A budget model is a tool to organize the university’s revenues and expenses and show the resource allocation to academic and administrative units.  Budget models typically allocate only continuing resources for continuing needs (such as tuition revenue and faculty compensation, for example), and do not include one-time expenses such as capital construction.  
At the highest level, budget models typically fall into one of two categories: centralized or decentralized.  
Universities with centralized budget models tend to have a small number of central leaders determining each administrative and academic unit’s budget allocation, which are often adjusted uniformly across units regardless of growth or declines in activity. Centralized models offer stability and predictability but provide little incentive to pursue cost efficiencies or growth opportunities. The most commonly used centralized budget model is “incremental,” in which each academic and administrative budget is increased or decreased by the same percent tied to the change in incremental revenue.  This is the budget model CU Denver used prior to 2017.
Decentralized budget models tie an academic unit’s activities to its budget allocations, with cost allocations to fund administrative areas. Decentralized models create stronger incentives within academic units to pursue cost efficiencies and growth opportunities and also carry more risk associated with variability in resourcing levels. These models provide more financial independence to academic units, placing the resource allocation decisions locally in the units.      
CU Denver’s current budget model is an example of a decentralized budget model. The university’s entire unrestricted fund budget is allocated through the model each year; each academic units’ total budget is based on its proportion of specific activity metrics (e.g., student majors or credit hour production), from which administrative cost and mission support allocations are subtracted. The remaining budget is for the academic unit’s direct costs, and the allocation of these funds is determined locally.

Beginning in November of 2016, a steering committee composed of cross-campus leadership was created to guide the development of a new budget model and process. The committee’s work culminated in the adoption of the incentive-based budget model in October 2017.  
In contrast to incremental budgeting, an incentive-based approach provides schools and colleges with greater responsibility for budget development and control, while allocating funding based on specific activities and metrics (e.g. credit hours production). This model more closely ties funding to instructional activities by allotting tuition resources relative to enrollment, which incentivizes the enhancement of revenues and management of costs at the school and college level. Also, the model provides all campus academic and administrative divisions a comprehensive, all-funds view of the institutional budget— highlighting the critical, yet often obscured, components of the institution’s financial sustainability that require on-going funding commitments.

More information can be found Budget Model Overview

Budget models are a tool used to allocate resources and do not increase or decrease the level of resources we have.  Higher education institutions, especially public universities, are facing significant internal and external pressures. CU Denver is not immune from these financial realities, which have created the need for near-term and longer-term budget reductions as well as a renewed focus on enrollment and revenue growth. Some of the factors impacting finances include:

• We have not met our enrollment targets in recent years even as we've worked hard to buck national and regional enrollment trends.
• We have kept tuition and fees affordable at CU in the interest of our students and families.
• State funding for research institutions has not kept up with inflation.
• We are committed to paying our employees competitively and equitably.
• Our costs for employee benefits and other campus costs continue to increase.
• Inflationary and economic pressures continue to have impacts.

When enrollment is flat or decreasing, incentive or activity-based budget models often result in allocations that are deemed non-viable by campus leadership, particularly if the enrollment challenges are concentrated in only a few schools or colleges which can lead to focused, deep budget reductions.  Due to significant internal and external pressures that impact financial viability, including enrollment challenges, higher costs of doing business, and inflation, CU Denver paused the incentive-based budget model in November 2022 and in its place launched a multi-year collaborative process to engage the community and establish administrative and academic unit budgets that align with the university’s priorities.

Administrative units, also known as “Central Support Units,” have limited-to-no ability to influence revenue and are treated as cost pools bucketed by function. Unrestricted fund budgets for administrative units are established through an annual request process that involves consultation with the Campus Advisory Committee on Budget (CACB) and approval by the campus’ Executive Team. The expense budget for each cost pool is attributed to schools and colleges through allocation metrics within the budget model as indirect costs.

The Auraria Library serves and is funded by the three higher education institutions on the Auraria Campus (University of Colorado Denver, Metropolitan State University of Denver, and Community College of Denver).  As of FY 2018-19, the Auraria Library budget is shared among the institutions through a funding formula based proportionally on institution student and faculty full-time equivalents (FTE).  The total Auraria Library budget is jointly approved annually by the executive leadership of the three institutions, which is then allocated through the funding formula.  The CU Denver portion of the Auraria Library budget is then included in a Central Support Unit that is attributed to the schools and colleges through an allocation metric within the budget model.