Mitigating budget shortfall risk in higher education: A multi-objective optimization approach

Budget shortfall risk, arising from the gap between required and allocated budgets, presents a major challenge to effective resource allocation in Higher Education Institutions (HEIs). Although previous studies have acknowledged the importance of budget allocation under uncertainty, they have generally relied on scenario-based analyses and have not incorporated explicit risk indicators for quantifying budget shortfalls. This study addresses this gap by developing an integrated quantitative budget allocation model tailored to the context of HEIs. Recognizing the multi-objective nature of budgeting decisions, the proposed framework integrates the Lexicographic and ε-constraint optimization methods to prioritize objectives and systematically explore the Pareto frontier. The model adopts a two-tier budget allocation structure that distributes financial resources across both cost centers and institutional activities while introducing dedicated risk indicators to quantify and support the management of budget shortfall risk at each level. A real-world case study conducted at Yazd University, Iran, demonstrates that the proposed approach effectively reduces budget shortfall risk, improves resource allocation efficiency, and supports financially sustainable decision-making. The proposed framework provides a practical decision-support tool for university administrators to make evidence-based budgeting decisions, strengthen financial sustainability, and improve the effectiveness of institutional resource allocation.