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Revisiting the Budget Model

InsideHigherEd is running a story today on the endless debate in higher education administration: should university budgets be centralized or decentralized? As MetaEzra readers know, Cornell, perhaps possessing one of the most complicated budgets in the country due to its unique convergence of public and private funds, has recently planned for a more centralized budget model, and IHE picks up on the story:

Even higher education’s biggest proponents concede that it is an enterprise often resistant to change, and it’s little wonder that fundamental changes to budgetary strategy are among the most difficult to sell. That difficulty became apparent early this year at Cornell, where recommendations from a budget task force that seemed to argue for greater centralization received mixed reviews.

“You’re essentially undoing the decentralization that has made Cornell the great institution that it is,” said John Bishop, associate professor of human resource studies in the ILR School. “The provost gets the power to kill off a campus if he wants to and to do whatever he wants.”

In a Friday interview, Bishop told Inside Higher Ed that he worried a centralized model might involve high-level administrators in decisions on hiring, which are best left to experts in their fields. Moreover, there are healthy incentives for colleges and schools to pull their own weight in a decentralized system, he said.

Bishop is unable to argue the counter-factual, however, and it's possible that Cornell could be an even greater institution if there was more cooperation, say, in public health research and programs across the colleges. As I've written before there can be very high costs to decentralization.

“If [schools] are successful, they should continue,” Bishop said. “If they’re not, then the provost should decide, 'I can’t subsidize these guys so they are going to go down.' ”

Bishop's comment is also striking because as a contract college professor he surely knows that four of Cornell's schools would not be 'pulling their own weight' were it not for funding from the state of New York. And anybody have any thoughts as to how much student demand there would be for ILR were it not for the discounted tuition?

At any rate, the article goes on to report that Cornell still hasn't figured out how it's going to implement its centralized budget process just yet:

The fears Bishop and others expressed have not come to fruition at Cornell, because the university hasn’t adopted the task force’s recommendations, said Elmira Mangum, Cornell’s vice president for budget and planning. At the same time, the university is reviewing its budget policies and aiming to develop a system that is more transparent and standardized across colleges, she said.

“We’re still wrestling with this on campus in terms of what we can do,” she said. “It’s by no means settled yet. I wish it was.”

Because several of Cornell’s colleges are state-supported, the university's budgetary options are necessarily limited. The four state-supported colleges are statutorily obligated to retain their own tuition revenues, necessarily instilling those units with one of the hallmarks of an RCM system. At the same time, Mangum says that only the law school and the Samuel Curtis Johnson Graduate School of Management function independently as “tubs,” controlling revenues and expenditures independently.

“I think what most people want to know is that they will be treated fairly, and they can understand [the budget process] and they will be accountable,” Mangum said.

Economic pressures, she added, are another incentive for rethinking how budgeting is done.

“I think that’s probably what is [compelling] a lot of people to examine how they actually allocate their resources,” she said, “and on what basis they should allocate those resources.”

Let's hope that examination comes sooner rather than later.

Matthew Nagowski | Posted on December 13, 2010 (#)

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