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Friday, December 19, 2014

New decentralized budget management model aiming to increase University departments’ efficiency may be in UNM’s future

news@dailylobo.com

The University is seeking a new academic budgeting model after three years of unsuccessfully trying to manage the shrinking budget.

UNM President Robert Frank said the model is called Responsibility Center Management, which would decentralize academic budget management. He said that through RCM, the University’s individual colleges will be able to manage their own revenues and expenses by themselves. This will make budgeting processes clearer, he said.

“In general, RCM models are considered to be healthier models because they put more control at the operations level,” he said. “It allows the University to rebase its budget in a way that it clarifies expenses and costs as we go forward.”

According to a video on the UNM website, RCM functions through performance-based budgeting, which gives incentives to departments that pull in the most revenue and exhibit more student success.

Departments earn more revenue through research programs that obtain grants from outside sources and developing colleges that maintain high retention and graduation rates. Faculty members who are determined to be more efficient are also awarded higher salaries. But according to the video, UNM is still working on an objective method of assessing efficiency, which is an abstract concept.

Frank said at the moment the University uses an Incremental Historic Budgeting model, which determines department funding based on what departments received in the past. He said that with this model, departments submit requests for budget changes to the provost and in turn the University decides whether to approve the changes. Instead of rewarding efficient departments, the model simply maintains the current division of funds but with a smaller budget.

“About three years ago, we had to make cuts,” he said. “Since then, all units have shrunk and each year that shrunken budget stayed in place.”

On the other hand, Frank said the RCM model will make it clear for the University which departments bring in the most money. He said that the model may consequently bring more revenue into UNM.

“When budgets line up with what you expect of your operations, it creates clarity of expectations,” he said. “Most universities that have switched to this have found that they find increases in revenues. All the boats rise because there is a common focus for the entire enterprise.”

Frank said the Legislative Finance Committee evaluated UNM’s and NMSU’s budgeting models two years ago, and recommended that both universities use the RCM model of budgeting. Frank then assigned UNM Vice President David Harris and Provost Chaouki Abdallah to gather a work group to conduct the planning process for RCM.

Abdallah said they assembled a planning committee in the fall, and the committee has been meeting regularly. It has been looking at how RCM has been implemented in other universities nationwide, such as in the University of Minnesota and the University of Michigan.

Abdallah said that because RCM provides an accurate picture of a university’s revenues and expenses, it will increase transparency throughout the institution. But he said the model has given rise to problems in other universities, such as inefficient use of resources and weakened interdisciplinary programs.

“Universities, such as the University of Michigan, have been able to weather downturns in their funding,” he said. “But I have to stress that any budget model, if not managed properly, will have drawbacks and become open to abuses.”

Abdallah said that because he and his colleagues will still have to conduct further research on RCM, UNM will keep its current model for at least another year.

In 2009, Frank helped implement the RCM budget model at Kent State University, where he previously served as provost and senior vice president for academic affairs. Kent State is still using the model.

According to an article published in the Daily Kent Stater on Oct. 22, RCM increased revenue brought in by the arts and sciences, business and technology departments in 2012. But the budget model critically decreased revenue brought in by departments such as public health and education, and health and human services. This decrease allegedly reflects the departments’ inefficiencies and where they need to improve.

Kent State University Provost Todd Diacon told the Stater that RCM enabled colleges to manage their own revenue and expenses more freely. Diacon said the model has been warmly received by the departments and that RCM has been successfully implemented.

“I think you’d be hard-pressed to find anyone that would say, in central administration, that the colleges haven’t done a good job managing RCM,” Diacon told the Stater.