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Archive

Tuition Revenue Targets (FAQ)

WHY ARE TUITION REVENUE TARGETS BEING ESTABLISHED FOR SCHOOLS AND COLLEGES? The Provost and Chancellor articulated the following objectives in a memorandum from the Chancellor to the Faculty Senate on 1/28/99.  The memorandum was subsequently published in the UWM Report. It is partially reproduced below.

1.  To ensure that UWM meets both our enrollment target and our revenue target.

Since 1995 UWM has operated under both Fall enrollment and annual tuition revenue targets that are negotiated with UW System.  It is imperative that we meet both of these targets.  Since 1995, the Provost has negotiated fall term enrollment targets with the deans of each school.  To ensure that we meet our fiscal year revenue target and balance our Fund 101 budget, the Provost is negotiating with each dean to set annual tuition revenue targets.


2.  To identify schools/colleges that generate tuition revenues in excess of their target.

We must collect about $60 million dollars in tuition revenue to balance our Fund 101 budget.  By setting revenue targets for each school based on their prior pattern of revenue generation, we can determine which schools and colleges are generating additional revenues beyond these targerts.  Since these revenues are returned to UWM, they can be allocated to the schools and colleges.


3.  To provide a model for the allocation of marginal or "excess" tuition revenues.

Since tuition revenue growth is achieved primarily through additional enrollments, tuition revenue targets permit the Provost to model the generation and allocation of marginal tuition revenues.  By allocating "excess" tuition revenues to the schools/colleges that generate it, the Provost can help to ensure that programs with growing enrollments receive some additional resources to support the additional workload.

4.  To facilitate sound academic and financial planning in the schools/colleges.

Our enrollment projections, based on a model that assumes no change in trend over what we've experienced over the last 2 years, predict an 8% enrollment growth over the next five years. The practice of establishing enrollment and revenue targets for schools and colleges provides for a predictable flow of excess resources back to the schools/colleges that experience enrollment growth as well as a stability of resource bases for units that do not experience substantial enrollment growth. Schools and colleges which experience the enrollment growth we are expecting will be able to predict the marginal tuition revenues that they will earn and thus to plan intelligently to accommodate the additional workload.


IS UWM STARTING TO OPERATE LIKE A BUSINESS?

No.  We are adjusting budget policies and procedures to accommodate reduced levels of state taxpayer support and our corresponding greater dependence upon other sources of revenue.  We are thus beginning to operate more like a private university.  Many private universities (e.g., Harvard, Stanford, University of Southern California) have budget policies that are similar to the tuition revenue targets being implemented at UWM.


HOW DEPENDENT UPON ENROLLMENTS IS THE UWM BUDGET?

Under the Bulls Eye tuition revenue policy established by UW-System in 1995, 100% of the Fund 101 budget is dependent upon meeting both our enrollment and revenue targets.  In simple terms, our budget will decline in proportion to any future enrollment decline and the associated tuition revenue decline. We also, though, have the opportunity to recoup tuition revenues should our enrollments and revenues continue to increase as they have in the past two years.


WHAT PROPORTION OF UWM'S BUDGET IS COVERED BY TUITION?

The state program funds budget at UWM is about $154 million.  Of this amount, about $60 million is generated by tuition.  Under the Bullseye tuition revenue target established by UW System in 1995, if we fail to raise the $60 million in tuition, then we will have an immediate budget lapse in the amount of the shortfall.  In effect, the tuition revenues in our Fund 101 budget are being treated as if they were program revenues or "soft" funding.


WHAT PROPORTION OF UWM'S BUDGET WILL BE ALLOCATED TO SCHOOLS AND COLLEGES ON THE BASIS OF TUITION REVENUE TARGETS?

Only a very small fraction.  Under the model that assumes 8% enrollment growth over the next five years, less than 2% of UWM's current state program funds budget, and approximately 5% of UWM current tuition revenue budget, would be allocated to schools and colleges as excess revenues on the basis of their established tuition revenue targets.  Said another way, 98% of the state program funds budget, and 95% of the tuition revenue budget, would either remain where it is now or be reallocated as per university and school/college strategic planning, and would not be directly impacted by the tuition revenue targets.


DOES THIS MEAN THAT BASE BUDGETS ARE NOT AFFECTED BY THE TUITION REVENUE MODEL?

Base budgets are not being modified.  The Provost anticipates that all of the schools and colleges will meet both their enrollment and revenue targets next year.  The Provost has also said that he will attempt to hold schools/colleges harmless for minor revenue shortfalls in much the same way that he has held many units harmless for minor shortfalls in their enrollment targets.  The primary purpose of setting tuition revenue targets is to facilitate the predictable allocation of tuition revenues above and beyond the amounts required to balance our current budget.  Over time, schools and colleges will be able to build these incremental tuition revenues into their base Fund 101 budgets.


HOW WILL THE TUITION REVENUE TARGET BE DETERMINED FOR A SCHOOL OR COLLEGE?

Here's a sample calculation for a fictitious unit:School of Intergalactic Studies:1,000  Fall 1998 term enrollments (FTE SCH conveyed)
$4,000,000 1998-99 fiscal year tuition revenue attributed to School
1,050  Fall 1999 term enrollment target negotiated between dean and Provost
1.05  Planned enrollment growth ratio
$4,200,000 Planned tuition revenue growth rate as per enrollment growth anticipated
5%  Tuition increase approved for Fall, 1999 (not yet done)
$4,410,000 Tuition revenue target for School


WHAT IS THE PROPOSED TUITION REVENUE TARGET FOR MY SCHOOL? FOR MY DEPARTMENT?

While the method of determining tuition revenue targets has been determined, the specific targets for each school and college have not yet been negotiated by the Provost and Deans.  Moreover, the final target cannot be established until tuition revenues are finalized for this year by Business and Financial Services and the Board of Regents sets tuition for the coming fiscal year.  The process will begin with the Provost and Dean agreeing on a Fall term enrollment target for the coming year.The Provost does not set enrollment targets for specific academic departments and does not intend to set revenue targets for academic departments.  The dean of each school or college will determine how the unit manages its enrollments and revenues.


ARE TUITION REVENUE TARGETS THE SAME THING AS REVENUE BASED BUDGETING OR RESPONSIBILITY CENTERED MANAGEMENT?

No.  As descibed earlier, allocations based on tuition revenue targets will be only a small portion of the total university budget.  Under revenue based budgeting models, extensive portions of the instituitonal budgets are allocated on the basis of revenue generated.  Responsibility Centered Management attributes instibutional revenues and costs to the revenue-generating units.  This model, for instance, is in place at Indiana and Michigan, and goes far beyond the allocation of excess tuition revenues.


DO OTHER UNIVERSITIES HAVE TUITION REVENUE TARGETS? DO OTHER CAMPUSES IN THE UW SYSTEM?

Virtually every "free standing " (ie. not part of a larger system) private or public university uses some form of revenue targets or enrollment targets that convert to revenue targets.  The UW System now negotiates revenue targets for each UW System campus, which puts us into the same situation as most other higher education institutions.


HOW IS TUITION REVENUE ATTRIBUTED TO SCHOOLS AND COLLEGES?

Tuition is attributed to schools and colleges based on the credit hours that they convey.  The tuition billed to each student (less remissions) is divided by the total number of credit hours taken by that student and attributed to the curricular area code in proportion to the number of credit hours conveyed to that student.  This method is necessary to accommodate the flat rate we charge undergraduate students for enrollments between 12 and 18 credits and for graduate students above 8 credits.


THERE SEEM TO BE A LOT OF CHANGES LATELY IN THE WAY WE DEVELOP BUDGETS AND MANAGE RESOURCES.  WHAT'S GOING ON?

The financial climate within which UWM operates has changed significantly during this decade.  To accommodate these changes, the university has made and is continuing to make significant adjustments in the way it budgets and manages resources. The Chancellor and the Chancellor's Budget Advisory Committee will undertake a comprehensive review of these budget procedures next year with the expectation that budget policies and procedures will continue to evolve.


WON'T THE PRACTICE OF ALLOCATING TUITION REVENUES TO SCHOOLS AND COLLEGES WHICH EXCEED THEIR REVENUE TARGETS PROMPT BEHAVIORS WHICH COMPROMISE THE QUALITY OF EDUCATION AT UWM, MAKE INTERDISCIPLINARY CONNECTIONS BETWEEN UNITS LESS LIKELY, AND, GENERALLY, INCREASE INTER-UNIT COMPETITION?

First, we need to recognize that we are talking about attributing a minor fraction of our university expenditures in this model.  For example, should our enrollment growth meet the anticipated projections, less than $200,000 in excess revenue will be allocated across all schools and colleges in the 1999-2000 fiscal year.  We are not anticipating that relatively small proportions of excess revenues will be able to have any large effect.Second, we need to recognize, also, that we are already dealing with some "silo" behaviors between schools and colleges.  In fact, the discussion of tuition revenue targets has brought some concerns and tensions into the open that were already there.  We need to deal with these concerns in a more forthright and cooperative way.  Primarily, we need to recognize that all units benefit when the university as a whole benefits.Third, we need to recognize how we now control quality.  Our curriculum is based on faculty expertise and initiative, approved by deans and school curriculum committees, reviewed and approved by the graduate and undergraduate university-wide curriculum committees, and then approved by the provost (with possible approval also necessary from the Board of Regents.)  None of this will change when tuition revenue targets are in place.


IS UWM UNDER PRESSURE TO INCREASE ITS ENROLLMENTS AND REVENUES?

The pressure to increase enrollments is from our current students and our prospective students.  The UW System is not pressuring us to increase; rather, under EM 21, we are being asked to determine our enrollment future.  We think that our future needs to continue to be built on access and quality, and that we need to begin to take more responsibility in meeting student demand and managing our resources to meet this demand.
 
If there are additional questions, please direct them to Associate Vice Chancellor Ruth Williams