As I’m on the subject of finances and budgeting these days, I thought it a good time to bring up the topic of “responsibility-centred budgeting” (RCB). It’s a timely topic, given both this ludicrous article in the Edmonton Journal last week, and the fact that I have one loyal reader who’s been urging me to write about it for months now (Hi, Alan!).
Responsibility-centred budgeting basically says that units (usually faculties, occasionally departments) are responsible for raising their own funds and covering their own costs. If you use less space, you have more money for other things; if you teach more students, you’ll get more money. It’s a simple formula, and is very true to the medieval origins of the university, where professors were all required to set their own fees and collect their own money.
At this point in the discussion, everyone should quickly go and read Nick Rowe’s Confessions of a Central Planner, which is by far the best thing ever written in Canada on university management. There’s lots of good stuff in that piece, but pay particular attention to one specific point Rowe makes: universities, for the most part, get paid based on how many students they teach. Yet within most institutions, there is a Hobbesian war of all-against-all to get other people to teach students. This is because historically, in most institutions, the link between the number of students taught and the funding one receives is loose at best, non-existent at worst.
Some people – mainly those who literally have no clue about how universities are actually financed – abhor the idea of money following students within the institution. Often, they (and “they” are almost always profs in Arts) come up with scare stories about how money will all go to Science, Engineering, and Business. And while it’s certainly true that professional schools tend to be money-spinners, at most institutions the departments that do the most teaching – and hence, do the work to bring in money from tuition and operating grants – are frequently to be found in Arts (typically, English is one of them). Science and Engineering, despite being thought of as “big money” disciplines, tend to net out pretty even because they are also “big cost” disciplines.
The importance of RCB is mainly that it aligns incentives within institutions. When units are responsible for generating their income and covering their own costs, they tend to use fewer resources, and focus more on generating income. That’s good not just for bottom-line reasons, but also because it fundamentally changes an institution’s culture – from one where the (much-derided) central administration is a government to be lobbied for money, to one where everyone is involved in the search for revenue and efficiencies.
RCB is not quite as simple as it sounds – for it to work, each faculty needs some kind of staff able to do sophisticated budgeting and course development, and that won’t work at smaller institutions. There still needs to be central oversight to ensure departments don’t go hogwild hiring tenure-track staff on the basis of short-term profits, or start gaming the system of pre-requisites and required courses in order to screw cognate disciplines. And there’s still a role for central admin to play in redistributing some money to disciplines that could never make it on their own (mostly Fine Arts).
It’s not a panacea, of course, and there are ways it can be misused. But on the whole, RCB is proving to be an important tool for Canadian universities to deal with their shift to being more tuition-reliant.