In each newsletter, the Co-Presidents will unpack research on a critical area of shared governance in preparation for our monthly Senate meeting. This article is the first in this series, and is included in the October 2025 Newsletter

What exactly is a budget, in the context of higher education? 

A budget, we’ve learned, can be many different things at once: a way of planning for and tracking revenue and expenses; a transparent and clarifying accounting of university finances; a Byzantine and obfuscatory document in which one can get lost; and a tool for realizing an institution’s strategic plan and enacting institutional values.

Strengthening the link between a university budget, on the one hand, and an institution’s strategic plan and values, on the other, is essential. Before we can meaningfully engage with strategic planning in our November Senate Meeting, we need to unpack the budget process and its relationship to strategic planning. The following information on the budget process in higher education provides a historical and analytical perspective to help us better understand Pratt’s specific budgetary circumstances and approach.

What is a budget model? 

A budget model is the underlying philosophy and set of rules that determines how an institution allocates revenue across its units. As Pardo-Guerra explains it, budget models are “devices of governance that shape how universities engage with the world, how staff and faculty experience their professional lives, how capital investments are planned and executed, and how students are trained and supported” (Hines, 88). 

What role does enrollment play in all of this? 

As Mitchell and King succinctly put it, “Enrollment is code for revenue” (37).

Rick Longo (Vice President for Enrollment Management) has provided the following graph of enrollment at Pratt as well as a contextual explanation of these enrollment trends.

Enrollment goals are set each year by each program chair in consultation with their dean and admissions. The provost has initial and follow-up meetings with the deans to review and confirm goals. The new undergraduate student enrollment goal typically lands around 855 each year. 

The enrollment spike in FA21 was due to the addition of 279 deferrals from remote FA20. The enrollment spike in FA24 was due to efforts to mitigate the 10–20% enrollment drops forecast nationally due to changes made by the DOE to the FAFSA (Free Application for Federal Student Aid).

Higher admits were made to offset anticipated enrollment yield declines. These efforts were highly successful, but this took us by surprise as we bucked the national trend and our top NYC competitors saw their FA24 enrollment drop 12% and 19%.

Here are some terms that are worth understanding:

• Discount Rates: The amount of unfunded financial support Pratt provides its students. These are neither cash-funded nor donor-supported awards. Instead the discount rate is the average amount of tuition we forego to support enrollment.
• Merit-Based Awards: Discount amount awarded by Admissions based on academic and portfolio scores.
• Need-Based Awards: Discount amount awarded by Financial Aid based on results of the FAFSA.
• Headcount: The total number of students enrolled. Includes full-time and part-time.
• Net Tuition Revenue: The amount of tuition a student pays after deducting their merit-based and need-based Pratt awards (discounted tuition). A 35% discount rate would mean a student pays 65-cents for every 1-dollar of tuition charged, and we lose 35-cents per every dollar charged.
• Cost of Attendance: This is the sticker price for full-cost enrollment. Includes tuition, fees, room & board, estimated supplies. For 2022-203, the total COA was $77,607.
• Net Price: This is the actual cost of enrollment, all in, after deducting “gift” money (federal, state and institutional grants). For 2022-2023, the average total net price of enrollment was $51,702, which was $25,905 lower than the sticker price.

As President Bronet mentioned at our September Senate meeting, the challenge this year has been the drop in international student enrollment; the challenge next year will be potential drops in domestic enrollment due to changes in Parent PLUS and Grad PLUS loans.

What is a balanced budget and how does it work?

Here are a few things we’ve learned that have helped us understand how complex university budgets are and how seemingly obvious and easy “fixes” are, in fact, not so obvious nor so easy:

• As part of their fiduciary responsibility, Boards of Trustees at most institutions mandate a balanced budget from the Administration. A deficit budget one year can yield a deficit budget in future years, which can then yield a structural deficit and, ultimately, a severe fiscal crisis.
  
• Many university funds have very strict parameters governing how they can be spent. These typically include grant funds as well as major gifts. For this reason, the institution’s capital budget and many of its “special project” budgets usually cannot be used to fund the institution’s operating budget.
  
• There are also, typically, restrictions on how and when funds from the endowment can be used in the operating budget.
  

Why do we all need to strengthen our financial literacy?

We share all of this with you, and we invite Cathy and Rick to present to us, not in order to inundate you with information nor to overwhelm with what may feel like a complex, intangible, even esoteric process. Rather, we share this with you so that we can develop, together, some institutional financial literacy and, ideally, in turn, greater agency when engaging with the budgeting process.

As Hines emphasizes, university budgets are inherently political; they reflect contested priorities and values. Through greater understanding, we can develop and advocate for a vision of the future we want to see: “As in politics more generally, there is no unique unambiguous solution. The best model may not be the one that perfectly aligns revenues and expenses, but may be one that reflects the collective, if contested, vision of what the university ought to be” (Hines, 96).

Some Essential Questions for the October Senate Meeting

Some questions we have, going into the October Senate meeting, include:

• What budget model does Pratt utilize and how does it allocate resources across the Institute?
• How are enrollment projections built into budget planning?
• Where and how does Senate input enter the budget cycle?
• How is the Senate involved in budgetary changes that directly affect faculty?

Below, you will find a guide to the resources mentioned above. These resources may bring greater understanding to the topics and help you develop more informed questions to pose at the October meeting.

Research on Finance, Enrollment, and Budget

The following resources help make higher education operations more visible and transparent. The Introduction to the Mitchell and King book frames this by looking at how American colleges and universities adapted during other periods of economic and financial difficulty in US history. Chapters 2 and 3 explain the role of finance and enrollment in higher education administration, how these areas are managed, and their connection to and implications for academics. 

In Chapter 2 of How University Budgets Work, Smith explains the basics of higher education budgeting, including the different kinds of budgets (operating, capital, etc.), how budgets are constructed, and how budgets are interconnected across an institution. In Chapter 3, Smith reviews the different budget models that universities might use as their philosophical basis for allocating revenue. In the entry on budgets in University Keywords, Pardo-Guerra takes a more critical look at university budgets.

We particularly recommend the Pardo-Guerra piece on budgets, as it is concise and critical and it synthesizes many ideas from the other resources.

• Mitchell and King – How to Run a College: A Practical Guide for Trustees, Faculty, Administrators, and Policymakers (2018)
  • Introduction
  • Chapter 2 – Finance
  • Chapter 3 – Enrollment
• Smith – How University Budgets Work (2019)
  • Chapter 2: University Budgets
  • Chapter 3: Budget Models
• Hines (Ed.) – University Keywords (2025)
  • Juan Pablo Pardo-Guerra – Budget