Budget Model Change FAQs

Why are we making changes to the current budget model?

The 2030 action teams called for a review of the current budget model to ensure it is aligned to UWM’s strategic goals; further, UWM had planned on a five-year review of the model launched in Fall 2018 to plan for the FY20 budget to learn from its experiences in the first several years.

The overall financial context is that UWM has 29% fewer undergraduate students than it did in 2011. Coupled with state funding that has not kept pace with inflation and a decade-long tuition freeze, the result is per-student funding lags far behind our peers. In addition, the number of high school graduates will decline by about 8% between  this academic year and 2034-25. The new budget model will better position UWM to align our investments and our future with these economic realities, while continuing to serve students and fulfill our research mission.

To do that, the model provides UWM units with clearer incentives to improve enrollment, retention and external funding, thus supporting the university’s strategic goals.

What were the major concerns about the current model?

Most concerns around the current budget model were due to its complexity. This made it hard for divisions to determine how revenue would be allocated.

In addition, the current model employs subvention, which adjusts the results of the budget model formula and gives some colleges more money than their activities justify. With no limits on subvention, there was not enough incentive for units to innovate and adapt, especially to improve enrollment and retention.

It also was difficult for divisions to understand how their actions would impact revenue allocation because, essentially, the formula as applied changed each year. Divisions and units want greater stability and predictability in the formula so they can better plan and drive their own futures.

Other concerns centered on divisions’ inability to invest in activities to improve retention and enrollment due to a two-year average that effectively delayed the financial progress they might hope to gain from enrollment and retention gains at the undergraduate level.

Does the model need to be changed if the Universities of Wisconsin receive additional operating funding as requested by the Board of Regents on August 22, 2024?

The recommended changes to the budget model are necessary regardless of the UWs proposed 2025-2027 biennial operating budget. The proposed changes to the budget model are aligned with the 2030 action plan and the institution’s mission.

There is a long process ahead before we will know whether all or part of the board’s 2025-27 biennial operating budget request will be funded.

Further, if it is funded, UWs plans to use the money for specific priorities, such as student financial aid, compensation increases for faculty and staff, new research priorities such as in the area of artificial intelligence, and inflationary cost increases that would otherwise need to be covered by cuts.

If UWM wishes to change its financial trajectory and make substantial improvements in student success, these budget model changes are also critically needed. 

What was the process around reviewing the Budget Model?

The project charge was issued in May 2023.  Soon after, Provost Andrew Daire and Sr. Vice Chancellor Robin Van Harpen formed a Budget Model Review Committee. The project was implemented in three phases, with the first phase involving stakeholder feedback (surveys) and meetings with all colleges, Divisional Finance Officers and the Academic Planning and Budget Committee.

The second phase involved:

• Assessing stakeholder feedback,
• Reviewing best practices nationally, including a peer assessment,
• And forming principles to guide proposed changes.

The final phase involved:

• Modeling,
• Discussion of options by the committee,
• Feedback sessions with every college, deans, the Academic Planning and Budget Committee, University Committee, Academic Staff Committee and the Divisional Finance Officers from across the institution.

The Budget Model Review Committee met 11 times between June 2023 and July 2024.

Were changes to the model approved?

Yes. Provost Daire and Sr. Vice Chancellor Van Harpen kept Chancellor Mark Mone apprised of the work of the review committee throughout the process. They presented final recommendations to the chancellor on August 15, 2024, which he accepted.

What core principles underlie the budget model?

In Fall 2023, the Budget Model Review committee established nine key principles and circulated those to stakeholders for feedback, underlying review of the model. Those principles were formally adopted in December 2023. They were:

• Incentivize performance: The budget model should incentivize performance of units to align with campus strategic priorities and UW-Milwaukee’s mission.
• Ease of predicting revenues: The budget model should be simple enough to predict revenues related to key drivers, such as enrollment. It also should enable multiyear financial planning.
• Establish a subvention pool: Develop an updated strategy for the subvention pool and a limit on the total dollar amount.
• Establish a strategic pool: The budget model should continue to support a pool of funds for strategic initiatives.
• Flexibility to support the uniqueness of units: The budget model should allow for some flexibility in the allocation of funds to units based on their unique characteristics, such as costs of instruction and the availability of differential tuition.
• Granularity: The budget model should be granular enough for decision-makers to assess financial health at the program and subunit levels.
• Tax Structure: Explore usage-based charges of campus services as an alternative to the revenue contribution approach.
• Accumulated fund balances (“carryforward”): Explore enabling divisions who have a recent history of meeting budget targets to use some carryforward balances without seeking permission during the budget process.
• Enable timely improvements: To the extent recommended changes may take time, establish phases to enable the highest impact changes as soon as possible.

What are the changes to the model?

The primary changes being made to the model are:

• Change the formula for distribution of undergraduate tuition to focus on student credit hours and majors. 
• Incorporate residency mix into the distribution of undergraduate tuition. 
• Use more recent undergraduate enrollment performance in the formula. 
• Distribute state appropriations based on resident student credit hours and research.
• Replace the current subvention pool with a College Strategic Initiatives fund with a five-year phase-in.
• Allow colleges and divisions greater discretion in the use of carryforward balances.

How do these changes support our overall campus strategy?

The current model aims to incentivize the institution’s 2030 goals of student success, research, innovation and community impact, and financial sustainability. These goals remain our priorities.

The proposed changes will enable all colleges to transparently see the financial impact of different activities.

The institution will still retain the ability both at the college and institutional level to invest in a limited number of activities that may not cover their direct costs but are important to the institution. However, the institution and divisions will have to prioritize these activities in line with funding levels.

How long will units have to adjust to the new model?

The model will be used beginning in FY26, which starts on July 1, 2025. Having said that, the elimination of subvention and replacement with a College Strategic Initiatives fund will be phased in over five years, beginning in FY26. FY26 budget planning starts in September 2024.

How does this model support our research mission?

The model continues to distribute 80% of indirect cost return to colleges, which is a significantly larger percentage than most institutions provide.

In addition, the model will provide 50% of undesignated state appropriations, currently a pool of about $10 million, to be distributed based on a college’s relative share of external award activity. External award activity includes contract and grant expenses on funds 133 and 144.

How does the model address disciplines that may have higher cost structures?

Many disciplines have unique characteristics that impact their cost structure. These range from programs that operate teaching laboratories to accreditation or programmatic design (e.g. music, architecture).

As they do today, colleges will need to balance these needs in line with the institution’s overall funding levels. However, the new model retains differential tuition being distributed exclusive of the contribution to central services. This means that differential tuition is not assessed the current campus contribution rate of 41.5%.

In addition, the model establishes a $2 million College Strategic Initiative and Adjustments Pool, which could provide additional funding if warranted.

How does the model address programs or activities that may not be able to cover their costs but which are institutional priorities?

These programs or activities could be supported by the College Strategic Initiative Fund, although only for five years. During that time, they must find a path to become self-sustaining.

When you look at the changes, it appears that Lubar College of Business, College of Community Engagement and Professions, and College of the Arts and Architecture will see significant increases. Why is that?

This is due to changes within the formula to distribute undergraduate tuition based on undergraduate activity metrics, simplifying research metrics to include all contract and grant expenditure types (public service and research awards weighted the same), and the decision to reduce or eliminate subvention. Even under the current model, Lubar College of Business and College of Community Engagement and Professions should receive significantly more resources due to their larger enrollments and performance under existing metrics.

What is the budget model referred to as?

The current budget model, which was created over five years ago, is referred to as the “New Budget Model” colloquially. Thus, we are recommending that the model implemented in FY26 be referred to as the UW-Milwaukee Activity-Based Budget Model.