10/31/2012: Today’s message from our interim provost – presumably sent with Gottfredson’s blessing – represents some serious backtracking regarding Brad Shelton’s 2009 “New Budget Model”, of which Shelton wrote:
What is RCM? In most modern American universities, authority is highly decentralized, but responsibility (specifically financial responsibility) is held centrally. This decoupling of authority from financial responsibility poses problems for decision makers at every level of the University. Responsibility Centered Management (RCM) is a combination of policies and practices designed to overcome these problems by coupling decision making directly to the associated financial ramifications. These policies and practices should be clearly articulated and crafted to fit the mission of the institution. The backbone of an RCM is typically a Budget Model which:
- prescribes precisely how revenues are shared amongst responsibility units,
- associates revenues directly to revenue creating activity (for example student credit hours or degrees awarded),
- allows decision makers to realize rewards from good financial decisions,
- allows good local decision making to benefit the entire institution.
The Oregon Budget Model is described in detail in the Oregon Budget Model Primer.
“It is a tool that allows the Provost and each of the Deans to understand the financial consequences of each decision they make. The Model is not designed to create incentives or disincentives …”
But of course the whole point of Responsibility Centered Management is exactly that – and it’s a good thing. Johnson Hall has blown through its share of the budget with a raft of pet projects like the $2 million Jock Box budget, Police, administrative sabbaticals, golden parachutes for “special assistants” etc. There’s also been some serious mismanagement – e.g. of ORSA, and some other things they’ve hid pretty well.
Apparently raising the tax rate on the colleges isn’t enough to cover these bills – now Bean wants to pretend the whole deal was just advisory. He gets a bit muddled there in the middle, but see the bottom for where this is going:
Office of the Senior Vice President and Provost
Message for October 31, 2012
Below is a description of the Oregon Budget Model. I thank a number of members of the administration for helping put it together, most notably Brad Shelton.
What is the Oregon Budget Model?
The Oregon Budget Model is an arrangement between the Provost and the Deans of the Schools and Colleges. The model determines the overall General Fund Budgets (see below) of the Centrally Funded Units, and each School or College.
The primary purpose of the Model is to achieve decision-level transparency. It is a tool that allows the Provost and each of the Deans to understand the financial consequences of each decision they make. The Model is not designed to create incentives or disincentives nor does the Model proscribe the internal budgeting process of any School and College. Those decisions should be made to attain the mission of the institution, not to maximize dollars. The model is there to show the financial impact of proposed decisions as one factor in decision-making.
Under the Budget Model, any changes in educational activity directly affect the budgets of the Deans. Changes might include how many student credit hours faculty teach, how many majors are in a school and how many graduate students are enrolled.
What is the General Fund?
The General Fund is the bulk of our basic operating funds, the dollars we use to pay for instruction, maintenance, utilities, the library and a host of other operations. The two primary sources of General Fund dollars are student tuition and state appropriation. The General Fund comprises a little more than half of all of the operational dollars flowing through the institution.
There are many other types of funds within the institution, such as Grants, Contracts, Auxiliary funds (Housing, Parking, Athletics and others) and Gift funds. The Oregon Budget Model does not affect any of these funds.
Oregon Budget Model impact
The best way to understand the impact of the Model on the University is to consider the change in the percentages of overall Academic General Fund budgets and overall Administrative General Fund budgets.
The Oregon Budget Model was fully implemented in 2010-11, although some of the principles of the model were already used to adjust 2009-10 budgets. Here is the General Fund breakdown:
General Fund % Schools and Colleges Centrally Funded Units 2008-09 57.2% 42.8% 2009-10 59.5% 41.5% 20010-11 61.9% 38.1% 2011-12 63.4% 36.6% 2012-13 (approximate) 63% 37%
To understand these percentages, we must consider some important caveats. The Oregon Budget Model does not just realign budgets; it also realigns responsibilities for certain types of expenditures. For example, under the Model, Academic support accounts became School and College costs rather than Centrally Funded costs. The percentages above take most of those changes into account, going back to 2008. Thus we see that the Model has effectively shifted a significant percentage of funding from Centrally Funded to School and College Budgets.
Plenty of detail about all of our budgets can be found on the web site of the Office of Budget and Resource Planning: http://brp.uoregon.edu
Future of the Oregon Budget Model
The Oregon Budget Model is not cast in stone. It has proved to be an excellent tool for analyzing decisions, but any such tool is guaranteed to create unintended consequences. Further, we find ourselves in a very different situation today than in 2009. The model will need to change as we understand the full impact of recent economic events. Like every AAU school that works with an activity-based budgeting system, we will constantly be adapting the Model to best achieve the mission and strategic goals of the University of Oregon.
I welcome questions or comments at firstname.lastname@example.org