Prepared For the UAB Faculty Senate


Warren Martin and Joe Walker,

Of the Faculty Senate Finance Committee

March 15, 2005


Last spring, UABís upper administration allocated new funds from the State of Alabama based on a system comprised of distribution indices.The distribution indices are specific measurements of a school on a dimension of interest such as funded research expenditures or credit hour production.Since funds are attached to the distribution indices, it is important that the faculty understand the selection process and the specific allocation procedures.The purpose of this paper is to present a review of the process and one of the procedures.



The distribution indices generally represent measures used in UABís scorecard that in turn reflects UABís vision and mission.†† Therefore, for an understanding of the process, it is important to start with the vision and mission as the foundation, and then the scorecard measures as the framework and finally the distribution indices as the specific facet receiving current attention.The vision and mission of UAB, as defined on the UAB web site, are as follows




An internationally renowned research universityó a first choice for education and health care.


UAB is a research university and academic health center that discovers, teaches and applies knowledge for the intellectual, cultural, social and economic benefit of Birmingham, the state and beyond.


Given the broad strategic thrusts of the vision and mission; the questions become how can we focus our efforts, measure our progress and allocate funds to reward achievement?To answer those questions, the administration of UAB solicited input from faculty, staff and students.†† The result was the identification of six broad categories of effort listed below.

Scorecard Category

Undergraduate Education

Graduate Education

Research and Scholarship

Service to Community and State

Community Financial Support

Work Environment


Within each category, specific scorecard measures were developed.For example, under the category of Undergraduate Education, there are twenty measures (three of which deal with honors programs).Some of the scorecard measures include the number of entering freshmen; the number of entering transfer students; the retention rate; and the graduation rate (which will be discussed later). Each school is rated annually on the scorecard measures and this information is available on the UAB web page.


Logically, the distribution indices should be a subset or indicator of the key scorecard categories.The six distribution indices used in 2003-2004 are listed below with the respective scorecard category.

Scorecard Category

Distribution Indices

Undergraduate Education and Graduate Education

ACHE formula

Undergraduate Education and Graduate Education

Increases in credit hours produced by full-time faculty

Research and Scholarship

Research funding expenditures increases

Undergraduate Education

Degree completion ratio of the graduating seniors compared to the number of junior and seniors

Graduate Education

Professional exam pass rate (for the Medical, Dentistry and Optometry Schools only)

None (see explanation below)

Allocation of 2003-04 funds (held back in case of proration)


Five of the six distribution indices can be directly related to the scorecard categories and will be discussed in more detail below.The sixth distribution index is a very unusual case of where funds were held back due to the chance of proration (see endnote 1).There is no scorecard category for this unique situation.


2003-2004 Allocation Process

The actual allocation process used by UABís upper administration can be viewed as consisting of three steps.First, the distribution indices are identified.Second, the new (incremental) funds from the state are divided into set amounts for the respective distribution indices (note that existing funding, grant and contract amounts, outside gifts, tuition and fees are not addressed by this process).Third, the funds are then allocated to each school based on a distribution scheme.


For the allocation of new funding for the academic year 2003-2004, five distribution indices were used: (1) the ACHE formula,(2) increases in credit hours produced by full-time faculty, (3) research funding expenditures increases,(4) degree completion ratio of seniors compared to the number of junior and seniors and (5) the qualifying professional exam pass rate (for the Medical, Dentistry and Optometry Schools only).†† The amount of funds allocated to each of the distribution indices is listed below:


Distribution Indices

Amount of New Funds

Percent of new funding

ACHE formula



Increases in credit hours produced by full-time faculty

†† $300,000


Research funding expenditures†† increases

†† $750,000


Degree completion ratio of graduating seniors compared to the number of junior and seniors

†† $300,000


Professional exam pass rate (Medical, Dentistry and Optometry Schools only)

†† $223,058






The ACHE formula is based on the difference between the recommended ACHE formula calculation and the 2003-04 state appropriation for each school (this number is officially called the ACHE deficit index).The distribution was based on each schoolís proportion of the total difference.The ACHE formula calculation funding primarily reflected the student credit hours that were weighted by the student level -freshman-sophomore, junior, senior, master, or PhD (see endnote 2).The second index is based on the increase in un-weighted credit hours produced by full-time faculty.Officially this index is the increase in credit hour production by the full time equivalent (FTE) of all faculty members not paid by requisition (which is almost always full-time faculty).The first two indices listed relate to the overall credit hour production and over one half of the funds allocation (64%).The third index deals with the amount of new research funding expenditures and that index received 21% of the funds. So, eighty five percent of the new funds were allocated to the first three indices that measured some form of credit hour production or research expenditures.The fourth index, the degree completion ratio, reflects of the graduation rate (which will be discussed in more detail later).The fifth and final index, the exam pass rate, is a category for the professional schools on the medical side of campus.This category was added to balance the indices since these professional schools have no undergraduate students.


††††††††††† Now that the general indices have been briefly introduced, the actual allocation process for one index, the degree completion ratio, will be reviewed in detail.One reason for the emphasis on degree completion ratio is that it is an increasingly important concern to some members of the federal government.For each school (with undergraduate enrollment), the number of juniors and seniors can be divided by the number of graduating seniors, to create a ratio.If the progress through an academic program is fairly consistent, the ratio should be around 2.However, if a unit has a large percentage of students who take several years to go from junior standing to graduation, the figure will be substantially more than 2.As shown in the table below, the degree completion ratio for each school varied from 4.31 for NSM to 2.2 for Nursing.The average (mean) for relevant school units was 3.56.New funds were allocated to schools with degree completion ratios below the mean such as A&H, Engineering, SHRP, Nursing and SBS.Each school received an amount proportional to their differences below the mean. On the other hand, Business, Education and NSM were above the mean on this ratio and consequently received none of this pot of funds (although these three school did receive additional funds for credit hour production by full time faculty).


The Allocation of Funds Based on the Degree Completion Ratio



Degree Completion Ratio: 2003-04


Below the Mean

Allocation Percentage*

Allocation Amount **

A & H









































UAB Mean = 3.56***

Total = 2.70

Total = 100%

Total = $300,000


*Allocation percent:amount below the mean divided by the total below the mean.

**Allocation amount:allocation percent times funds available ($300,000).

*** The UAB mean rather than the mean of the ratios is used here.

The source of this data is Vice President John Lyons.


The use of the degree completion ratio demonstrates that UABís administration would like to see students move through the institution at a regular pace.Every school has a large number of potential options for improving their standing on this index.The number of students could be limited although this action could possibly conflict with the student credit hour goal and would only have a short-term effect.A more comprehensive plan to avoid such a conflict might be to screen students more carefully or to attract better students who can finish on time.Yet another plan would be to more strongly enforce the completion of prerequisites so that students with junior hours who have two and one-half years of course work remaining are not fully admitted to the unit until there are only two years of course work remaining.Another related consideration would be the strict enforcement of a sequence of courses leading to the degree.Which of these alternatives or combinations of alternatives would be the best for a given unit will depend on the resources and specific situation found in each unit.




While the distribution indices are designed to allocate new funds, it is important to understand that there are two major constraints in the allocation process.The first constraint is the amount of funding made available from the State of Alabama.With limited funding from the State, the amount to be allocated is restricted.The second constraint is the current areas of need as identified by the top administration.As new initiatives are verbalized in Washington, D. C. that may impact on federal funding, UABís administration will try to address those issues within a reasonable time to protect UABís funding standing.If funds need to be allocated to address a major concern or are greatly limited in the case of restricted funding, the amount available for other important needs will consequently be reduced.


Given the distribution indices, the challenge for a school or faculty member is identifying the best strategy for increasing funding.Each school could appoint a team of faculty to study their particular situation for each distribution index. The faculty members may be able to develop new policies and procedures to improve their standing on the distribution indices.However, just focusing on the current distribution indices without regard to all the scorecard categories and measures is myopic.There is no guarantee that the allocation for next year will be based on the same variables.The selection of distribution indices probably will change over time.For example, it is said that the dependence on the ACHE formula is expected to be less important in the future as other indices are given more weight.


So what is the ďbestĒ strategy for a unit to secure funding?It is clear that UABís vision, mission and scorecard will provide the foundation and framework for whatever indices will be selected.Next, consideration of the actual scorecard measures will refine the potential choices even more.Then the ďbestĒ strategy will depend on the individual strengths and weaknesses of each school as well as trends in the administrationís priorities.


††††††††††† Finally, in closing, it is important to consider that scorecards are an important trend among businesses and universities.The University of Louisville, Penn State University, The University of Vermont and The University of CaliforniaĖBerkeley are just a few of the institutions currently using a scorecard system (for at least a part of their campuses) in an effort to improve the quality of their offerings and to stimulate efforts towards accomplishing their strategic goals.As a result, it is expected the use of scorecards will continue in the future and even become more popular.




Note 1:The 2003-04 funds held back due to the threat of proration was allocated based on each unitís salary base.This situation represented a special case that hopefully will not reoccur.


Note 2:The legislators either have not been using the ACHE recommendations, or the recommendations have been substantially changed, so the concept of weighted credit hours has lost some importance.As a result some people have suggested that the State of Alabama funding would encourage UAB to teach more undergraduate students since no extra funding was given for teaching graduate students.