New budget policy adds up for some, not others

Joe Carlson

Ten months after the Board of Regents passed a far-reaching policy creating incentives for better education, most agree on at least one thing the policy has fostered: confusion.
Heralded as one of the best and worst things to come down the pipe from central administration in years, Incentives for Managed Growth is a policy designed to merge academic and financial values. The policy reduces under-enrolled classes by rewarding those that attract more students.
Although it has had nearly a year to flourish in the petri dish of University administration, questions about potential drawbacks still remain.
Since its passage, the policy has been accused of hurting smaller colleges and interdisciplinary programs, giving incentives to corrupt academic values and slashing funding for central services such as the libraries.
Administrators still stand by the policy, saying much of the hype surrounding it is just that — hype. Although they admit the growth policy has problems, administrators say it provides for enough benefits to justify a few initial drawbacks.
“Some corollary of Murphy’s Law is that new systems will create new problems,” said Executive Vice President Robert Bruininks.
Although the ramifications of the policy are subtle and far-reaching, the basic IMG principle is relatively simple.
Distribution of tuition money should be based on class enrollment numbers rather than the political and somewhat arbitrary whims of administrators, as was the case before IMG.
The policy sets up a system where colleges directly receive 75 percent of the tuition money from students enrolled in classes offered by the college’s departments. The other 25 percent of the tuition goes to the college that the student calls home.
In theory, the system encourages colleges to offer more popular and required classes in addition to rewarding successful new ventures. The policy forces colleges to streamline their course offerings by not granting financial rewards to classes with few students.
For instance, rather than giving $40,000 dollars to four under-enrolled classes, the policy encourages the deans to hand out $80,000 to two popular classes.
It’s a utilitarian approach to higher education. Some have argued it’s just another example of the increasing “corporatization” of the University. Administrators counter that good education can only happen when there is adequate funding, which sometimes requires difficult funding decisions.
“Let us realize that, like it or not, the University doesn’t run on values or love; it runs on money,” said Jim Infante, one of the administrators who was involved in the initial planning of the policy.

When University President Mark Yudof spoke about IMG as part of a presentation to the Board of Regents in early April, administrators said they listened with great attention. For some, it was the first time the policy made sense since it was initially proposed more than six years ago.
“I don’t know if the board understood the IMG process until today,” said Regents Chairman William Hogan III at the April meeting.
Few have been able to completely comprehend the policy since it was first investigated at the beginning of former University President Nils Hasselmo’s term.
Richard Pfutzenreuter, associate vice president in the Office of Budget and Finance, said he first heard of the policy when he was hired in 1992. At that time, a handful of key administrators were investigating different budgeting systems at other universities such as Michigan and Indiana.
“They handed me that in 1992 and said, This is where we want to go,'” he said.
Six years later, the University is finally there. But in today’s legislative context, when the state is showing a greater willingness to fund higher education, a budget-trimming policy like IMG might seem a bit out of place.
Incentives for Managed Growth is a descendent of Responsibility Center Management, a policy considered at the University in the mid-’90s to help make difficult budget-cutting decisions.
The idea of a more financially accountable education was conceived at the University during a period of “restricted income,” said Infante, former vice president for academic affairs.
Infante said central administrators knew at the time that less funding from the state meant some programs would have to go. The only question was which departments.
“We thought that decisions should be made at the level where the best information is held,” which was inside the colleges themselves, Infante said.
Therefore, he helped plan a policy that would make those unpopular decisions by itself: Under RCM, programs that couldn’t support themselves through tuition would become vulnerable to budget cuts within colleges.
The original policy was never passed by the regents, however, in part because it was too harsh and made colleges accountable for not just revenues but costs, Pfutzenreuter said.

The University College factor
For all the brouhaha surrounding the policy, its initial effects have been relatively mild.
“IMG is just basically an accounting system, and big things are not driven by accounting systems,” said Ann Waltner, associate dean of programs in the College of Liberal Arts.
The full effects of the policy won’t be evident for years, as the incentives slowly begin to affect managed growth.
However, IMG is making waves in Wesbrook Hall, where University College Dean Hal Miller is looking at a $2.6 million hole in the college’s budget for the next fiscal year. The shortfall could mean as many as 20 pink slips for the college’s staff and faculty. University College offers night school classes for many nontraditional students.
Miller said he realized the policy’s implications long ago and has been planning for them.
“What we anticipated was that IMG would provide an incentive for colleges to do their own outreach education programs instead of relying on us to do it,” Miller said.
University College hires professors from other colleges such as CLA to teach night school courses that use much the same syllabi as day school classes. Now, IMG provides an incentive for CLA to offer the night school classes itself and collect the tuition money that would traditionally have gone to University College.
Miller said the incentive has hurt his college. But Fred Morrison, a law professor who is on the University Senate Committee for Finance and Planning, said the college’s predicament is not due to the policy, but rather coincidentally timed with the passage of the incentives policy.
“That’s not IMG … That’s a decision that came collaterally with IMG,” Morrison said. “That would have happened under any system.”
Either way, the controversy highlights one negative aspect of IMG that central administrators and college deans alike have been talking about since before the policy was passed. The incentive for competition between colleges — which has the potential to result in course duplication and isolation of schools — is a possibility everyone is trying to avoid.
In a short-sighted fiscal competition between colleges, the students will become the ultimate losers, said Mike Martin, dean of College of Agricultural, Food, and Environmental Sciences.
“This isn’t a widget factory,” he said. “Our bottom line is, if we don’t do quality teaching, no matter how we distribute the money, then we didn’t do a good job.”
Morrison said a curriculum review committee might start to monitor for dubious course offerings in the near future.

Hurting cooperation
Infante said he realized the decentralization strategy could potentially hurt University College. Another drawback he foresaw was the disincentive for interdisciplinary programs.
In its current incarnation, IMG encourages colleges to have students in as many classes as possible under their direct control. Colleges get 25 percent more in tuition money if students taking their classes are also majors. For example, CLA gets three-fourths of the tuition from an IT student taking an English course. But CLA collects the full tuition from an English major taking CLA English courses.
The colleges get three-fourths of the tuition money when students take the college’s courses. And the colleges get all the money if the students are also majoring in that college.
“It says, keep your students at home,” said Lauri Rockne, associate to the dean in the Hubert H. Humphrey Institute of Public Affairs. Rockne said she was concerned because the institute specializes in cross-disciplinary studies.
So far, it’s too early to tell if the policy is hurting the institute’s programs, Rockne said, although it does demand extra time and effort.
“It’s a piece of work to try to undo what IMG tries to do,” she said.
Tom Fisher, dean of the College of Architecture and Landscape Architecture, pointed out that the disincentive might actually benefit cross-college work in the long run.
Because college administrators have known for some time IMG’s effects, Fisher said they’ve been working hard to make sure interdisciplinary studies aren’t hurt. The disincentive has resulted in more communication, which has actually become a benefit.
Rosenstone concurred.
“Has it stopped interdisciplinary work? Absolutely not,” he said. “I think the surprise is, quite frankly, it’s the opposite.”
Another concern on the minds of college administrators like Miller is the funding of central services such as the libraries. There is a perception that all-campus services are going to suffer now that the money which formerly went to fund them is going directly to colleges.
That concern is a fallacy, though, because IMG only deals with certain pieces of the total budget, not the whole pie, Pfutzenreuter said.
“We’re a $1.6 billion operation,” he said, and IMG only decentralized $230 million in tuition and $50 million in other revenues, Pfutzenreuter said.
“I’ve heard that criticism continually and it’s just not a fact,” he said. “If the library is a value of the institution, it will get funded.”
Despite these concerns, administrators and college deans are hopeful for the policy. New solutions will arise to confront the problems that emerge as the policy becomes a more central part of decision making at the University.
Even Martin, one of the policy’s most vocal opponents when it was first proposed, said he sees the potential benefits with the policy.
“I’m prepared to be persuaded that this can work,” Martin said.
Bruininks said he’s not surprised the policy has drawbacks; the important thing is to concentrate on solving those problems.
“No system is going to be entirely perfect,” Bruininks said. “Every strategy people have tried is going to solve some problems and create others.”