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CyberCampus: Definitions of Optimization Variables (11/16/98)

General note on the Player inputs to resource allocation

CyberCampus’s resource allocation procedure simulates the action of a college or university Budget Office. Players specify their policies, which the Office strives to carry out. However, policies that are mutually inconsistent or incompatible with the institution’s external environment cannot be carried out as given. In such cases (which represent the rule rather than the exception) the Budget Office “trades off” one policy against another to get the best feasible budget. If desired, players can view trial tradeoff results and modify their policies before the budget takes effect.

The decision variables are described in notes associated with the! screens where they appear. Note that real growth rates (i.e., rates expressed in constant dollars) are net of inflation. A variable’s new value, expressed in dollars of the year, will equal the prior year’s value plus inflation plus the real growthrate.

Resource allocation proceeds in three stages.

Overall budget guidelines: this screen sets prices, the planned growth of revenues and expenses, and the surplus or deficit. Players’ policies affect market behavior, institutional growth or contraction, and financial gains or losses.

Expenditure allocation by function: this screen allocates planned expenditures across budget categories. Players’ expenditure allocations and reallocations determine the effectiveness of individual academic and support-service activities.

!60Faculty hiring by department: this screen allocates the faculty budget across departments after taking account of attrition and contractual commitments. Players’ faculty hiring policies determine departmental growth and performance.

Players can set three kinds of policies for each decision variable.

Target value: the value the Budget Office would achieve absent any need for financial tradeoffs.

Importance of achieving the target: how strongly the Budget Office should strive to achieve the target. (Importance is zero-sum: making one variable more important reduces the relative importance of other variables on the same resource allocation screen.)

Upper and lower bounds: limits on !how much the Budget office can adjust the variable. Priority will be given to keeping each variable within bounds, even if its importance weight is low. However, extreme financial stress may require the bounds for some variables to be violated.

Variable definitions

Overall Budget Guidelines

Revenue policies

Real growth of tuition rate: constant-dollar percentage increase in tuition (“sticker price”). The tuition rate directly affects revenue and it influences student demand and financial aid requirements.

Real financial aid growth : constant-dollar percentage increase in the financial aid budget: the sum to be set aside for financial aid. The “Financial Aid” screen allows the Player to limit actual aid expenditures to the budgeted amou!nt or allow overruns if indicated by aid policies.

Endowment spending rate: the percentage of endowment market value that can be spent each year. Market value grows or declines as a function of the Player’s investment strategy and general economic conditions. To avoid undue volatility in budgeted endowment income, the spending rate is applied to a moving average of market values.

Indirect cost rate: the overhead rate for sponsored research projects. The rate influences the size and success of sponsored research proposals. It divides the money from each project between the principal investigator and general funds (to cover administration, support services, and plant). The Budget Office calculates the maximum rate allowed under government regulations and prevents the Player from setting a target or upper bound that exceeds this amount.

Expenditure policies

Real faculty salary growth: constant-dollar percentage increase in the facu!lty salary budget. After adding inflation, the increase is applied to the faculty salary component of the departmental and sponsored research expenditure lines. Individuals’ salaries are determined according to the Player’s priorities (on the ____ screen), with the requirement that the sum of all salaries equals the budget.

Real staff salary growth: constant-dollar percentage increase in the staff salary budget. After adding inflation, the increase is applied to the staff salary component of each functional expenditure line.

Other cost-rise provision: constant-dollar percentage increase in the budget for non-salary costs (e.g., supplies, communications, travel). After adding inflation, the increase is applied to the “other” component of each functional expenditure line.

Budget adjustment: the percentage by which total expenditures will be increased or decreased in response to financial conditions. (Salary increases and other cost-rise are added in after the adjustment.) P!ositive figures represent money for new programs; negative ones represent downsizing. Players allocate the budget adjustment sum across expenditure functions on the next budgeting screen.

Transfer to plant: percentage increase or decrease in the amount transferred from the operating budget to the capital budget. Transfers reduce the sums available for current expenditure but increase the reserve for new plant construction.

Surplus or deficit: the budget’s “bottom line”: i.e., total revenues minus total expenditures. Surpluses flow into the institution’s operating reserve and deficits are taken from the reserve. Positive reserves earn interest and conversely. The interest rate on negative reserves (i.e., bank debt) grows as the institution’s financial situation deteriorates. In the extreme, banks refuse to grant additional debt, the institution goes bankrupt, the President gets fired, and the game ends.

Expenditure allocation by function

Faculty expense: the percentage increase or decrease in the funds available for faculty after taking account of salary increases. This translates roughly into “percent change in faculty numbers.” The model determines faculty attrition (who departs and who stays), then sets the lower bound equal to the percentage reduction in faculty expense if no departing professors were replaced. (Players may set targets and upper bounds to maintain or increase faculty size to the extent possible.)

Non-faculty departmental expense: the percentage change in the non-faculty departmental budget after taking account of staff salary increases and other cost-rise. These expenditures will be allocated among departments in proportion to faculty salaries.

Libraries: the percentage change in the library budget after taking account of s!taff salary increases and other cost-rise. Includes both acquisitions and the provision of service for patrons.

Information technology: the percentage change in the academic information technology budget after taking account of staff salary increases and other cost-rise. Includes both equipment acquisition and provision of support services, training, and software.

Student life: the percentage change in the student life budget after taking account of staff salary increases and other cost-rise. Includes student services, counseling, general recreation, cultural events, and intellectual enrichment outside academic programs and departments..

Athletics: the percentage change in the athletics budget after taking account of staff salary increases and other cost-rise. Includes expenditures for intercollegiate athletics, intramural athletics, and fitness-oriented recreation.

Institutional advancement: percentage change in the advancement budget a!fter taking account of staff salary increases and other cost-rise. Includes fund-raising, alumni affairs, and governmental relations.

Administration (G&A): percentage change in the general and administrative budget after taking account of staff salary increases and other cost-rise. Includes academic administration at the decanal level and above, financial administration and internal audit, security, and all expenditures not elsewhere classified.

Operations and maintenance (O&M): percentage change in the O&M budget after taking account of staff salary increases and other cost-rise. Includes plant operations, building and related equipment maintenance, and utilities.

Faculty hiring by department

Departmental faculty numbers: size of the faculty roster for each department. When compared to the number of faculty continuing after attrition, this determin!es the number of new faculty that each department can hire. Players need not allocate all available faculty lines to departments—some can be left in reserve for hiring during the year or in future resource allocation cycles.