Des Moines Register
08-22-06
ISU to revamp budget process
Proposed method would benefit colleges that increase enrollment, bring in
revenue
By LISA ROSSI
REGISTER AMES BUREAU
Ames, Ia. — Iowa State University is poised to break from tradition by
overhauling its budget process to reward colleges that generate income and
attract students.
The new approach, perhaps about two years away, would result in a sharp
departure from the current budget process at ISU, which channels money to
colleges in lump sums without direct ties to enrollment.
Often referred to as "responsibility-based budgeting,'' the new way of allocating
university money is stirring some controversy.
Critics predict that the process will eventually hurt students by forcing ISU to
place more emphasis on boosting enrollment and generating money to pay for
research.
Proponents argue that the new process makes economic sense in a world where
schools like ISU are depending more on money generated by tuition and fees
and less on dwindling state allocations.
"We know universities are going to have to generate more resources themselves,
just because the state has decided to invest less in its education," said Mike
Crum, an associate dean in ISU's College of Business. He has been part of a
committee studying the new approach.
Currently, ISU distributes money to colleges in lump sums that increase in
varying increments tied to faculty salary increases, or a broad, university-wide
cost, such as energy.
Some deans complain that the current budgeting process does not account for
rapid spikes or dips in enrollment. That gap, they say, translates into larger class
sizes in colleges that grow faster than the money.
Responsibility-based budgeting would distribute money based on enrollment,
credit hours, fundraising revenue and, in some cases, the cost of teaching. In
return, the colleges would have to pay bills for services, such as facilities and
information technology.
Report cites benefits
At present, ISU is the only public university in Iowa considering an approach
precisely like this. The University of Iowa this year distributed part of money to
colleges based on what was generated, but it didn't require them to pay for
services.
A 1997 survey by the National Association of College and University Business
Officers found that about 16 percent of public universities were using a version of
responsibility-based budgeting. University officials say the percentage is higher
today as states tighten their funding of public universities.
The new process, if approved by the ISU president and the Iowa Board of
Regents, would be put into place by 2008. ISU's budget for fiscal 2007 will be
$994.8 million.
The approach would help the university increase its enrollment and money made
from research, according to a report released by the budget committee in June. If
successful, it would also help ISU offer better quality academic programs, have
enough money to pay for new programs or course offerings, and reward quality.
Crum said the idea to tie enrollments more closely to budgets could help the
business college, where enrollment has increased by 31 percent over the last
decade and which, as a result, has the highest student credit hour to full-time
staff ratio on campus.
"The current model doesn't allocate additional tuition revenue to the units that
generate the students," he said. "The new budget model is designed to do that.
... As the tuition dollars follow the student, that would allow us to generate more
resources to hire more faculty - course we would try to reduce the class size."
How it works elsewhere
At the University of New Hampshire, the budget method has motivated colleges
to offer more introductory courses focused on broad, rather than technical,
knowledge, making them more accessible to nonmajors. At other universities,
insiders said the system has forced faculty members to make decisions, such as
whether to enlarge class sizes, based on whether the move will make money,
rather than on what's best for education.
"From my perspective, I would think it's too bad the faculty even have to think
about the money," said Phyllis Newman, chief financial officer in the College of
Arts and Science at Ohio State University. "I prefer the faculty to think about
what's a good education."
One common concern about this approach is that it could cause colleges to
create easy courses to attract more students, or create courses, such as a
French conversation class in a business school that only focuses on language
and not on the culture, that will steal students from the French department, said
John Griffith, the former assistant vice president for finance at the University of
New Hampshire.
"The university could decide we want to dumb down our programs (to) get more
students," Griffith said, adding that that did not happen at the University of New
Hampshire. "What you need is a central governance to say, 'There is a greater
good here.' "
Students pledge vigilance
Students and faculty at ISU said they would watch closely to protect against the
erosion of academic quality in light of a new approach to the university's budget.
"Students don't want to hurt the academic reputation Iowa State has," said Jason
Carroll, a graduate student in civil engineering and a member of the university's
student body government. "We would never want to create easier classes so
more students would take them."
Gregory Palermo, an ISU professor of architecture who is the president of the
Faculty Senate, said there would be "much greater scrutiny to new programs or
new courses" under the budget model.
In the past, Faculty Senate committees reviewed new courses and based
questions on academics, he said.
"Now we say, 'What's the impact on other divisions of ISU?' " Palermo said.
New method could help ISU reach goals
The proposed new budget approach at Iowa State University could help the
university increase its enrollment and the amount of money made from research,
according to a report released by the budget committee in June. If successful, it
should also help the university make progress on its strategic plan, a document
that outlines the university's goals; offer better quality academic programs; have
enough money to pay for new programs or course offerings; and reward quality.
ENROLLMENT: In the fall semester of 2002, 27,898 students were enrolled at
ISU, compared with 25,741 enrolled last fall. Numbers for this semester will not
be complete until the 10th day of classes. By 2010, planners expect 26,000
students to be enrolled at ISU.
RESEARCH: This year was the first in seven years that ISU did not break its own
record for outside funding. ISU brought in $280 million in grants, contracts and
cooperative agreements. The University of Iowa was the only public university in
Iowa to see an increase in grants and contracts for fiscal year 2006. ISU Vice
Provost for Research John Brighton said he believes the proposed budget model
would motivate faculty members to bring in more research money, because
under the proposal, they would keep more of it themselves, rather than funnel
parts of it to the university's central fund, which is what happens now.
REWARD QUALITY AND NEW COURSES: The proposed budget model creates
an Institutional Excellence Fund, which is designed to pay for new, "cutting edge"
proposals. It could also involve using money for faculty retention or to bolster
emerging strengths at ISU. The fund would not be a mechanism to save
colleges, units or classes that have lost enrollment or money because of the new
budget model, committee members said.
WHO ELSE IS DOING IT: Many private universities operate their budgets similar
to what ISU leaders are considering. Public universities started to mimic the
approach in the 1970s. Over the next three decades, the model spread to several
universities, including some in Illinois, Michigan, Minnesota and California. A
1997 survey by the National Association of College and University Business
Officers shows that at that time, 16 percent of public universities and 31 percent
of private universities were using a budget philosophy similar to what ISU is
considering.
Looking ahead
SUMMER/FALL OF 2006: Test the budget model to see how much money
different colleges would receive.
FALL 2006: University community reviews the budget model.
SPRING 2007: ISU president will decide whether to adopt the new approach or
make refinements. When that decision is made, the Iowa Board of Regents will
vote on whether to approve the changes.
FISCAL YEAR 2007-08: Make final refinements; develop the fiscal 2008-09
budget using the new approach.
FISCAL YEAR 2008-09: New budget model expected to be fully operational.
'Responsible’ budgeting
THE PROPOSAL: The proposed ISU budget model funnels money to colleges
that generate money and assigns costs to units that incur expenses — both as a
result of decisions the colleges make and as a share of the administrative and
other support costs from which they benefit.
CURRENT METHOD: ISU doles out money in lump sums. Units are not
responsible for expenses such as the cost of office space and how office space
is used. Also, more money generated from grants goes to the general fund —
rather than the researcher — than under the proposed budget model.
COST TO STUDY: There will be training costs in addition to the costs to study
the budget model, ISU staff members said. ISU paid $25,000 for the consulting
services of Huron Consulting for its work on the process to develop the proposed
budget model.