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.
Bean’s message?
“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, 2012Colleagues:
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:
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 [email protected]
Regards, Jim
UO has “strategic goals” now? Who knew?
It’s that “responsibility” word that is causing all the trouble. It’s just not in the JH dictionary.
The Bean-gram states: “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.” If so, I would be very curious to see how we can reconcile as a University what I perceive to be an extraordinary increase in the number of large seat classes and experimental classes at the 1xx level versus taking our monies and adding in additional sections of classes that our students need to take to graduate or even, shudder the thought, starting to develop more options for upper level electives. The model did exactly what it was intended to do — reward colleges for putting students in the seats, without regard to the quality of the seats.
For all I know replacing the RCM model is a good idea. But Bean’s attempted explanation raises a lot more questions than it answers. I hope Gottfredson will do a better job explaining it to the Senate next week.
PLease, bring this to an end. Every single time he opens his mouth.
It’s his halloween trick. Give me more candy or I will toilet paper all your departments.
Does anyone know what is going on? Note these statements:
“allows decision makers to realize rewards from good financial decisions(Shelton)” AND “The Model is not designed to create incentives or disincentives …” (Bean). Those statements cannot both be true.
I also think the real problem can be found in this statement:
“associates revenues directly to revenue creating activity (for example student credit hours or degrees awarded),”.
That works great in a business where the goal is to increase revenue creating activity.
THAT IS NOT THE GOAL OF A UNIVERSITY. And yet we have created a budget model that rewards that, and only that, as a goal.
This could only work if it said “associates revenues to mission supporting activity (whatever that might be). Bean says that is the goal: “Those decisions should be made to attain the mission of the institution, not to maximize dollars.” But saying it doesn’t make it so and the model doesn’t actually work that way at all.
I imagine a Dean that said “Well, we are a million dollars over budget but look at all the activity we created to “attain the mission of the university”.” would be fired….or made a special assistant to someone. So Deans are doing what they are incentivized to do – increase revenue creating activity and decrease revenue draining activity – without regard to any mission or goal. Sure, they use fancy words and high-minded statements to make it all sound “mission-driven” but that is not what is happening. The incentives are all screwed up. In my unit, class sizes are increasing, instructors are having their teaching loads increased, donors drive initiatives and programs that provide valuable services are being cut. This is only the beginning.
Universities face an uncertain financial future. They are no longer a public good, funded by the public to attain their mission. Money has to come from somewhere. But this system is not working and if someone is realizing that, good for them. My bet is not on Bean – after all, this was initially his baby, not Shelton’s.
The problem is leadership, frankly at all levels, leading to budget chaos layered over administrative changeovers. The budget model was a huge change that dramatically altered college, department, and vpr funds. At the department and PI level we’ve been scrambling for 3 years to figure out the new $$ flow, where funds will be, and how and who to ask for them. Questions have been met largely with ‘we don’t know’ and zero big-picture framework. At this point, though, keep funds stable for a couple of years, and we might be able to do effective local decision-making. IMHO, it would be terrible to shake it up again. Tons of wasted time to figure out a new system again.
The “zero big-picture framework” you can lay squarely at the provost’s door.
Heard the UO fund balance is huge, as in mountains of cash huge. Beamers and sabbaticals for all top admin, athletics, and foundation, when we are are free from the oppressive yoke of the socialist state. Now back to teaching you scurvy dogs.
Dog says
1) Dogs are not pirates and therefore can’t be scurvy – we can be scurrilous
2) the mountains of cash is not that huge. It is true that CAS is sitting on a lot of cash, from tuition rrevenues, that it doesn’t know what to do with. Its also true that these “hills of cash” have not been redirected to the startup problem, precisely because of the RCM model. on the whole, however, our cash balance is pretty favorable we just have no mechanism to invest in anything sensible – so the cash reserves just sit there and collect dust.
3) We have in fact, zero-little picture framework. Everything is complete opaque.
I envision dogs emaciated with bleeding gum, toiling to produce those mountains of cash. How about using the mountains of general fund balance to: add tenured professors; or people with research potential (noble prize winning or something) with active cutting edge research, even if they do not walk in the door with millions in grants; or just try to retain the good ones before the offer from a real AAU school comes in; or how about some classroom space instead of a parking lot full of TSA style SUVs; or just some parking spots to justify the $500 paid for the hunting permit; perhaps some counselors and tutors to check in on the average undergraduate who does not run a four 40; or give the students a break and cover the cost of an EMU to host those counselors and study sessions–they do not need the opulence of of $1500 per square foot jock temple; or a few in state students; or more research GTF learning their craft from those new and retained active researchers… Oh wait, I know: claim poor; blame the state; jack the tuition up another 15%; cut instate students in preference for out of state dollars; build websites that have more links to Donate to the private foundation than to actual content; have 12 administrators doing what Dave and John did; and Swear that a private Oregon using canned video lectures, delivered all MOOKish like will be the salvation of Oregon, nay, America.
Is it just me, or is Oregon Hall like Dilbert World??