Sunday, February 05, 2012

Budgeting in Higher Education

For this reflection, I am going to concentrate on two chapters from a 2001 ASHE Reader on finance in higher education. This will include Chapter 35 (Schmidtlein, 2001) and Chapter 36 (Brinkman and Morgan, 2001). I found both of these chapters to be insightful readings.


Schmidtlein (2001) had the most insightful of the two chapters by often stating the obvious in very well constructed sentences. His chapter examined the issue of why it is so hard to actually link budgets in higher education to planning. One of the reasons that Schmidtlein noted was that it is difficult to predict the future of higher education in the first place. Since predictions are hard, making a budget to fit the future may prove to be futile.

Schmidtlein (2001) made a reference to the Oracle at Delphi as an example of how people have tried to explore the future for planning purposes. Although he does not develop this idea, I think it is an excellent example. The many women who served as the Pythia at the Oracle showed cleverness in predicting the future. It appears they really did not know either so they couched their prophecies in ways that could be later validated regardless of what happened. In 560 BC, Croesus of Lydia asked the Pythia if he should invade Persia. He was told, "After crossing the Halys, Croesus will destroy a great empire." He thought this meant he would win. Instead, he got beat and in the process destroyed his own empire. The Oracle had it right no matter what. As an oracle of higher education, I could make predictions such as, "Funding in the state will present many surprises for higher education this year" or "Seek the path of diversity in your institution and many rewards may be reaped." However, these statements would not actually help in planning a budget. Although I have exaggerated the oracle example here, I think it does illustrate how predicting the future can be tough and that Schmidtlein was right in his view that this is a reason why budgets do not always align with planning.

Another reason that Schmidtlein (2001) wrote was a problem for connecting planning to the budget was time. Higher education politics can be fierce. When planning is done, the politics continues. Those who lose in the planning stage tend to keep fighting looking for ways to reverse decisions and get more money despite what the original plan was. There is such a huge gap between when planning is done and when funds are dispersed that there are lots of opportunities to hijack the process and get funds reallocated in ways that did not fit the planning process.

Yet another problem in connecting budgets to planning is organizational attitudes toward budgets. Schmidtlein (2001) wrote, “Organizational units nearly always view planning as a means to enlarge their budgets, while central staff frequently seek reallocations and reductions” (p. 419). This belief is very evident in higher education. Departments always see the planning and budgeting process as a way to get more funds. The idea that funds may be shifted away to other areas of the institution is not received well. Almost every department on a campus has a list of projects they want funded in the future. No matter what the planning goals are, these departments recast their wish lists to appear to fit the new planning goals.

When departments on a campus do not get increases to fund wish list projects, they often get angry. Athletics is a frequent target of their anger. Many in academia are not supporters of athletics. Some are actively hostile towards the whole athletic endeavor. When these individuals see athletics getting more money, they imagine that this was at the expense of their departmental wish list. They the angrily complain that academics are not a priority on campus as they point their finger at the athletic department. It does not matter how badly athletics might have needed the money. The point to the department not getting more money is that they did not get more money. Athletics easily becomes a scapegoat and point of complaint for those frustrated with the budget process.

Schmidtlein (2001) also wrote, “Even in the best of times, organizations tend to view their budget base as a given and seek to confine discussions to requests for increases. Cutting budgets usually is a politically difficult task” (p. 420). I have certainly seen this is relation to the library acquisitions budget. Funds for purchases of books and periodicals are given to the library with a certain amount allocated to support every college on campus. The formula was set up decades ago and it no longer reflects changes in programs. Hence, some areas get more money than they needed and others do not get enough. Not surprisingly, those colleges which are overfunded in relation to others have fought tooth and nail to keep their allocation as is. Each college views their library acquisition fund as a given base that can only grow. To them, reductions in the amount are not acceptable under any circumstance.

I think this ties in well with Brinkman and Morgan (2001). The two wrote a very technical chapter that looked at many of the nuances of the budgeting process. In particular, they wrote about performance budgeting and responsibility center budgeting. I will admit that my eyes rolled into my head as I read this forcing me to have to reread passages several times. I believe this is important but it is also hard to get too excited about it. I know people who are excited about this stuff and I appreciate it. As a leader in higher education I plan on having people like this around me so I can rely on them for help with the importance of budget mechanics. Any library dean who does not follow the budget process closely is not going to do well…

One key point that Brinkman and Morgan (2001) wrote about was the trust factor of higher education. The authors referred to this as a trust market. They wrote, “higher education has been drawing down on what was once a large reservoir of trust” (p. 428). In essence, buyers are starting to doubt that higher education is worth the cost. Those losing trust include different levels of government, parents, and students. Reasons for this may include steadily rising tuition, seemingly politically motivated faculty at odds with most of the population, ineffective faculty and lack of proof for learning, etc. The constituents of higher education are skeptical of escalating costs.

Yet, Schmidtlein’s (2001) points about institutions believing their budget should only go up is relevant here. Central Michigan University is a good example. The institution lost millions of dollars in state funding over the last five years. Administrators on campus have kept track of this and call small increases from the states as a “restoration” rather than the increase that it is. Simply put, they feel entitled to whatever was the highest level of state funding in the past with growth to this expected each year. Higher education is not alone in this view in Michigan. The state prison system is complaining about coming cuts to their budget and the closing of a few prisons. However, the governor believes paroling non-violent offenders and elderly inmates can be done safely and save the state money. This makes sense to me but as it reduces the prison system budget it of course is opposed by the prison administrators and their allies in the state legislator. Yet the trust factor is in play here. The public no longer believes that giving more money to higher education or to prisons is necessarily in the states best interest. The trust factor for both is down.

Brinkman and Morgan (2001) also briefly touch upon the library in a resource center based budget system. Libraries do not quite fit the model. They wrote, “Additionally, in most RCB systems, the central administration of an institution oversees a taxing or subvention system where some activities such as libraries, judged to be valued but outside of proper market forces, are subsidized” (p. 429).


Works Cited

Brinkman, P. T., & Morgan, A. W. (2001). Changing fiscal strategies for planning. In J. Yeager, G. M. Nelson, E. A. Potter, J. C. Weidman, & T. G. Zullo (Eds.), ASHE reader on finance in higher education (pp. 425-436). Boston: Pearson Custom Publishing.

Schmidtlein, F. A. (2001). Why linking budgets to plans has proven difficult in higher education. In J. Yeager, G. M. Nelson, E. A. Potter, J. C. Weidman, & T. G. Zullo (Eds.), ASHE reader on finance in higher education (pp. 415-424). Boston: Pearson Custom Publishing.

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