Responsibility Centered Management: New budget model proposes to decentralize units at USF

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.  

According to a 2011 accountability report, many faculty members expressed concerns over the university using different calculations for how to assign state funding increases and how they distributed cuts to each unit. They also expressed concerns over increasing centralized marketing initiatives from the university that prevented them from targeting their unique demographics they hoped to seek for enrollment. 

Eisenberg said he thought the dean level would be an intermediary step to complete decentralization.  Deans could also take action on behalf of departments, some of whom he said may have a “rude awakening” when they realize their financial positioning in relation to their colleges, though several areas still need to be fleshed out. 

Support units, or units that provide services to the university but don’t generate revenue, for example, would be funded based on a tax of revenue producing units, he said, but how the tax should be developed, how big it should be and whether it should be up for re-negotiation, is something that would need to be explored. 

Providing training for some fields, such as medicine and engineering, costs more than for fields such as history or philosophy, Eisenberg said, and though state dollars aren’t proportionally allocated based on the types of students enrolled, he said the RCM model would have to account for that. 

But some faculty questioned whether the model was aligned with the overall priorities of the university. 

“I can understand the pure business sense of this model, but where is the academic sense in it?” Steve Permuth, a professor in the College of Education, said. 

“(The RCM model) really isn’t designed for academic excellence,” Eisenberg said. “It’s an attempt to bring in mind the academic aspirations that we have with the economic realities we’re facing. It creates clarity about what the current reality is, about what motivates people to do the things that they wouldn’t have otherwise done.  

“It doesn’t let you off the hook (from) conversations about quality and conversations about what is a money loser for the university that we must continue to invest in and subsidize because it’s the right thing to do,” he said. “I don’t think for a moment that we can’t do that, but it would be good to be conscious of the extent to which we’re doing that.” 

Permuth said consciousness of gaps in budget subsidies was not enough, and that he’d like to hear of pros and cons of the model from other universities that had implemented the model. 

“If you don’t have academic excellence driving the procedures at this university, we have a big problem,” he said. “It’s not only economics, it’s academics.”

Eisenberg said he had heard reassuring things from other universities.  

“They tell me the dream is real,” he said. “You can get to the point of transparency where anybody can look at it and see, ‘Oh, I see the money coming in. I see the distribution. I understand how that works.'”