Budget Management for Academic Institutions

💰 🧮 💸 🎓 A common refrain I hear when talking to college and university trustees: budgets in higher ed are unlike anything in the business world. How colleges make and spend money remains mysterious even to those who've spent their careers in higher education. That's why in the latest installment of the Higher Ed 101 series on the Future U Podcast, Michael Horn and I took a deep dive into college budgeting with Rick Staisloff, a former college CFO and founder of RPK Group. Whether you're a board member, college professor, or tuition-paying parent, this episode offers valuable insights into college budgeting—what works and what doesn't. My three takeaways: 1️⃣ College budget buckets are too large. Most institutions don't really know where they're making money or where they're spending it. "We have to get into unit cost to really understand the financial health of an institution," Staisloff told us. Most colleges don't know how much it costs to graduate a biology major versus an English major, for instance. When enrollment was growing and public funding flowed freely, this approach probably wasn't fiscally responsible but it functioned. Now, when institutions need to be strategic, leaders need greater insight into resource allocation—otherwise they're moving pennies instead of dollars. In other words: show me where you spend your money, and I'll show you what you value. 2️⃣ The lack of transparency leads to lack of accountability. While colleges might set enrollment goals, their leaders often don't know what financial targets they should be hitting. "I'm always struck at the institutions we work with at how seldom deans, chairs, budget unit heads are given a clear sense of what good looks like and what they're supposed to be achieving," Staisloff explained. 3️⃣ It's business intelligence, stupid. My biggest takeaway: how little higher ed leaders know about their business. Part of this is cultural—campuses resist discussing ROI of individual programs. Part is technological—colleges have underinvested in ERP systems, leaving them flying blind in financial forecasting. This becomes increasingly problematic as we face an enrollment cliff and federal funding uncertainty. 🎧 Listen to the full episode here: https://lnkd.in/e8zV_PSy 📺 Watch highlights of this episode as well as select full episodes on our YouTube channel: https://lnkd.in/dRRBvpiR I'm biased, but this episode should be required listening for new board members:

🚨 Making the Case for Your FY26 Budget 🚨 Higher ed pros know that budget season can make or break a year. For marketing and enrollment teams, the resources secured today will determine next year’s success. With financial constraints, political pressures, and an ongoing enrollment crisis, now is the time to fight for a budget that fuels growth - not just survival. So, how do you make a compelling case? Here's some key takeaways from the recent Higher Ed Pulse episode Mallory Willsea & I did: 🔹 Fight for a Seat at the Table Too often, CFOs finalize budgets without marketing’s input. Get in early. Bring data-driven insights to shape decisions. 🔹 Show Growth Scenarios - What happens if your budget is flat? - What does an extra $1M drive in enrollment? - How could shifting spend fuel growth? Tie your request to revenue-driving outcomes. 🔹 Marketing = Investment, Not Expense Cut marketing, and enrollment suffers. Use data to prove ROI and defend your budget. 🔹 Align with Institutional Priorities Frame your proposal around university-wide goals - online growth, partnerships, retention. Make your budget essential, not optional. 🔹 Optimize What You Have If growth isn’t on the table, push for flexibility. Can you reallocate media, personnel, or tech funds? Find unspent budget from vacancies. Leverage your churn (unspent personnel budget) to fuel alternative growth opportunities. 🔹 Know the External Pressures State funding cuts, economic shifts - this isn’t business as usual. Institutions need informed, proactive recommendations. ⏳ Now is the Time to Act⏳ Your FY26 budget isn’t set yet - which means you still have time to shape it. The best leaders don’t wait to be invited to budget talks. They step up, bring data, and drive strategic decisions. Now is your moment. Don’t let it pass you by.

New to managing your academic department’s budget? Without a solid strategy, it’s easy to drain resources on well-intentioned, but low-impact initiatives. Here’s how to prioritize spending that supports your department’s long-term goals: 1️⃣ Know Your Budget: Personnel vs. Operations. Be upfront with faculty about where there’s room for flexibility and where you’re limited, so expectations are clear. 👉 Transparency from the start keeps conversations grounded in reality and avoids unnecessary frustration. 2️⃣ Don’t make budget decisions in isolation. Faculty often have creative ideas for using resources effectively—and involving them in the process builds trust and cooperation. 👉 Budgeting is much smoother when everyone knows the rationale behind decisions. 3️⃣ Set (and Stick to) Clear Priorities. Every department has more needs than budget. Identify what drives your mission. Does it contribute to student success, faculty productivity, or long-term growth? If not, think twice. 👉 Your budget can disappear quickly on minor, scattered expenses. The trick is to have a guiding framework and communicate it clearly. If everyone understands the “why,” they’ll usually support your decisions—even when the answer is no. 4️⃣ Leverage Data, Not Assumptions. Use historical trends and data to guide spending decisions. What’s worked? What hasn’t? Where did you get the most return for your investment? 👉 Data-backed decisions aren’t just defensible—they also build trust. When faculty see that decisions are objective and tied to actual outcomes, it’s easier to get buy-in. 5️⃣  Plan for the Unplanned. Things won’t always go as planned—count on it. Whether it’s an emergency adjunct hire or an unplanned opportunity for faculty development, you need a buffer. 👉 A discretionary fund isn’t just for emergencies. It’s for innovation. Build flexibility into your budget so you’re not scrambling to cover unexpected costs. The biggest mistake? Trying to be everything to everyone. Prioritize wisely, focus on high-impact investments, and always leave room for flexibility. When your spending aligns with a clear strategy, every dollar works harder and gets you closer to your long-term goals. 👇 What strategies have worked for you in managing your department's budget? -------------------------- ♻️ Repost this to help other academic leaders. 💬 Follow for posts about higher education, leadership, & the arts. #HigherEdLeadership #BudgetManagement #AcademicLeadership #AcademicLeadership #HigherEdLeadership #BudgetTransparency #DepartmentChairs #StrategicSpending #HigherEducation #FacultyDevelopment #LeadershipTips

University Funding Models - A Thought Experiment Two universities, A and B, have identical teaching revenue ($100m) and teaching-related costs (75% of teaching revenue). Both spend $50m on research but their approaches differ. University A gets half its research funding from teaching surplus with the rest coming from research grants that don’t cover overhead (every $1 grant, costs $1.70). University B also uses its teaching surplus but funds the remaining $25m from internal sources such as profit from a graduate training program and returns from an endowment. University A Strategic Considerations: - Prestige: Securing grants can enhance the university’s reputation, fostering partnerships and collaborations. - Resource: A significant admin burden accompanies grants, as resources are allocated to applications, compliance, and reporting. - Volatility: Grants are subject to funding cycles, policy shifts, and competition, making this stream unpredictable. Financial Implications: - Reduced Profitability: Due to the negative overhead recovery, the university spends more on research than it receives, diminishing its overall financial efficiency. - Cash Flow Pressure: Managing grants places constraints on operational flexibility, increasing reliance on unpredictable external funding cycles. - Opportunity Costs: The financial and human capital is tied up in managing inefficient funding, diverting resources from other strategic priorities. University B Strategic Considerations: - Financial Stability: Internal funding sources offer greater reliability, allowing long-term strategic planning without dependence on external cycles. - Strategic Autonomy: With greater control over revenue, the university can invest in infrastructure, technology, or new initiatives as it wants. - Enhanced Risk Management: Diversification reduces exposure to volatility. Financial Implications: - Higher Profitability and Efficiency: internal sources typically have lower administrative costs, resulting in a higher net return. - Improved Cash Flow Management: More predictable income allow for smoother budgeting and financial planning. - Capital Deployment: With stronger margins, the university can reinvest surplus in new revenue-generating initiatives or long-term institutional growth. So the trade-offs are: - Margin Efficiency: University B achieves greater financial efficiency by avoiding the admin overheads associated with external grants, leading to a stronger net return on the same level of gross income. - Risk Exposure: University A faces significant financial risk due to its reliance on external grants, whereas University B’s diversified funding model provides more resilience against economic fluctuations. - Strategic Flexibility: University B is better positioned to make long-term investments in infrastructure and new programmes, while University A may struggle to allocate discretionary funds due to administrative burdens and revenue unpredictability.