing the investment.
“So you say, ‘Hey listen, I need $5 million to create this program, which is going to generate 100 more students in this new graduate program,'” Sastry told the Assembly of the Faculty,” and you’ve spoken to the Provost and you’ve spoken to the Senior Vice Chancellor of Health Sciences – and they agree that’s the right direction for the school, in a very big expansion program, well, if so, then this Advancement Fund will give you the starting Resources.”
The idea, Sastry said, is “a kind of bank, so you’ll have to pay it back and see the revenue stream come in, but after that, then you can enjoy the benefits and whatever that increased revenue stream is going to be. .”
The model will require the ability for people to invest from the start, he said, adding that the fund has not yet launched. “We’re still working on the final by dotting the I’s and crossing the T’s on it, but we want to kick it off with (the ReSTART).”
Although schools cannot yet apply for money from this fund, it already contains about $90 million, Thurman Wingrove, Pitt’s comptroller, told the Senate Budget Policy Committee last week. Wingrove said the quasi-endowment distribution was increased in 2019 from 4.25% to 4.75%, which increased the distribution from $9 million to $75 million.
This extra money went into the operating budget to help with financial aid in 2021 and 2022. Wingrove said they decided to keep the $75 million constant, and any extra returns were used to establish the fund. distinct strategic advancement over the past two years. Money was also taken from the principal of the quasi-endowment to create this fund. He said the fund is currently valued at around $90 million.
This year, however, Wingrove said: “With all that going on between Commonwealth ownership and the desire to try to have as large a payroll as possible, we have decided to no longer hold that amount constant and to instead authorize all of the 4.75 distribution to go into the operating budget this year, as opposed to this strategic advancement fund.
Tyler Bickford, chair of the budget policy committee, noted that 2020 and 2021 were “a tough few years” for not putting all the extra money into the operating budget.
Planning and Budgeting Committees
At the Faculty Assembly, Cudd addressed strengthening the role of planning and budgeting committees (PBCs) as part of the budget restructuring process. A memo co-formulated by Cudd and Sastry will address that issue, along with transparency concerns aired earlier by the Senate Fiscal Policy Committee.
PBCs must be majority elected and have bylaws, Cudd said. They should be activated during the fall semester – “When they get their target letters (in August), this will be very useful budget information for PBCs.”
The memo will also outline the development of orientation and training modules in anticipation of frequent PBC turnover. “It’s a lot to understand and learn,” Cudd explained. “So we’re going to make our training more robust out of our offices as we move forward.”
While the new budget model is currently set to be “go live” in fiscal year 2023, Sastry highlighted the thorough and deliberate approach his office has taken to develop the model where it stands. currently. Once the model took shape in the 2020-21 fiscal year, he said this year was spent watching how the current budget model works “while also seeing how it would work in our new model.”
Despite many months – and literally hundreds of meetings devoted to “making sure the University is educated and comfortable, and to be honest, our office is also educated and comfortable” – Sastry admitted that pulling the trigger to 23 “is going to be a bit of a learning curve.”
“You won’t really have a sense of how this model affects you until you’ve completed the first year of operation and seen your second year’s budget,” he said. “We told people it was really October 23 that you were going to be like, ‘Oh, okay, I get it. This is now my budget. This is what happens when I overperform or underperform.
“So we’re asking people to be patient, but we’ll also work with you because we know we’re not going to get 100% success, right off the bat.”
Shannon O. Wells is a staff writer for the University Times. Join it at [email protected].
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