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UNM President Robert Frank looks to change the University’s budget model to a system that would require each department to depend on the money it generates.
Frank said the model, which is called “Responsibility Center Management” (RCM), would change the way money is distributed throughout the University. He said that rather than money being allocated from a central source, schools and departments at the University, such as the College of Arts and Sciences, would use departmental revenue for funding.
“The way revenue is calculated, is it comes from the student credit hours. You get credit for how many student credit hours you create and you get credit for grants and contracts and tuitions. And then how much you have in, if you have endowments and gifts and other things that come in,” he said. “So that creates all of your revenue and then you also track what your costs are.”
Frank said departments would be responsible for funding departmental staff and faculty members and overhead for the University, which includes costs for departments that don’t generate revenue, such as the president’s office and the libraries.
Frank said the system is simpler than the current budget system in that the new system would track the revenue each department collects and spends. He said that it’s easy to forget how each department’s budget was calculated with the current system because funding is allocated for specific reasons, such as a new professor.
“Each year we put money in each place, and then over time we don’t remember why we’ve put all the money everywhere,” he said. “And then somebody comes forward and says ‘You know, we need a new Renaissance professor because we’ve always had a Renaissance professor and our Renaissance professor left last year,’ and so you’ve got a lot of complex relationship-based deals.”
Frank said the new system would align the University’s budget with the state’s model, which requires the University to keep track of student credit hours for funding in order to focus on student graduation rates.
“This model will focus on student credit hours, which are the intervening variable for students graduating,” he said. “So, this model focuses on students graduating just like the state does so they both push the incentives to the right place.”
Frank said the University will use the current budgeting system for the 2013-2014 school year, but will run a shadow RCM budget that will help the University understand how the new system would work.
“We’re going to run two sets of books. We’ll still run on the old book, but we’ll have the new model, and you can see if we were on this new model, this is how it would have looked it would look,” he said. “A pilot model, if you would.”
The Board of Regents would have to approve the new model for it to take effect.
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Frank said costs to implement the new system have not yet been determined, but that it would include education costs to teach University leaders how to use the system and software costs. But he said the new system should be easy to implement because the University’s data system for the departments is set up in a way that will transfer to the University’s accounting system well.
But the new system has caused some controversy because University leaders are unsure of how it will be implemented.
Faculty Senate President Amy Neel, who sits on the budget steering committee, said the committee has discussed how the system will work at the University. She said the system can be implemented in many different ways, which causes some concern since the exact method has not yet been decided.
“I think the thing that’s most worrisome to people right now is that we don’t know how it will work. We’re not even close to deciding how exactly it’s going to work,” she said. “And so that makes people nervous. Uncertainty and change make people nervous.”
Neel said the new system would focus on revenue-generating units but fail to look at efficiency and cost centers, such as the president’s office, human resources and Information Technologies.
She said part of the concern is that the new system may require that departments that generate more revenue help fund departments that generate less revenue.
“I think in general you can say that big undergraduate classes are going to probably bring in money because you’ve got maybe a part-time instructor or a teaching assistant teaching them for very low pay and they’re bringing in a lot of tuition dollars,” she said.
“And then thinking about graduate classes, we’ve got tenured professors and maybe associate or full-time professors teaching small numbers of students. And those are the kinds of courses that have to be subsidized by the big course, I think that’s the kind of thing we’re thinking about.”
Neel said that although there are concerns, the University would benefit from the new system because it will provide information that has never been available before, including information about which departments generate money and how much each department costs. She said it will also allow the University to understand how much non-revenue-generating departments cost.
Frank said the RCM system was used at two universities he has worked at before, including Kent State University, where he implemented the system as provost. He said people often become nervous.
“It’s a new system, everybody’s nervous, they’re all worried that they’re going to go broke or we’re going to lay off people. It’ll all work out,” he said. “We’re a university … we’re not going to stop teaching things we value.”
