Faculty Forum Papers
"THE BUDGET ALLOCATION PROCESS AT OSU"
BY
M. Carlson, R. Frank, K. Moore, V. Tremblay, J. Young
February 1998
NOTE: Footnotes are noted in brackets. Footnotes appear at the bottom of the
appropriate page when printed out; however, for those of you who prefer not
to print out the paper, the footnotes are printed at the end of the document.
As members of a Budget Task Force for the College of Liberal Arts (CLA), we
have spent much of last and this academic year reviewing OSU's past and
current budget allocation process. Although we would like to commend the
Administration for working hard to increase student enrollment and to
improve the University's budget process, our work has revealed several
concerns.
This document describes these concerns and makes several suggestions to
further improve the budget allocation process at OSU. It is our hope that
this document will lead to continued public discussion about the internal
budget allocation process at OSU.
Before we begin, we would like to thank President Risser for taking the lead
in developing a new budget allocation model for Oregon's higher education
system, and we hope that our paper contributes to this discussion as it
applies to OSU.
I. The New Budget Approach at OSU
During the past year, the Administration has worked to develop a new
approach for allocating budgets within the University. Initially, the OSU
Administration considered using the Budget Allocation System (BAS Model), a
model developed by OSSHE to determine public college and university budgets
in Oregon[1].
Because of problems associated with the BAS Model, the Administration
developed a new budget approach, driven, at least in part, by student credit
hours (SCH). A major concern with this approach is that it potentially
ignores the cost side of SCH generation, and as a consequence, growth in
certain areas may actually reduce the economic viability of the University.
As is evident from the figures in Table 1, there is a wide discrepancy in
the cost effectiveness (i.e., profitability) among colleges [data sources
can be found in the College of Liberal Arts document, "CLA Task Force on
Budgets" (March 21, 1997)].
TABLE 1: Profit per SCH for 1993-94
College Profit or Loss/SCH
_______________________________
Agriculture -$26
Business 76
Engineering -50
Forestry 35
H&HP 95
Home Ec 69
Liberal Arts 124
Oceanography -942
Pharmacy -78
Science 78
Vet Med -2,567
While OSU is not a private institution driven by profits alone, and while
some colleges within OSU attract more outside funding that others, it is
nonetheless questionable fiscal policy to underfund those units that clearly
earn a profit from instruction. One could nonetheless argue that OSU will
ONLY be able to extract itself from its current fiscal difficulties by
redirecting more, not less, of its resources into those units that generate
profits for the institution, profits which in turn are needed to help
support the higher cost programs that traditionally have been prominent
features of the OSU curriculum.
II. Application of the New Budget Approach at OSU
An important concern involves the implementation of the budget allocation
process during our last set of budget cuts. According to an article in OSU
This Week, one third of the cut in a college's budget "was based on
enrollment trends" ("Enrollment History Tied to Budget Questions, OSU This
Week, March 6, 1997, p. 1). As a result, the College of Liberal Arts (CLA),
for example, received a substantial cut in budget because CLA saw a large
drop in student enrollment from 1990-1995.
The reason for concern with this explanation is that it is based on a very
limited sample of information about OSU's enrollment and budget histories.
To illustrate, consider the budget and enrollment data for a more extended
time period, 1982-95 for example, a period for which data are readily
available[2].
1. From 1982-95, overall OSU enrollment fell 15.5%. Of the largest
colleges CLA was the only one to see an enrollment increase of 2%.
Enrollments in agriculture fell 23.0%, engineering fell 23.1%, science fell
34.9%, and business fell 48.0%.
2. Although the Administration is correct to note that CLA enrollments
fell from 1990-95, the Administration fails to point out
that they rose dramatically from 1982-90 (51.4%). More importantly, CLA saw
no substantial budget (real dollar) increase from 1982-90. Yet, CLA's
1996-97 budget is cut dramatically because of the SCH decline since 1990.
3. The enrollment decline in CLA since 1990 is the direct result of
purposeful administrative cuts to popular programs (i.e., journalism
and broadcast media) in an effort to cover the budget shortfall created by
Measure 5. Thus, CLA budgets are cut twice: popular programs were
eliminated in CLA because of Measure 5, which resulted in declining SCH and
further budget cuts.
4. Enrollment declines have had no adverse effect on college budgets in the
past. For example, from 1982-95 engineering had a 23.1% decline inn
enrollment while its budget rose 66.9%, and business had a 48.0% decline in
enrollment while its budget rose 13.2%.
These examples illustrate that funding only follows SCH for CLA when SCH
fall. In any case, the Administration's position that declining enrollment
justifies a large budget cut to CLA relies on a very select sample of data.
This makes clear how important it is for any budget model to first
explicitly identify an equitable base budget or year from which to make
comparisons. Budget implications are quite different if one chooses 1982
instead of 1990 SCH from which to base budget cuts.
Finally, focusing primarily on SCH may create financial incentives that are
not always compatible with the fundamental goals of the University. For
example, such a model may encourage departments to duplicate courses in
other disciplines. Likewise, it may encourage an advisor in discipline X to
advise students into discipline X, regardless of whether or not this advice
is in the best interest of the student.
III. Inequalities Among Colleges at OSU
Although all units at OSU are poorly funded, we are concerned that there are
serious funding inequalities across colleges at OSU that are not being
addressed. Because of our recent work for the college, we focus on funding
inequities regarding CLA, but other colleges may be able to make similar
claims.
Our analysis demonstrates that although average OSU salaries are generally
comparable to salaries at peer institutions, CLA faculty have salaries far
below those of faculty members in like departments at peer institutions. The
average CLA faculty member earns barely three-quarters of what faculty earn
in the same field at peer institutions. To illustrate, Table 2 shows that
OSU salaries are generally on par with salaries at peer institutions[3].
Table 3 indicates that of all colleges at OSU, CLA average salaries are
lowest. More importantly, the "Salary Ratio" is far below that of any
college at OSU[4]. For example, these figures indicate that average CLA
salaries are only 77.6% of those from a national survey of faculty salaries
during the 1990-91 academic year.
TABLE 2: MEAN SALARIES AT OSU PEER INSTITUTIONS
(All Ranks, 1993-94)
Mean Salary
Peer Institutions (thousands)
__________________________________
UC-Davis 56.1
Arizona 53.7
Iowa St 53.4
Colorado St 51.7
N. Carolina St 50.5
OSU 47.5
Washington St 47.0
Oregon 45.9
Oklahoma St 44.9
Kansas St 44.0
Utah St 42.0
AVERAGE 48.8
TABLE 3: MEAN SALARIES AND SALARY RATIOS BY COLLEGE
College Mean Salary OK-State Salary
Survey (thousands)
Salary Ratio (1993-1994) (1990-1991)
________________________________________________________
Business 57.7 79.1
Engineering 60.6 84.9
Science 51.6 85.4
Vet Med 58.6 88.4
Pharmacy 50.5 89.1
Oceanography 55.1 90.6
Agriculture 49.7 98.5
Forestry 49.5 100.7
H&HP 46.1 102.3
Home Econ 48.7 103.8
Liberal Arts 43.8 77.6
AVERAGE 52.0 90.9
Again, more discussion about the budget process is in order, and we
recommend that the Administration establish a committee to address these
salary inequities across colleges at OSU.
Finally, it is clear that the Oregon economy is changing away from
traditional agricultural-extraction to high-tech industries. Thus, in order
for OSU to continue to be a major contributor to development of the state
and world economies, to provide a quality education in fields most relevant
to the 21st century, and to attract more students, OSU must invest more
heavily in the core areas of liberal arts and sciences-- a vision adopted by
all of the great land grant universities in the U.S[5].
IV. An Alternative Budget Allocation Model
As administrators ourselves, we are sympathetic to the problem of developing
a fair and rational budget allocation model. We also understand that it is
much easier to criticize than to suggest a practical alternative. As a
result, we have given this issue considerable thought and have designed an
alternative that we believe is worthy of consideration.
Our purpose was to develop a budget allocation model that is consistent with
the primary goals of the University. In our opinion, such a model should
better reflect market conditions, better serve the public by encouraging
units to become more competitive with like units at peer institutions, and
allow the Administration to help identify specific objectives for the
institution. This would require the following:
1. Identify a set of universities that OSU views as peers. Given the
unique nature of many programs at OSU, it might be more desirable to do this
by college or even by department. This would enable the Administration to
set priorities and allow for differences in mission and program type (i.e.,
undergraduate programs, graduate programs, extension, etc.).
2. By unit (college or department), compare performance with budgets.
This could include a comparison of SCH, faculty productivity (research,
teaching, and service), faculty salaries, faculty FTE, staff support, and
profits with those at peer institutions.
3. Fund each unit in a way that allows the unit to become competitive
with peers and is based upon the unit's long-run productivity and profit
levels relative to peers.
This model would better ensure the financial health of the institution by
paying more attention to profits (and not just SCH). In addition, it would
enable the Administration to clearly identify priority programs, since the
Administration would determine each unit's set of relevant peers. It would
also better reflect the market, as many faculty are concerned with working
conditions and salaries relative to peers. Finally, since budgets would be
tied to productivity (broadly defined), units would have an incentive to
better meet the broad range of goals of the University. This would
encourage all of us to improve the academic reputation of OSU.
Because a budget allocation model will have a lasting effect on the
reputation and future of OSU, we would encourage the Administration to
continue with its open discussion of OSU's budget process and address the
concerns we have outlined above.
[1] For a discussion of the benefits and costs of the BAS Model, see the
College of Liberal Arts, CLA Task Force on Budgets," March 21, 1997.
[2] See our memorandum (April 23, 1997) to Dean Schaffer, "Letter to
Editor of OSU This Week: 'Is Enrollment History Tied to College Budgets?"
for a more complete description of the data and their sources.
[3] The sample of OSU peer institutions are defined in the Oregon State
University Fact Book.
[4] The Salary Ratio measures the average salary by college at OSU
divided by the average salary by college at a broad-based national salary
survey compiled by the Oklahoma State University. (See the "Budget
Allocation System" document for details.)
[5] This will be especially important if the state decides to go forward
with discussed plans to undergo "a 'massive transformation' of Oregon's
higher-education system by putting the seven state campuses mostly on their
own to compete for students and dollars." (Charles E. Beggs, "Planned
Overhaul Stirs Waters," Gazette-Times, Corvallis, Oregon, December 9, 1997,
p.1)
Opinions expressed by authors of Faculty Forum articles are not necessarily
those of the OSU Faculty or Faculty Senate.
