UR Finances 101: Frequently asked questions
WORK IN PROGRESS

How are budgets for schools and departments determined?

There are three generic flavors of budget:
(a) Division operating budgets. These include routine expenses, three quarters of which are salaries for faculty and staff in divisions other than the medical center.
(b) Capital budgets. These include onetime expenses such as building construction and renovation.
(c) Central administration operating budgets. 

The budgeting process for each school begins in the office of that school’s dean. It starts with an effort to predict revenues and operating expenses for the coming year as accurately as possible. The next step looks at proposed capital additions and their costs. Finally, discretionary costs enter the picture.  These typically include one-time projects, augmentations of the wage and salary program of the division beyond the "base" proposed package, etc. 

It is then discussed and reviewed by the President, Provost and the Chief Financial Officer, and then by Financial Planning Committee of the Board of Trustees. If the budget is found to be in deficit, ways must be found to bring it into balance. Sometimes that involves revising assumptions about revenues.  Sometimes it involves changes in program, or deferral of capital improvements, or other changes in the cost structure of the division where there is real flexibility.  Sometimes the only way to bring the budget into balance is to increase the amount of endowment spending. The decision is not taken lightly, and is made with a view to preserving the quality of the institution and its programs.

This last point is central and essential to the process.   The university's endowments (plural) ultimately are the payer of last resort in the budget process.  If we overspend our revenue capabilities, the endowment falls.  If we under spend our revenue capabilities, the endowment rises.  Ultimately, future generations bear the consequences of these decisions.  A higher endowment spending rate this year makes for a smaller endowment than would otherwise be the case for all future years in the history of the university, unless the excess spending improves the university's financial position in some way (attracting more revenue through student tuition or research grants) or reduces future costs in some way (e.g., by automating some function that allows a reduction in staff costs in the future). 

For a more detailed discussion of this process, see Provost Phelps’ report to the Faculty Senate of October 15, 1996. This report is outlined here.

Last revised December 11, 2008.

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