A budget model is a tool to organize the university’s revenues and expenses and show the resource allocation to academic and administrative units.  Budget models typically allocate only continuing resources for continuing needs (such as tuition revenue and faculty compensation, for example), and do not include one-time revenue or expenses such as capital construction. 

At the highest level, budget models typically fall into one of two categories: centralized or decentralized. 

Universities with centralized budget models tend to have a small number of central leaders determining each administrative and academic unit’s budget allocation, which are often adjusted uniformly across units regardless of growth or declines in activity. Centralized models offer stability and predictability but provide little incentive to pursue cost efficiencies or growth opportunities. The most commonly used centralized budget model is “incremental,” in which each academic and administrative budget is increased or decreased by the same percent tied to the change in incremental revenue.  This is the budget model CU Denver used prior to 2017.

Decentralized budget models tie an academic unit’s activities to its budget allocations, with cost allocations to fund administrative areas. Decentralized models create stronger incentives within academic units to pursue cost efficiencies and growth opportunities and also carry more risk associated with variability in resourcing levels. These models provide more financial independence to academic units, placing the resource allocation decisions locally in the units.     

CU Denver’s current budget model is an example of a decentralized budget model, specifically an incentive-based model.  The university’s tuition and state funding budget first covers university mandatory expenses and an initiative pool, the remaining budget is split between campus support units and schools/colleges.  The school/college portion is then allocated to each academic unit based on its proportion of student majors and instructed credit hour production.  

Subvention, also known as academic cross-subsidization, is then added in to determine the final budget for the academic unit’s direct costs. Subvention is financial support to units that are not allocated sufficient revenue within an incentive-based model to cover expenses due to low enrollment and/or high instruction cost.

Beginning in August 2024, a multi-level, cross-unit committee called the Budget Allocation Review Committee (BARC) was charged with assessing the usefulness and pain points of University of Colorado Denver’s (CU Denver) 2017 budget model, working collaboratively to evaluate alternate models and any necessary metrics, and supporting an enhanced awareness of financial information across the campus community.

Following a full academic year of study and meetings, including a wide range of communications to campus via unit-level and campus-wide briefings, the BARC recommended a metric-based model that allocates main campus tuition and state appropriations to:

• University Mandatory expenses, which include costs such as Institutional Financial Aid, debt payments and insurance for CU Denver buildings, budgets held for annual merit pools and faculty promotions, and CU Denver’s payments to support AHEC and the CU System Office.  These expenses do not include permanent personnel. 
• Campus Support Units, such as the Chancellor’s Office, the Provost’s Office, and Strategic Enrollment and Student Success, and;  
• Schools and colleges.  Within schools and colleges, tuition revenue will be allocated based on 50% student credit hours of major, and 50% student credit hours of instruction; state funding will be allocated based on resident student credit hours of major. 

  The model also includes an initiatives pool of one-time funds that can be awarded to any academic or campus support unit to seed innovation aligned with long-term strategic goals of the institution. 

Both the old budget model and the new one are examples of incentive-based budget models that allocate funding to schools and colleges based on enrollment and credit hours and include subvention (cross-subsidization among schools and colleges) to reflect CU Denver’s mission as a comprehensive university.  The largest differences between these budget models are the weighting of academic activity metrics and the treatment of University Mandatory and Campus Support Unit budgets:

• The prior model weighted credit hours of major more heavily (75% for undergraduate and 65% for graduate), whereas this new model weights majors equally with credit hours of instruction.

Campus Support units are the administrative areas of the university that have direct responsibility for planning, organizing, directing, controlling, and evaluating major university functions.  This includes major areas reporting to the Chancellor and the Executive Vice Chancellor of Academic Affairs:

• Chancellor’s Office
• Access & Campus Engagement
• Advancement
• Administration & Finance (including Emergency Management, Facilities Management & Planning, Financial Services, Human Resources- Denver, Budget & Fiscal Planning, and Office of Information Technology- Denver)
• University Communications & Events
• Provost’s Office (including Academic Planning & Institutional Effectiveness, Faculty Affairs, Graduate Education, Auraria Library, Research Services, and Teaching, Innovation & Program Strategy)

Double majors are counted in each school/college of their majors in the budget model metrics. The student credit hours are counted in full for each degree major, regardless of whether the major is in the same or different school/college.

The budget model builds a University Initiative Pool in the first step of the model equal to 1% of the tuition plus state funding remaining after campus-wide mandatory expenses.  These are one-time funds that can be awarded to any academic or campus support unit to seed innovation aligned with long-term strategic goals of the institution.

We have created a sandbox environment for users to test how changes in enrollment may impact school and college budget allocations.  FY 2025-26 Parallel Year Sandbox  This tool is for illustrative purposes only and does not guarantee any budgetary outcome.

The budget model allocates a set pot of available revenue between schools and colleges based on each unit’s share of the five buckets (undergraduate resident, undergraduate nonresident, graduate resident, graduate nonresident, and state funding).  This means that a unit’s budget allocation also depends on enrollment in all schools and colleges.  Let’s consider four simple scenarios with two equally sized units, College A and College B, with enrollment increases for College A in this type of model:

• Scenario 1: Enrollment in College A increases by 10 and enrollment in School B decreases by 20.  This would result in a reduction to the campus tuition revenue, which means a reduced budget to allocate to the units.  College A would take higher proportion of the available revenue: a larger slice of a smaller pie. 
• Scenario 2: Enrollment in College A increases by 10 and enrollment in School B decreases by 10.  This would result in the same amount of tuition revenue, with College A taking a slightly higher proportion: bigger slice of the same size pie.     
• Scenario 3: Enrollment in College A increases by 10 and enrollment in School B increases by 10.  This would result in an increase to the campus tuition revenue, which means a higher budget to allocate to the units.  College A would take the same proportion of the available revenue: a larger slice of a larger pie. 
• Scenario 4: Enrollment in College A increases by 10 and enrollment in School B increases by 20.  This would result in an increase to the campus tuition revenue, which means a higher budget to allocate to the units.  College A would take a smaller proportion of the higher available revenue: a smaller slice of a larger pie.