Reilly: Indiana sets example

Kate Reilly

Kate ReillyOn July 1, 2014, the beginning of the new fiscal year, a decentralized budget model will be instituted at  Temple. The university will be introducing the new budget plan in hopes that controlling financial planning at school level will promote entrepreneurship, efficiency and sound educational choices.

But what exactly does that mean for Temple’s schools and students?

Decentralized budgeting is the distribution of funds directly to individual schools rather than through a university’s central power. When Temple implements this new budget, colleges will be responsible for how funds are spent.  In short, schools will run more like businesses, micromanaged by deans acting as CEOs. Students will be purchasing their education from these businesses like customers.  Only time can tell which “businesses” will be most popular with consumers, but predictions can be made about how this decentralized budget will affect Temple.

President Neil Theobald came to Temple after working as the senior vice president at Indiana University’s flagship school in Bloomington, Ind., a school that has followed a decentralized budget model since 1990.

According to Theobald’s biography on Temple’s website, he holds a professorship in education finance.

“His research interests in the appropriate role of decentralization in educational financing and in modeling educational labor markets are reflected in more than $1.5 million in funded research, numerous books and book chapters, dozens of articles published in professional journals and nearly 50 policy reports for various state governments,” the page reads.

However, Theobald did not take part in the planning of Temple’s new budget.

“The planning for Temple’s new budget came before President Theobald had become president of [the university],” Ray Betzner, Assistant Vice President of University Communications, said. Betzner said the school has been planning this budget for the past two years.

Temple looked to Indiana University, a leader in decentralized budgeting, during the research and planning process of the new model.

“[Indiana University] is viewed as the expert in [Responsibility Centered Management] budgeting, being that they are one of the schools who have been practicing this budget model the longest,” Ken Kaiser, Temple’s Interim Chief Finance Officer and Treasurer, said. “About 75 percent of our budget plan is very similar [to Indiana’s].”

In 1996, Indiana University released its first report on the effects the decentralized budget had on the school in the model’s first five years. The report recorded 12 positive and 13 negative perceptions of the budget. Some positive observations include: “Allowing schools a considerable degree of flexibility and independence,” “encouraging decision-making from the bottom up rather than from the top down,” and “increasing the responsiveness to students’ interests and concerns.”

On the flipside, some negative issues the report itemized were “failure to provide a ready method for controlling costs,” and “failure to respond to the quality of particular programs in any direct way.”

The main issue in the report came after allegations had been made that “quality had become a less important value in decision-making once the decentralized budget model was implemented.”

“Because ‘quality’ is a difficult concept to quantify, dealing with quality in an RCM environment – necessarily highly quantitative – can be difficult,” the report said. “As an important part of an environment conducive to high quality research, teaching and service, it is necessary to generate and maintain a sense of vision for the campus.”

It’s understandable for any new system to face problems when first implemented, but when Indiana released its most recent budget review in 2011, there were still more recommendations than successful results.

“IU seems to be moving in the direction of greater centralization, which threatens to erode RCM as a budgetary system,” the most recent report said. “The first point of tension is a perception that some university administration actions seek to direct how Bloomington schools operate. This approach is seen as being inconsistent with IU’s decentralized model.”

So, after years of practicing a decentralized budget model, some IU administrators are finding themselves stuck in their old ways.

“I would argue Indiana University is still tweaking things, but 75 percent [of its budget model] is working for the school,” Kaiser said.

“I’m [more than] hopeful,” he said. “I am confident this new budget will turn out well for Temple.”

That being said, the university must be wary of possible changes that must be made to the new budget plan, just like Indiana University has. While the administration has taken great strides to improve upon Indiana’s system, the main thing the Temple community can take away from these reports is that there will most likely be growing pains involved with the new budget, however major or minor they may be.

Kate Reilly can be reached at katherine.reilly@temple.edu.

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