Responsibility Centered Management: New budget model proposes to decentralize units at USF
Published: Thursday, January 30, 2014
Updated: Thursday, January 30, 2014 01:01
As the state Legislature and State University System explore new ways to determine the allocation of budgets to higher education, administrators at USF are looking at new methods for allotting budgets as well — ones that would place greater responsibility on each college to generate its own funds through enrollment and entrepreneurial ways of revenue generation.
At a Faculty Senate meeting last week, College of Arts and Sciences Dean Eric Eisenberg and Vice President for Business and Finance Nick Trivunovich announced that with the approval from the president, the university would be moving forward with “the process of figuring out the nuts and bolts,” of a modified “USF version” of a Responsibility Centered Management (RCM) system.
RCM, a budgeting system used since the 1970s at several universities across the country, including the University of Pennsylvania, Duke, Harvard, Kent State, Ohio State, Indiana University and the University of Florida, consists of designating the responsibility of budgeting to smaller units — namely colleges.
“Once responsibility is delegated, deans are fully accountable to what happens in their college — looking for ways to generate more revenue, etc,” Trivunovich said.
But USF is not looking to adopt a pure RCM model, in which each responsibility unit, or college, would have to rely solely on the revenue they are able to generate for themselves, Eisenberg said.
However, he said, taking note of the difference between what each unit is bringing in and how much it is being subsidized can be helpful.
“We could never implement a pure RCM model, because cross subsidies are very, very important at a university, but it gets us closer to that and away from a relatively centralized, historically based budgeting system,” he said.
An online presentation from the University of Florida, exploring the pros and cons of the model, stated that it could pit colleges against each other, causing them to fight for resources. The model could also focus more on short-term budget goals while ignoring long-term ones that could create a “misalignment between financial allocation and university priorities.”
But Eisenberg said the RCM model provides incentives to deans to work in “really creative” ways to generate revenue or increase enrollment. It will also allow them to find efficiencies in spending knowing that the revenue, or tuition, would flow directly back to them and allow issues, such as the fear of losing rollover or carry forward funds, to dissipate. This is because each unit would retain control of their finances.
“It provides decentralized control to the deans of the colleges to incentivize them to make the kinds of decisions that will produce the behaviors we would all want to have,” Eisenberg said. “Right now … you might produce more credit hours, you might not, you might offer a new entrepreneurial degree program, you might not, but there’s not a clear connection between the actions and the rewards that might come from those actions.”
Trivunovich said the model provides for greater transparency in the ability to show which units are costing the university more and which are generating more revenue.
Some faculty expressed skepticism toward the model, which Eisenberg said would be hashed out further in smaller committees with “budget people,” and then later presented to faculty for feedback in townhall-like sessions.
Emanuel Donchin, a psychology professor, said he didn’t buy into the logic of decentralization at the college level.
“The logic doesn’t make any sense because if you really wanted responsibility to drive actions, the deans are the wrong units for it,” he said. “It must be at the department level. There’s no way from where you sit that you can control the actions or revenue of the departments … I think it’s completely bizarre, other than that the deans sit on the committees that make these decisions, of how you can go from the logic of RCM to having the deans (at the helm).”
The level of decentralization has been an issue at some universities that have adopted the model.
Indiana University has used an RCM model since the early 1990s, in which each school receives the full amount of tuition revenue it generates through enrollment and receives a fixed share of state allocations, while paying into a “funding for support units” pool and “funding for the common good” fixed tax.