UBC’s Budget and Finances Part 3: The Tuition Allocation Model (TAM) and its Consequences

Preamble: I intended to publish this post last week, but my inner mathematician was still wrestling with some of the details of UBC’s Tuition Allocation Model and its relationship to the budget. As it happened, PAIR posted the 2020W enrolment data this week, which allowed me to replace my (very close) enrolment estimates with real data and recompute the TAM outcomes. In spite of these new calculations, there are still some puzzles remaining arising from unexpected discrepancies between my calculations and numbers reported in the 2020/21 budget and elsewhere. One of these puzzles is the size of the ISI tuition allocation to the Academic Excellence Fund (AEF). I expect to solve these puzzles, most likely with expert help from the Administration. 

UBC collected well over $900 million in tuition fees from students this year, 60% of this from international students. UBC has an obligation to use students’ tuition fees foremost to ensure the faculties and academic departments are able to deliver on the university’s  commitment to provide students with access to academic programs and educational experiences one expects to find at a leading research university. (This necessitates UBC using its considerable resources to support its core academic research mission, as well.)

In terms of UBC’s budget, the way tuition revenue is distributed in the university should reflect this obligation to put the academic mission ahead of all other considerations in deciding how to spend tuition fees.

UBC encodes its priorities for spending tuition revenue in its Tuition Allocation Model (TAM), which is then used as the mechanism for determining for each faculty its share of the tuition fees paid by students registered in courses in that faculty. UBC’s TAM also allocates tuition revenues to the central administration and to “excellence funds” controlled by the central administration. (More on these funds later.)

On the face of it, the TAM is formulaic and the allocations it produces thus seem predictable, which is a good feature for those managing budgets and analyzing the financial effects of decisions that affect enrolment.

The basic description of the model is fairly simple, though there are (unnecessary?) complexities in the detailed version.

(I would provide the reader with a link to a document describing the TAM, but I have not found a public version of one. Bits of commentary on the TAM are scattered in public budget documents, but not coherently. I knew the basics of the TAM before joining the Board of Governors through conversations with administrators, and so I am assuming what I say about it to be in the public domain.)

As with all such mathematical models, one must study the TAM’s outcomes to learn how it works, which is necessary to decide whether the TAM produces results that align with the University’s principles, values, and goals — all things that should have influenced the implementation of the model. After all, the budget should tell the same stories UBC tells about who we are and how we are achieving our goals so we and others can assess the outcomes through the stories the budget produces throughout our faculties and academic departments.

Thus, the TAM is far more than an algorithm.

Behind the mathematics of the TAM are the policies and managerial approaches the Administration uses to implement its vision of how UBC should operate.

Thus, a consideration of the TAM includes asking the question ‘Do the policies and managerial approaches used to code the TAM produce outcomes that support the academic mission as the central purpose of the University?’

Before we can dive into such questions, I need to tell you how the model works. I will start with a description of how to compute the tuition allocations and then give an example for a faculty I will call Faculty X. I will focus on the revenue from undergraduate tuition fees.

I am aware most of my readers aren’t mathematicians, and will try to keep that in mind in what follows.

A Description of the TAM

UBC’s Tuition Allocation Model has the same basic set-up for both the Vancouver and Okanagan, though there are some differences in the way revenue is split between the faculties and the central administration (often shortened to “Central” in budget and finance documents).  This reflects the different operating and financial contexts for each campus.

In the detailed model, there are also variations for tuition fees from COOP students on work terms, exchange students, and non-degree students, etc. I will ignore these and focus on fees for undergraduate students in degree programs.

It is important to note UBC budgets many of the “system-wide” activities through the Vancouver budget, so “Central” in what follows sometimes refers to this Vancouver+System part of the budget and sometimes to the part specific to Vancouver; context should make this clear. I will use “Okanagan Central” for the Okanagan-specific central administration, and note there are chargebacks from Okanagan Central to Central, which I won’t discuss in this post.

The TAM also treats domestic student (DOM) tuition fees and international student (ISI) tuition fees differently.

In my calculations, I use enrolment data from PAIR (you need to be on campus or have a UBC VPN to access these data online), and I make various approximations based on public data when I do not have access to real data or when data are not public. Keep in mind this contributes to small uncertainties in any numbers I present here. (These uncertainties are  of a different nature than the unexpected discrepancies I mention in the Preamble.)

Now, the TAM.

1. A portion of all tuition revenue is committed to student financial aid (SFA).  Currently this is 7.5%.

2. A portion of all tuition revenue goes to overhead such as bad debt.  Currently this is just over 1%. (I only know the actual figure from a Board document, but the 1% figure is commonly used by those speaking publicly about the TAM.)

After these amounts are taken off the top, the remaining tuition revenue is then allocated to the faculties and Central/Okanagan Central, including their “excellence funds”.

3a. DOM tuition in Vancouver is split 75% to the faculties and 25% to Central.  For a student in Faculty A taking a course in Faculty B, the faculty tuition revenue is split 50:50 between the two faculties.

3b. DOM tuition in the Okanagan is split 60% to the faculties and 40% to Okanagan Central.  (Many services managed by individual faculties in Vancouver are managed centrally in the Okanagan.) For a student in Faculty A taking a course in Faculty B, all the faculty tuition revenue would go to Faculty B.

Things start to get interesting when we look at ISI tuition revenue, so I hope I haven’t lost you so far.

4. For ISI tuition revenue, the TAM uses 2016/17 as a baseline for calculating the allocations. This means each faculty is guaranteed to receive a base of ISI tuition revenue equal to that based on 2016/17 fees.

In 2016/17, ISI tuition revenue (after the amounts in 1 and 2 above are taken out) was allocated as follows:  in Vancouver, 65% to the faculties and 35% to Central, and in the Okanagan, 50% to the faculties and 50% to Okanagan Central. This provides the base component of the current-year allocations.

5. The TAM then proceeds to allocate the incremental ISI tuition revenue from the current budget year over 2016/17, which is calculated by taking the current year’s ISI tuition revenue and subtracting an amount equal to the the revenue based on 2016/17 ISI tuition fees. This incremental ISI tuition revenue amount is large as tuition fees have grown significantly since 2016, as has enrolment.

How is the incremental ISI tuition above the 2016/17 baseline distributed?

Two-thirds of this incremental ISI tuition revenue is put into the Academic Excellence Funds (AEF) in Vancouver and the Excellent Funds (EF) in the Okanagan.

(We will talk more about the AEF a bit later as it is an important part of the story.)

The remaining one-third of this incremental ISI tuition amount is then allocated in the “usual way”: (Vancouver) 65% to the faculties and 35% to Central, and (Okanagan) 50% to the faculties and 50% to Okanagan Central.

Before I present how this works for Faculty X, I will note that because the TAM uses 2016/17 as a baseline for distributing ISI tuition revenue, the amount of money flowing to the AEF and EF grows as the ISI tuition revenue increases, both through tuition rate increases and ISI enrolment increases.

We are (potentially) nearing a point of relatively constant enrolment (or at least that is inferred from the enrolment plans the Administration has presented to the Senates , p. 94ff), so the rate of growth of this increment should slow down.  However, the annual ISI increment will continue to be a large percentage of the total ISI tuition revenue, and the increment will also grow at some rate of inflation (determine mostly by tuition rate increases).

Using 2016/17 as a baseline for our incremental budgeting means faculties and academic departments are receiving baseline funding relative to a year prior to UBC’s most recent growth spurt in international student enrolment.  It also assumes the faculties and academic departments in 2016/17 were in a state of good general operational and financial health. There is evidence this assumption should be questioned.

Since 2016/17, overall enrolment at UBC has grown about 16%, mostly through increased numbers of international undergraduate students.  As I discussed in my last post, the faculty complement has grown at a much, much slower rate. This is on top of similar growth in enrolment over the previous 5 years and little growth in the faculty complement. UBC undergraduate enrolment has grown 32% since 2011. This has an impact on the ability of academic programs to meet students expectations about their academic experiences at UBC, and affects students’ access to highly demanded programs and courses.

An Example:  The TAM Outcomes for Faculty X

Faculty X on the Vancouver campus has a large undergraduate enrolment in its programs and courses.  Let’s assume Faculty X has a little over 10 thousand undergraduate students enrolled in its courses.  About 60% of the students it teaches are in Faculty X; the rest are in other faculties. About 26% of the students it teaches are international students.

The total tuition fees associated with undergraduate students in Faculty X is $146.1 million. From this the TAM deducts 7.5% ($11 million) for students financial aid. A further 1% ($1.46 million) is deducted for overhead.

The leaves $133.7 million to be allocated to the faculties and Central (including the AEF).

The TAM then allocates $22.7 million to Faculty X and $5.3 million to other faculties from $37.3 million in DOM tuition fees.  This leaves $9.3 million for Central. Up to rounding, this gives the 75:25 split between faculties and Central.

This leaves $96.5 million in ISI tuition fees to allocate.

The next step in the TAM is to allocate two-thirds of the incremental ISI tuition revenue relative to the 2016/17 ISI tuition revenue.

For tuition revenues connected to courses taught in Faculty X, this increment is $96.5 million minus $52.9 million, which gives $43.6 million.

Thus, the AEF is allocated 2/3 of $43.6 million, which is $29.1 million. This is 30.2% of the total ISI tuition revenue available.

The other 1/3 of this $43.6 million, which is $14.5 million, is added to the 2016/17 base of $52.9 million. This means $67.4 million of the original $96.5 million ISI tuition revenue is allocated 65:35 to the faculties ($43.8 million) and Central ($23.6 million).

Faculty X must now share this $43.8 million with other faculties.  In the end, Faculty X gets $34.5 million and the other faculties get $9.3 million.

Thus, Faculty X  receives $34.5 million out of $96.5 million from the ISI tuition revenue for courses it teaches.  That is 35.8%.  Other faculties receive a further 9.6% of the original $96.5 million. Altogether, the faculties receive 45.4% of the total ISI tuition revenue.

And Central receives $52.6 million, with $29.1 million in the AEF and $23.6 million in its general revenues. This is 54.6% of the original $96.5 million of ISI tuition revenue.

So, how much tuition revenue do Faculty X and Central each receive in total through the TAM?

Faculty X gets $22.7 million from DOM tuition fees and $34.5 million from ISI tuition fees for a total of $57.4 million. This is 42.9% of the total tuition revenue available, $133.7 million.

Central gets $9.3 million from DOM tuition fees and $52.6 million from ISI tuition fees for a total of $61.9 million.  This is 46.3% of the total tuition revenue available, $133.7 million.

For comparison, prior to the implementation of the AEF, Central would have received $43.1 million, leaving the faculties $90.6 million, of which Faculty X would have received $71.3 million.

Added note: I have applied the TAM to the tuition revenue associated with courses taught in Faculty X. Faculty X also receives a portion of the tuition fees for students from Faculty X taking courses in other faculties (remember the faculties split tuition 50:50 for these students).  I calculate this to be $6.9 million, which brings the total tuition revenue Faculty X receives to $64.3 million. (There is no adjustment to the above AEF amounts for Faculty X because the AEF is allocated money before the ISI tuition revenues are split between the faculties and Central.)

What does the TAM mean for faculties and their academic departments?

How do we decide if the outcomes from the TAM for faculties align with the University’s (ambitious) goals for its academic mission, especially its teaching mission given this money comes directly from our students?

Academic departments do the teaching, so any analysis could begin by examining the state of the financial and operational health of the individual programs in Faculty X and the reasons a program is in the state it is. Such analysis should consider how well a program is able to meet the demands on it, including its ability to offer a diverse set of courses with sufficient enrolment capacity to meet demand from students.

It is possible to apply the TAM to each academic department in a faculty so we would see how their teaching contributes to the overall faculty tuition revenue (and I have done so for Faculty X). While this would provide us with some information to help assess the financial and operational health of each department, on its own, this information may not be sufficient to answer many of the basic questions we might ask.

Why is this so?

The TAM allocates tuition to faculties, but after that, it is up to the faculty’s dean to decide how to allocate tuition revenue to the academic departments. While some faculties implement a faculty-level tuition allocation model similar to the university-wide TAM flowing tuition revenue to each department depending on their enrolments of domestic and international students, others do not do this.

In fact, the failure to implement a faculty-level TAM can (and does) have the effect of creating at-risk academic departments where enrolment growth does not attract sufficient new resources to meet the new demands on an academic department’s teaching mission. (Students’ needs are not met as a result.)

Faculty X does not have a faculty-level tuition allocation model, and so has several departments at high risk with respect to their teaching missions because problems created by past decisions about funding these departments continue in spite of greatly increased tuition revenues to Faculty X. (There are at-risk academic departments in other faculties similarly in jeopardy when it comes to their teaching missions.)

The failure of the TAM to include a component of the model to allocate tuition revenues to academic departments is a serious flaw in the tuition allocation exercise at UBC. It is equivalent to allowing the Central Administration to allocate tuition revenue to the faculties without any regard for the teaching done by these faculties (some might say “on a whim”). Would any dean whose faculty is adversely affected by this accept such a state of affairs?

What about the AEF and its impact on academic departments?

The Vancouver-based Academic Excellence Funds (AEF) were originally created as the Strategic Investment Funds in 2016 to support UBC’s “excellence” goals and the desire for UBC to become Canada’s best university by 2026.

In 2018, the AEF terms of reference were changed in 2018 to create five funds:

  1. Strategic Fund,
  2. Revenue Sharing Fund,
  3. Academic Capital Fund,
  4. Student Financial Aid (SFA) Fund, and
  5. Integrated Renewal Project (IRP) Fund.

The April version of the 2020/21 budget document and the 2019/20 budget document each have some information about the intended allocations from the AEF for those years. Unless you know the project details, it may not be clear when money from the AEF has gone to faculties and academic departments directly, particularly with respect to their teaching mission.

There are AEF  allocations for central projects related to the research mission — e.g. for the Clusters of  Research Excellence program and for the Advanced Research Computing (ARC) project. These do not include unrestricted, on-going funds for academic departments, however.

There is also support for research students; e.g. the PAEI is supporting UBC’s increase in the minimum funding for PhD students.

What about support for hiring faculty?

The Strategic Fund is supporting the President’s Academic Excellence Initiative (PAEI), which includes a competitive research hiring program focusing on themes identified by each faculty. (I have not found a public document describing the PAEI in detail.)  One hundred faculty members will be hired through the PAEI Accelerate Phase, 84 in Vancouver and 16 in the Okanagan, over the next 5 years, say (there are some pandemic delays).  There will be a second phase (details not yet public). The PAEI is one of the few long-term commitments from the AEF, and for Vancouver, about $13.5 million recurring will support these positions (faculties contribute to the recurring salary costs as well; currently the rate is 20%).

It is exciting to have opportunities to hire new faculty, but the PAEI is not intended to address the kinds of teaching capacity issues that characterize at-risk academic departments. The allocation of positions, only a few to each faculty, are made on a research basis and are intended to be add-ons to the larger hiring plans of the faculties. This implies the faculties themselves are intended to manage, on their own, the risks associated with academic departments whose academic missions at risk because of their current financial situations.

(I am focusing on the Vancouver AEF, but I would be remiss if I didn’t mention the Okanagan EF, which has a strong overall focus on the academic mission, in my opinion. For example, the EF funds a program to provide bridging funding to support the diversification of the faculty by hiring BIPOC faculty.)

The Revenue Sharing Fund is similar to funds at other universities and is designed to support faculties unable to meet their commitments to their programs given their precarious financial state. These faculties often have limited opportunities to enrol international students. Smaller faculties can also be unstable because even relatively small changes in their enrolments can put them into a deficit situation. Allocations from the Revenue Sharing fund often provide salary support over a few years so the faculty can work to stabilize its position. This fund is a residual fund (last in the queue for its share of the AEF) not designed to fund long-term faculty positions.

The Academic Capital Fund makes contributions to capital funding for academic buildings. The amounts are small at this point (~$5m). In theory, other small capital projects related to research or teaching could be supported by this fund.

The SFA Fund simply pools its money with the rest of the SFA allocation, though it could be used for targeted scholarships, bursaries, and other forms of student financial support.  For example, some student members of the Black Caucus presented to the Board of Governors in February and requested scholarships and research funding for Black students.

I am perplexed by the inclusion of the IRP Fund as an “academic excellence” fund.

Is the AEF the right tool for UBC to achieve our “academic excellence” goals?

Whatever “academic excellence” means for a university, I am certain its meaning is deeply connected to the work of the university’s faculty.  Achieving “academic excellence” goals thus starts with hiring and retaining faculty members whose creativity, intellectual capacity, and commitment to their academic work are likely to lead them to great achievements in research and teaching, and then making sure they are well-supported by UBC.

Given this premise, and given the main contribution of the AEF to faculty hiring is through the PAEI, if the PAEI is to act in a supporting role in faculty hiring plans instead of a main contributor to them, as it seems to be designed to do, then the faculties must be given more resources to fund hiring plans that really can enable academic departments to build the teaching and research capacity needed for UBC to keep its promises to students and to fulfill its ambitions as a research university.

(There is, of course, value to having some central funds to enable responsiveness to novel or changing contexts for the academic mission. And there is great value in a system in which whether or not a faculty or academic department has the ability to generate tuition revenue from international student fees  creates large inequities to have a mechanism to redistribute money to address these inequities.)

Faculties also have academic capital needs to support its faculty and students. Many faculties need updated or new academic space. The current model for funding a new academic buildings at UBC requires the faculty to contribute to the cost. The AEF’s Academic Capital Fund will only be able to support a small number of projects, which limits its effect.

I believe UBC would better achieve its “academic excellence goals” if it put more unrestricted money into its faculties and their academic departments — right at the heart of UBC’s research and teaching activities. Faculties would then make decisions about how to allocate such money to best achieve their “academic excellence goals”. Faculties would also have more predictability about the resources they will have to reach their goals, which would allow for longer term planning with more certainty.

The Administration (and the Board of Governors) would need to trust the faculty and their collective expertise in this vision of UBC.

It is time for a review of the TAM (and hence, the excellence funds, too) to decide if it supports UBC’s core academic mission in keeping with the University’s principles, values, and goals.


Caveat: The exercise of running the TAM using real data for a faculty left me with as many questions as answers about what I see in budget documents. Budgets are not balance sheets and UBC’s financial reports are not “the books.”  This can make it difficult to reconcile information in the budget. UBC’s incremental budgeting adds to the difficulty of tracking the evolution of key budget entities, like the AEF.

I have, for example, calculated an estimate for the total amount of tuition revenue added to the AEF for 2020/21. It differs greatly from what is reported in the budget, creating a puzzle I’m likely to obsess over.  Commitments to funds often run over multiple years, which can affect the amount available to use in any given year. I cannot tell such accounting details from the budgets and other documents available to me.

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