Two weeks into WKU’s new budget year, officials still have not identified how they plan to implement the 10% overhead charge on revenue dependent accounts across the university or which accounts will be affected.
The overhead, as stated in the 2024-25 operating budget, will “be charged to all revenue dependent and auxiliary accounts.” There is no other mention of the 10% overhead elsewhere in the budget and no explanation for how the overhead will be charged.
The Herald spoke with Susan Howarth, executive vice president for strategy, operations and finance, on June 26 to discuss aspects of the budget, including how the overhead will be charged on revenue dependent accounts.
“We have not yet come to a decision on how it will be charged,” Howarth said. “It can be done multiple ways. It can be done on revenue, it can be done on expenditures. And so we just haven’t come to a decision on that yet.”
Howarth said details about the overhead would be finalized after discussions with “budget managers” across the university had been held.
“(They) are working with the budget folks on how best to go about this, and things to think about, and so on and so forth, because we want to be thoughtful, and we want to do it in the most fair and equitable way,” Howarth said.
A meeting with the budget managers was held on July 1, Brian Dinning, executive director of budget and financial planning, told the Herald in an email on Wednesday.
“This was the first of several meetings to discuss the best way to implement this strategy efficiently,” Dinning said. “These conversations are ongoing and any affected units will be notified once the details have been finalized in the coming weeks.”
But for now, revenue dependent units on campus are still in the dark about if and how they will be affected by the 10% “tax,” as former Staff Regent David Brinkley called it in the regents’ June 7 budget meeting.
Derek Olive, director of continuing and professional development, told the Herald in an email on July 2 that, “Unfortunately, the university administration has not clearly defined how the new 10% overhead charge will work so I do not have an opinion and will not until I know how it will be administered.”
Similarly, Drew Rash, associate director of student activities and Greek life, told the Herald that he was not sure how the “Greek Activities” budget would be affected by the overhead charge. Projected revenue for the budget is listed as $10,000 in the budget documents from the June regents’ meeting.
Rash said this budget is used for expenses such as printing, shipping, memberships to Greek Affiliated organizations, membership in the association of fraternity/sorority advisors and charges from other departments on campus.
But it isn’t just revenue dependent accounts that are unaware of the potential effects of the charge. In the staff senate meeting on Wednesday, newly elected Staff Regent Jennifer Hammonds told the senate that she, too, had no information concerning the charge.
“I don’t have any updates on the 10% for revenue dependent lines,” Hammonds said. “If there’s anybody involved in meetings that’s taken place through the budget committees, please share those. I don’t have any update to report on that.”
A detail that is also being worked out, Howarth said, is what accounts will be charged.
“I don’t know how many new revenue dependent type activities have come to pass since I’ve been here, most of them were in place when I got here,” Howarth said. “Now, was everything classified correctly in our accounting system? I can’t say that for a fact. You know, there could have been some misclassifications over the years where they’ve been classified as revenue dependent when they should have not done so. That’s the type of cleanup work that we have to do as well.”
According to a list of revenue-dependent units the Herald acquired through a public records request, there are 63 revenue-dependent units projected to generate a total of $8,972,000 in revenue during the 2024-25 budget year.
The overhead charge isn’t being levied on revenue generated by every unit at WKU, just those classified as revenue-dependent and auxiliary. For example, Athletics is projected to generate about $11 million in sales and services revenue in 2024-25 according to the 2024-25 operating budget – more than all of the revenue-dependent units combined – but is not included on the list provided in response to the records request.
The documents list university areas ranging from the Kelly Autism Program to International Recruiting and Admissions and the College Heights Herald.
“We don’t know if the tax is on what we project our revenue to be, if it’s on what actual revenue turns out to be or if the tax is on the money left after all of the expenses are met,” Chuck Clark, director of Student Publications and an adviser to the College Heights Herald, said on Thursday. “We don’t know any of those details, so it’s really hard to move forward.”
Any charge assessed against revenues for the Herald will have a direct impact on students working at Student Publications, Clark said. Potential impacts could include cutting pay for student journalists who cover campus news or reducing the number of print editions of the Herald each semester.
Howarth told the Herald that the implementation of this charge will help balance the budget and it will help revenue dependent units pay “for their existence.”
“I don’t know what else people want us to do at the university,” Howarth said. “We have to have a balanced budget, plain and simple. You cannot spend more than you bring in. If you do, your cash goes down because you’re burning cash.”
Howarth asked if the university doesn’t want to have an overhead charge, then would it rather realign the budgets lower?
“That’s where my frustration is,” Howarth said. “If people would just offer another solution, rather than just questioning everything we’re doing, I would be, I would look at other suggestions.”
In the regents’ June 7 meeting, Brinkley expressed a lack of understanding as to why the overhead was being implemented now.
“I really just want to understand why this year, and that would be FY25, there’s suddenly a 10% piece when that wasn’t a part of RAMP (Resource Allocation, Management and Planning) in previous years,” Brinkley said in the meeting.
Howarth confirmed for the Herald that the 10% overhead was not a part of the original RAMP model that was introduced in 2018 as part of President Timothy Caboni’s strategic plan: Climbing to Greater Heights 2018-2028. The fiscal year 2022-23 marked WKU’s full transition to the RAMP model.
“Once the model has been in place for two to three years, you typically reevaluate the model and see if there’s some things that you need to change,” Howarth said. “It really has nothing to do with any type of budget model.”
WKU’s budget model, RAMP, is built off of principles from the Responsibility Center Management (RCM) budgeting strategy, Ron DeMarse, director of the School of Media and Communication and faculty representative on the budget executive committee, said in an email to the Herald on June 25
“On a broad level, the idea of RCM (Responsibility Center Management) budgeting is that responsibility and authority are vested in academic units,” DeMarse said. “Those units get to make budgetary decisions for themselves, and they get to benefit from financial successes (fundraising, grant-writing, increased enrollment, etc.). On the other side of the ledger, however, they also have to cover their own expenses as well as a portion of upper administrative costs.”
DeMarse said that, in WKU’s RAMP model, the authority and responsibility of budgets are held only at the college level, not the school/departmental levels.
“To be fair, depending on how it worked, a true RCM implementation at the school/department level could be catastrophic for a technology-heavy (expensive) unit like the School of Media & Communication,” DeMarse said. “The College is able to protect our programs, to an extent, in their departmental allocations.”
However, because this authority and responsibility are held at the college level, schools and departments have less “autonomy” now than they did five years ago, DeMarse said.
Revenue dependent accounts, in contrast, do not operate like colleges and schools, Jeffrey Budziak, associate dean of Potter College of Arts and Letters, said in an email to the Herald on June 25.
“Revenue dependent accounts generate their own revenue and are expected to support all of their expenses with that revenue,” Budziak said. “Examples vary, but it is common that if a specific program offers a summer camp for high school students, they operate the camp as revenue dependent. In that case, whatever revenue the camp makes (presumably from charging a fee to participate) pays for the expenses of the camp (maybe the compensation for camp staff, food for the campers, etc.).”
The 10% overhead, Budziak said, will function as an additional expense revenue dependent accounts will have to cover with their revenue.
“Certainly the principle of the budget as it was framed to everybody at the introduction of this new model was that if you generated the revenue, you keep it,” Clark said. “This certainly seems to be a change from that basic principle.”
News reporter Cameron Shaw can be reached at [email protected].
