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Frequently Asked Questions

As we continue to partner with colleges, departments and units to understand and implement a new, values-based budget model for the University of Kentucky, a number of recurring questions and themes have emerged. Below are some of the more frequently asked questions about the model.

In addition to enrollment and growth, what does the model incentivize?  Why is the model essential to financial success and sustainability at UK?

The new model focuses on aligning our financial resources with academic decision-making authority and accountability. This includes authority and accountability not only for enrollment and how we grow, but also for increasing student retention and graduation rates, measuring our success in research, and creating incentives to support and enhance interdisciplinary work that helps students and furthers scholarship.

A values-based model creates these incentives in two fundamentally important ways:

  • Making the financial aspects of our operation more transparent and our system more nimble
  • Empowering Colleges to make informed decisions about investing in priorities

Our move to a values-based model recognizes that the ways in which we have traditionally funded our ambitions and operations in public higher education are changing - dramatically. Consider a few factors:

  • State funding for UK has declined on a recurring basis by $50 million in the last five years - and no one projects those dollars to come back in the near future.
  • Policymakers, parents and students are raising questions and concerns about access and affordability, giving rise at both the state and federal levels to serious discussions about different performance funding models. The bottom line is that we cannot simply raise tuition as a formula for funding challenges.
  • At the same time, federal support for research - our primary source of dollars in this area - also has been flat or declining.

As a result, we must courageously and collaboratively position ourselves to succeed - and to build upon our institutional momentum - no matter what the shifting fortunes involved with state and federal funding may entail.

Other institutions, including many of those to whom we compare ourselves or aspire to emulate in terms of funding, graduate education and student success levels, have adopted their own values-based models in recent years in recognition of the same changing dynamics.

Our financial model - based on our unique institutional values and legacy - must look at where and how we grow in enrollment. At the same time, it must underscore our commitments to serve the Commonwealth as its public flagship, land-grant institution and to fulfill our service, graduation, education and research missions.

How does the model balance competition and collaboration?

The new model powerfully leverages both competition and collaboration to promote institutional priorities and values. The model encourages colleges to offer the highest quality programs to attract the best students at all levels. The model encourages us to compete - with ourselves and with each other - to retain and graduate those students in a timely manner. And the model empowers our researchers to aspire to even greater levels of success within a highly competitive marketplace for grants and funding.

Healthy competition will be fostered by academic leadership at the Provost, Dean and Chair levels - in collaboration with faculty leadership - to ensure that issues are identified early in the process and handled appropriately and productively.

The history of our sister institutions in a values-based model is instructive. Indiana University, for example, noted that Responsibility Centered Management "served to make transparent the actual costs and financial trade-offs involved in cross-RC activity, and as a result, fostered healthy conversations about the underlying substantive merits of interdisciplinary proposals."

Several tools are integrated within UK’s values-based model to encourage collaboration:

  • By allocating undergraduate tuition 75% based on student credit hours (SCH) of instruction based on the faculty member’s home College, the model explicitly encourages the free movement of students across College lines as they explore opportunities, and rewards Colleges for delivering instruction regardless of where that student is enrolled
  • The model ensures that small, interdisciplinary enrichment programs are adequately valued and supported by increasing the relative value of a student credit hour taught in the Honors Program or the Gaines Center
  • The model allocates F&A revenues according to the sharing agreements into which Colleges themselves enter.
  • The model empowers Deans and Colleges to work out collaborative, mutually beneficial arrangements among themselves. The new financial model places more control, resources and authority at the college level, better enabling collaborative agreements among colleges.

How will the model affect the academic quality of the Colleges?

The values-based model creates more transparency and predictability with respect to revenues. Because leadership will be centered within the colleges, academic considerations will be given an even greater priority as decisions are made by those closest to the impact of those decisions - at the college, department and unit levels.

What does the model prioritize?

The values-based model is centered on putting mission first and aligning resources to that mission. The greater transparency and decentralization created by the new model argue compellingly for a system in which revenues are what they should be - a means to an end. That end is accomplishing our missions of education, research and service as Kentucky’s public flagship, land-grant institution.

How will the model affect graduate education?

The new model will give Colleges more control and ability to invest in graduate education if that is their priority. Aligning resource control and authority at the College level is a fundamental tenet of the values-based model.

Additionally, specific mechanisms have been built into the values-based model to encourage support for graduate education:

  • The allocation of graduate tuition separately from undergraduate tuition will ensure that the value of graduate students/instruction is not overwhelmed by potential growth in undergraduate enrollments
  • For purposes of allocating state appropriations, a multiplier has been placed on the value of doctoral and other terminal degrees. This recognizes the additional level of time and effort that goes into shepherding those students to degree completion
  • The model treats student financial aid - for undergraduates and graduate students - as a common good that we will all financially support

How will administrative and service unit budgets be held accountable within the new model?

Our current financial system does not allow everyone to see and understand what the costs are for centralized administrative services and how they are allocated. In accordance with the Guiding Themes of Transparency and Accountability, the new model will provide a clear understanding of what is being spent on administrative and support units.

Drawing on best practices from other institutions that have been successful with these models, we are developing a governance process that will give Colleges a voice in the conversation about service unit budgets.

The goal is to enforce accountability at the highest levels of administration for managing costs and improving the effectiveness of administrative and support units. Making those costs transparent and then holding units accountable for agreed-upon performance expectations will be an essential part of UK’s values-based model.

Why are we holding everyone harmless, regardless of current levels of productivity?

The "hold harmless" principle acknowledges two core values:

  • The importance of financial stability. Colleges need and deserve time to thoughtfully respond to the incentives that will be built into the new financial model.
  • A respect for our shared history. The economics of higher education are changing, and our new financial model will empower us to proactively change to meet this challenge. Our history is an important part of this evolution. We must move forward in a planned and intentional way that recognizes the importance of the past while preparing us for the future.

Having a "hold harmless" principle means that in the first year that the new budget model is implemented, the model will not be used to adjust College's budgets. Operationally, it means that the University will hold back enough funds centrally in a Strategic Initiatives Fund (SIF) that it can "true up" Colleges to ensure a balanced budget in the hold harmless year.

This process speaks to the partnership that must exist among colleges and units and between colleges and the administration. Colleges will work in partnership with the Provost and EVPFA to determine appropriate SIF subsidies, if necessary, in future years to meet mutually agreed upon goals and how we will measure progress together to support our institutional values. To that end, throughout the year, it will be important that the Provost and EVPFA are meeting with colleges and units regarding progress toward short-term and long-term goals to determine annually the amount of SIF subsidy that is appropriate.

The model doesn’t allocate funds for service.  How will we fund future service activities?

Service will always be a vital part of our mission - our institutional ethos. Service is a value that we will continue to subsidize in many, if not most, cases because it costs dollars rather than generating revenues. The new financial model will improve our ability to serve by helping us to understand where our revenues come from and by empowering us to make informed decisions about what to fund (revenue generating or not) and at what levels.

I teach in a small department that will never enroll enough students to be financially self-sustaining. How will this model affect me?

The model we are implementing is designed to distribute revenues, responsibility and authority to the College level, not to departments or units within Colleges. It is perfectly reasonable to expect that we will continue to subsidize certain academic units and departments that are not or cannot be financially self-sustaining. Just as before, Colleges and departments will establish priorities which align with UK’s mission and values.

How will capital projects be funded in the new model?

Future capital projects will likely draw from a combination of potential sources, including:Fundraising

  • A College's own reserves
  • A commitment from a pool of "strategic initiatives funds,” distributed under the discretion of the President and Provost, and/or
  • Innovative partnerships (e.g., the partnership with Athletics to help fund the new Academic Science Building or the partnership with EdR)

Routine and deferred maintenance will continue to be funded within the University's facilities budget, which is one of the support area costs allocated to the Colleges in the new model. The distribution of costs to Colleges will be based on their share of square footage.

UK is different from the other institutions that have implemented RCM.

UK is, indeed, different, which is why we have diligently worked to ensure that our new financial model represents our mission and our values. While our model has been informed by best practices gleaned from other universities, we have meticulously tailored each and every component to meet the unique needs of UK.  Our model is carefully aligned with our institutional values and priorities, and is designed with the flexibility to evolve to meet the changing needs of UK over time.

What is the timeline moving forward, and what does parallel/partnership process mean?

We are working to go-live in FY16 (July 1st, 2015). Our goal over the remainder of this year and the upcoming academic year is to continue sharing information on the values-based financial model and to examine the model in parallel to our existing incremental budget system.

In accordance with the Guiding Themes of Collaboration and Coordination, studying the new model on a partnership-centered test basis will provide us all with the opportunity to understand more fully how the values-based system will work. Together, we will develop a strong understanding of where changes or modifications may need to be made to ensure that the system we adopt for the following year - Fiscal Year 2015 - maximizes our success.

During the partnership process, we will immerse ourselves in the details of the model, engage in meaningful conversation about the model, understand how the format of our budgets will look different under a values-based model, and determine how best to prepare ourselves for managing and leading under the new model.

The partnership process will not be a “live” model where changes are made on a monthly or weekly basis as the actual financial situation on the ground changes. Rather, the numbers will change only as we make informed, collaborative and deliberate decisions to change the assumptions upon which the new model is built.

Our team is honored to serve as your enthusiastic resource and partner throughout this inherently complex process. We look forward to answering questions, working collaboratively and responding transparently to ensure that UK continues to be financially successful and sustainable for generations to come.

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