Abstract: Budgeting Issues

Several factors (e.g., staffing reductions, new working environments, uncertainty about the future) have contributed to the era of reduced funding, making budgeting even more difficult.

Rising Cost of Education

Deferred Maintenance. In the mid-1980s, the public began to hear about the impact of deferred maintenance (an urgent need for repairs) at colleges, which have not budgeted for such needs. The value of a college’s facilities often exceeds the value of the college’s endowment. Setting aside sufficient funds to address deferred maintenance limits the funds available for other budget needs. Attempting to adequately budget for the campus deferred maintenance needs contributes to the rising cost of education.

Lattice and the Ratchet.  In  a  1990  Pew  Higher Education Research Policy Perspectives article, “The Lattice and the Ratchet,” a  broad  cross-section  of leaders described reasons for skyrocketing education costs and steps to develop a redesign framework. They attributed these costs in part to the administrative

lattice, the growth in  college  administrative  functions and personnel (more than 60 percent from 1975 to 1985) because of  administrative  entrepreneurism (organizations expanded to deliver more and better services, some previously provided by faculty), governmental regulations, and consensus management (increasing involvement  of  boards,  legislators,  and others in university committee decision-making structures). The panel cited the cost effects of the academic ratchet, as  some  former  faculty  functions were transferred to  administrators  because  of  changes in academic tasks (from all-purpose teacher, adviser, counselor, and job placement specialist to teacher, researcher, and consultant), professional pursuits (e.g., preferences for convenient class times and hours comparable to other department faculty, condensing hours to midday and increasing peak-hour space needs), and personal pursuits (e.g., individual research projects and consulting services,  which  now  are  essential revenue sources for some universities). The panel noted that without a commitment to  redesign,  schools  likely will assume that the incremental growth process can be reversed.  Faculty and administration can help rein in  costs by reviewing and justifying previous administrative growth;  simplifying  procedures  and  processes; redefining administrative organizations, authority, and tasks; and focusing on faculty structure simplifications.

Continued Pressures. In the 1990s, students, parents, trustees, and state and federal officials became increasingly dissatisfied with the cost of education.

Colleges and universities have been referred to as “vast empires of waste” because of factors such as  high salaries, faculty stars, poor curricula, and need for better administrators, leadership, and teachers. At the same time, state funding cutbacks resulted in faculty layoffs, purchasing reductions, and failure to update technology.

In a Policy Perspectives article, the concern was that dire higher education financial conditions would  not  get better until after 2010, in part because of revenue shortfalls, reduced federal funds,  declining  appreciation of endowments, and uncertain future enrollments. Also during the 1990s, corporations began to downsize and rightsize, becoming lean and mean to compete in the global market and putting many experienced employees out of work. “The Lattice and the Ratchet” was the first article to apply the same concept to colleges and universities.

Budget Process

Recognizing the ready availability of materials on budgeting techniques, this chapter notes that the zero- based budgeting process probably offers the best budget procedure before considering basic principles for budgeting in times of limited resources.

Think Strategically. The basic principle underlying budgeting is planning. Facilities planners must develop strategic department goals consistent with those of the institution, consider building and staffing needs and perform a building needs assessment if needed.

Be Creative. The best rule is to be creative before being forced to be reactive.

Be Flexible. Recognizing that conditions can change rapidly, different ways to accomplish the same tasks should be identified.

Adopt a Can-Do Attitude. Eliminating unnecessary tasks and prioritizing work are useful in overcoming the tendency to find reasons why work requests cannot be completed when working with fewer resources.

Use Team Approach. Managers cannot do it all and thus should apply total quality management principles, encourage employees to make their own decisions, and include employees in the budget process to capture ideas and enable them to understand and be more receptive to any needed changes.

You Are in Competition. The budget process has become competitive among departments, so submitted budgets must be well thought out and properly substantiated, with supporting materials as necessary.

Relationship to the Funding Authority. Budgetary competition means that a good relationship with funding decision-makers is important so that they have a clear sense of department needs.

Part of the Whole. Above all, managers must keep in mind that final decisions must be made in the best interests of the institution as a whole.