Our FAQ section will answer common questions about Incentive Based Budgeting (IBB). This section will grow as the project progresses, so please check back regularly for updates.
Budget Models at the UW
- What is a budget model?
A budget model is a way to organize and allocate a university’s financial resources and costs so they best support teaching, research, and service.
- What is the UW's current budget model?
Within the entire UW ecosystem of campuses and hospitals, multiple budget models are used to organize a wide range of variably restricted resources. Within the entire Seattle Campus portfolio of financial resources, the current budget model used to organize core operating resources is called Activity Based Budgeting (ABB).
- What is Incentive Based Budgeting (IBB)?
Incentive Based Budgeting (IBB) is a budget model that provides a framework for the distribution of revenue and costs. It is a common budgeting methodology that is used by top public and private universities, including many of our peers. Incentive Based Budgeting (IBB) is a strategic evolution of the Activity Based Budgeting (ABB) model that is designed to enhance transparency, clarity, accountability, and alignment with institutional priorities. IBB reduces reliance on broad revenue taxation, allocates revenue more directly based on activity, and establishes defined cost pools to allocate administrative overhead rather than opaque incremental allocations.
Why IBB?
- Why is the UW changing budget models?
For many years, the current Activity Based Budgeting (ABB) model effectively served as a revenue allocation framework, designed to distribute resources during periods of sustained growth. As the university has grown and its academic and operational environment has become more complex, aspects of the current approach have become less transparent and more difficult to use for long-term planning and analysis.
Transitioning to an Incentive-Based Budgeting (IBB) framework is intended to modernize UW’s approach to resource allocation. The goal is to improve transparency in budget development, strengthen financial planning and management, and enhance the ability to analyze and understand budget and financial data.
Many large public research universities, including several of UW’s peer institutions, use a model similar to IBB or other hybrid versions of it. A number of these peers are actively reviewing and updating their budget models to better align with current academic priorities, financial realities, and institutional goals.
- Why did the UW choose IBB specifically as the new budget model to use?
IBB builds upon the foundations of ABB and provides a more transparent and sustainable approach to aligning resources with mission and strategic priorities. It will provide clearer insight into our financial operations, stronger accountability mechanisms, and better alignment with our budget decisions and strategy.
What will IBB mean for...?
- What will the implementation of IBB mean for UW Bothell or UW Tacoma?
ABB currently assesses an “administrative overhead” tax on UW Bothell and UW Tacoma, intended to reflect the cost of certain activities performed centrally on the UW Seattle campus by administrative units. Administrative overhead was established under ABB as a fixed percentage of certain resources allocated to the campuses, a percentage established and unchanged for more than a decade. IBB will eliminate the ABB administrative overhead tax and evolve to allocate costs using a similar cost pool approach envisioned for the UW Seattle campus, with recognition that the Bothell and Tacoma campuses require and consume centrally provided administrative services very differently than UW Seattle campus units.
- What will the implementation of IBB mean for my school/college/administrative unit budget?
The transition from ABB to IBB itself is not intended to result in destabilizing effects to school/college/administrative unit budgets. The goal of implementing IBB is to align our framework for distributing resources and costs with the UW’s long-term strategy. This means that change to local budgetary conditions will occur over time to align our resources with our plan as it evolves.
The implementation of IBB will include a transition period as we move from ABB to IBB. This will allow for a strategic response to the incentive structure rather than prompting an immediate change in direction, leading to budgetary “cliffs” or “windfalls”. It is important to recognize that the UW’s budgetary conditions, influenced by things such as enrollment, research activity and the external landscape will continue to change and may result in budgetary changes irrespective of which budget model is in place.
- Will the implementation of IBB change my local department’s budget?
Just as ABB does today, the IBB model intentionally will focus on distribution of resources or costs at the school/college/administrative unit level (CCH05). Strategic deployment of resources within a major unit is best directed by the unit head (generally a Dean or VP) in consultation with UW’s shared governance framework. It is expected that resource allocation at a local level will occur in alignment with the UW Strategic Plan. Both ABB and IBB inform how resources reach each unit, not how each unit deploys those resources.
Timeline
- When will IBB replace ABB?
Implementing IBB is a multi-year journey that requires careful planning, extensive engagement with the university community and a commitment to continuous learning and refinement
2025-FY26: Design and Early Engagement
FY27: Enable Phase - Capturing Early Incentives and Building Operational Readiness
Budget planning for FY 28 takes place under ABB
FY28: Activate Phase - Ensuring alignment with UW's Strategic Plan and IBB runs alongside ABB
Budget planning for FY 29 takes place under ABB
FY29: Deploy and Mature - IBB Deployed with Stabilization Mechanisms
- How can I learn more about IBB?
If you have specific questions or would like to be contacted directly, please reach out to the IBB team via our Contact Us form