Proposal budgets are based on a reasonable estimate of the actual expenses that will be incurred in performing the proposed project. Inflation, or cost escalation - including anticipated cost-of-living increases to salaries and stipends - is a reasonable part of the estimate. Follow any sponsor instructions or limitations related to inflation, annual escalation, or cost-of-living.

Kuali Research automatically applies 3% inflation to many budget categories (excluding, for example, equipment and subawards). This automatic annual increase is useful for detailed budgets without budget limitations or caps, and for conversion to a modular budget.

What happens if the sponsor does not apply inflation or applies a different rate? Typically, the award budget will be adjusted by the sponsor. In the absence of policy or guidance from the sponsor related to inflation, there is no "penalty" for requesting inflation.

Salary Cap:  If you have applied the salary cap to a salary in year 1 of the budget, inflation should be applied to the budget as usual. Expenses will reflect the applicable salary cap. Your proposal budget should reflect a reasonable estimate of actual costs and it is reasonable to expect that the salary cap will increase annually.

Adjustments - instructions for adjusting inflation in your detailed Kuali Research budget:  Managing Inflation in a KR Budget

Justification:  Justify budgets with more than a standard escalation from the initial to the future year(s) of support.