Chairs and Deans Collaborating on Enhancing Department Budgets
Now that the threats of the COVID-19 virus appear to be diminishing and campuses are returning to face-to-face instruction, it may be an opportune time to examine the budgeting models and policies that our campuses and schools use. I say this because many of our institutions are still reeling from the loss of student enrollment and reduced state support or, in the case of private institutions, from reduced endowment reserves and overly generous tuition discounting. Thus, if allocations are made as they were before the pandemic department, budgets will be smaller.
Ask chairs what they would like to see in their budgeting system, and they will say ways to generate more dollars (no surprise there!). With this goal in mind, I will try to provide some ways to increase the department’s budget, not by giving it a larger piece of the pie (zero-sum game) but by making the pie larger. The dean’s role at the outset will be in assisting the chair in understanding the budgeting processes currently in place at the institutional and school levels; in assuring that the department, school, and institution share in the new income; and in supporting any policy changes necessary to facilitate budget increases.
Before we get into specific activities that might lead to revenue enhancement, there are a few preliminary items that need to be addressed before the collaboration starts. I have already mentioned one. Chairs will need to get up to speed on school and campus budgeting. This includes sources of revenue, institutional costs, policies and practices, and so on. Because of workload issues, the dean’s budget person may provide this education; they actually may know more about the subject than the dean. Chairs must also understand that the dean has many mouths to feed. They will have to share all proposals for new revenue with the dean and perhaps with campus, and honest, accurate dealing with the dean will be necessary to generate or maintain credibility to have their ear for subsequent ideas.
Internal sources of new funding
There is a consensus that department budgets typically derive from tuition, state appropriation, and fees. Excluded are income from food and spirit wear sales, rentals, performances, athletic events (including TV contracts), and clinics. Private institutions may supplement their much higher tuitions with dollars from their endowments. Fees include course fees that are linked to specific courses (e.g., laboratory, field trip, tutoring center, and study abroad) as well as program fees, which are assessed to all students in a program because of the additional cost of instruction and comparatively low enrollments in these areas.
Institutions often assess fees differently. For example, some do not charge lab fees, which means that funding for the additional expenses of lab equipment and materials must come from tuition or state appropriation. This reduces everyone’s budgets. Chairs should make certain that all fees are being appropriately charged to their courses and that they appear in their budgets. Chairs should also calculate the full cost (materials, amortized equipment costs, hourly prep and cleanup assistants, and so forth) of running each lab to make certain that the budgeted fee covers it. If you are running a math tutoring or help center or a writing center to support composition courses, then you should charge a course fee to the courses being supported. I realize that this will increase student costs. It is, however, justified by the real costs of a quality education that the department budget would otherwise have to cover.
New credit hours
As an example, imagine that you have a new academic program that can be initiated with existing faculty through reassignment, new course development, and the use of existing coursework. The program would increase the number of first-year majors in the department by 30–50 students in the first year and more thereafter. The dean agrees with this assessment. You have calculated an estimate of the new income that the two 5-credit-hour, first-year courses would generate for the department. If your students also take other courses in the school in the first year, include the income from this source as well. Assuming a public institution with a tuition rate of $400 per credit hour, those 30–50 students would generate $120,000 to $200,000 (excluding course fee income) in the first year from the two-course sequence alone! Additional data can be provided (year-four income, some student attrition, income from other courses taken in the school, and increased costs—such as an advisor and a new faculty line in year three to complete and expand the curriculum—over time).
Is there an institutional or school policy or practice that addresses the sharing of new tuition resources? What can the chair expect? Most institutions spend roughly 50 percent of their income on items that are infrastructural and nonacademic (e.g., heat, security, insurance, grounds) and support-related areas (administration, financial aid, library, registrar, admissions). That leaves 50 percent for the dean, who has faculty and staff salaries as the major budget item if the income comes to the school. The dean can ask this question if necessary. The new credit-hour income dollars would become part of the base budgeting and thus would have to pay their (reduced for all!) share of institutional and school costs. It should also be reflected in the department’s budget. In the absence of a school policy, the chair and dean would negotiate the level of the return.
Most institutions have internal grant programs to improve undergraduate education, promote research and scholarship, and foster community engagement. If you have a successful program or an excellent idea that you are or will be funding from department resources, consider applying for internal funding that will allow you to transfer the costs. Success with an internal proposal will also help faculty applying for and earning external funding for their work.
External sources of new funding
External grants can be a source of new dollars for the department. External research grants and contracts are found primarily in science and engineering departments, but a little effort can locate foundations and corporate entities that will support good ideas in teaching and research in other areas as well. Understanding that faculty grants support faculty work, you may wonder how the department might benefit financially. One way is through the funding organization’s willingness to compensate the institution for the institutional or indirect costs of conducting the project. All federal government grants do this. The indirect cost recovery (ICR) dollars are also called overhead and pay for the research facilities on campus (including the space in which the work is done) as well as the administrative oversight to make certain that the grants are expended appropriately. For example, a large federal research grant may be awarded $2M over five years of which (indirect rates are individually negotiated with institutions), say, $700K (an ICR rate of 53.8 percent) are indirect cost dollars. These dollars are used to offset institutional research costs where they displace institutional dollars on a one-to-one basis. That means about $140K per year (of institutional dollars!) are now available for other uses. Most institutions return a significant portion of these dollars to the place where they were earned to incentivize more proposal writing. Grants for teaching projects, curriculum work and outreach are smaller in amount and have lower indirect rates, but they are still worth the effort.
A second way that external grants can add to the department budget is through faculty buy-outs. If permitted by the funding source, academic year salary should be a component of the proposal budget. The faculty member will set a percent effort for the project. It may be 100 percent in summer for someone on a 10-month appointment and 20 percent throughout the academic year. Requesting academic year pay is less common than requesting summer pay but is what is important here. For example, a faculty member whose 10-month salary is $100,000 would have budgeted $40,000 plus fringe benefits (adjusted for salary increments in years beyond the first year) for each year of the grant. The external academic-year salary displaces the institutional salary at $2,000 per month (called salary savings); the practice at many institutions is to return most or all of the salary savings to the department, with the dean holding the balance plus the fringe benefits. Let’s say the return is 80 percent ($16,000). The only obligation on these dollars is to pay the cost of replacing the faculty member in 20 percent of their effort—the buyout part. This may mean recruiting an adjunct to replace some teaching or dropping a section from the course schedule and reassigning some service obligations.
If there are existing polices for adjusting department budgets for increased enrollments, distributing ICR, and sharing salary savings, you are ready to go. If not, meet with dean about these ideas and bring along examples of policies from other institutions to facilitate the conversation.
You are probably thinking that philanthropic donations are designated expenditures and that we need assistance with funding for a variety of purposes. But some efforts can indirectly assist departments. Donations can replace items you would otherwise have to purchase. Instrumentation for teaching labs (in biology, chemistry, geology, physics, and engineering) or for research from local industry is an example. Industry replaces equipment on a shorter schedule than we do. Office furnishings are another area where departments would benefit from having a local donor.
A significant portion of donated dollars goes to student financial aid. The larger donations are in endowed accounts that spin off a certain percentage of the principal each year for scholarships. Used wisely, these funds can allow recipients to take more classes, avoid missed semesters, replace some external work hours, and graduate sooner. Marketing can also use the availability of these scholarships to attract more students. The dean’s role would be in making available the school’s development and marketing staffs to assist. Many of these outcomes will increase department enrollment.
N Douglas Lees, PhD, is professor and chair emeritus of biology and former associate dean for planning and finance in the School of Science at Indiana University–Purdue University Indianapolis.
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