Virginia Tech will begin a three-year transition to a new performance budget model that will impact how funds are distributed to colleges beginning in the 2017-18 fiscal year.
“Adopting a new budgeting model will better position the university to be more adaptive to change, and create new incentives to faculty for instructional and research innovation,” said Thanassis Rikakis, executive vice president and provost.
“As we move forward as a global land-grant university, this new financial model can support academic excellence, world-class research, and our commitment to service while advancing student access and efficiency and affordability,” he said.
The university’s recent visioning exercise, Beyond Boundaries, identified the need for a new funding model to make Virginia Tech more agile and flexible, and to promote internal and external funding partnerships.
Virginia Tech made its last major changes to the way academic division budgets are allocated in the mid-1990s. Since then, the university has undergone substantial growth in financial activity, complexity, and dependence upon self-generated revenues.
To illustrate, the state provided 37 percent of the university’s total budget in 1998. This past fiscal year, state support accounted for less than 18 percent of the total operating budget. In the same time, Virginia Tech’s annual operating budget has grown from $574 million to $1.4 billion.
In addition, expectations among university faculty and leadership have changed, resulting in greater curricular reform and more interdisciplinary collaboration. Many degree programs, for example, have been renewed and updated. Students and faculty are engaged in more interdisciplinary instruction and research, and the university is becoming more reliant on self-generating revenues. A budget model that recognizes and funds these type of partnerships and entrepreneurial activity on the part of departments is needed.
“Our current budget approach is one where money follows legacy, with only marginal changes from year-to-year tied to changes in levels of activity," said Ken Smith, vice provost for resource management and institutional planning. “Moving forward, the new budget model should allow resources to more closely follow activity, such as instructional efforts and meeting other enrollment, research and scholarship, and philanthropy goals.”
Virginia Tech will continue to develop and collect feedback on the new performance budget model during the 2016-17 fiscal year, and will fully implement the new model the following fiscal year. At that time, budget allocations will be linked to the accomplishment of annual performance goals.
Performance goals will be determined jointly between the colleges and the Office of the Executive Vice President and Provost. Goals will be set in the context of the past five years of actual activity and five years of projected activity such that the goals for any single year is a point on a continuum of planned improvement.
Rikakis emphasized that the process of setting goals is not just formulaic funding but to encourage better planning and a deeper understanding and discussion between deans and department heads and dean and university leadership on the strategic direction of departments, colleges, and the university as a whole.
“The incentive-based budget model is not a formulaic budget. There will also be qualitative analysis, and opportunity for discussion and the adjustment of goals as the environment and needs of the colleges and university change,” said Rikakis. “We want to be transparent in this process and not just change for the sake of change. As the university evolves, the budget model will also adapt so we can continue to meet goals and support continuous improvement and excellence in instruction, research and engagement activities of the colleges.”
Faculty and staff can view a voice-over presentation (restricted by PID log-in) that details the budget model and the planned transition on the Office of the Executive Vice President and Provost’s website. Specific questions can be directed to Ken Smith or Jeff Earley in the Office of the Provost.