Budget system to stay decentralized

Despite complaints from deans, "responsibility center budgeting" will not be replaced by a centralized system. The University's decentralized budgeting system will not be changed, despite complaints from deans that it discourages Penn's "one university" ideal. The system -- called "responsibility center budgeting" -- will nevertheless be examined this spring or next fall to determine whether other methods are available to reimburse individual schools for teaching students from other schools. The University's current budget system allows individual schools to control their own students' tuition dollars rather than receiving funds from the central administration. As a result, schools are required to transfer funds to any other school where their students take classes. At the same time, schools that borrow professors from other programs must contribute to their salaries. This practice has lead some deans to complain that there is a disincentive for their school to allow students to take classes in other schools or to borrow professors. Recently, Graduate School of Fine Arts Dean Gary Hack mentioned this budget system as a fundamental problem with the Fels Center of Government program -- which is currently under review -- since it inhibits the program's ability to attract students from other graduate programs. Hack said students from the Wharton School's graduate division, the School of Social Work and the Graduate School of Education would benefit from classes in government, while adding to the school's vitality and helping to alleviate shrinking attendance. But Deputy Provost Michael Wachter said the current budget system allows, rather than inhibits, study outside of students' home schools. If the schools did not receive compensation for teaching outside students, they would not allow those students in their classes due to the opportunity cost of letting in students without payment, Wachter said. "This system creates incentives for schools to develop cross-school programs," he added. "They couldn't afford to do it otherwise." Wachter said there are few barriers to students taking classes outside their school, adding that the restrictions that do exist -- such as the rule that College of Arts and Sciences students receive credit for only four outside classes -- are for academic, not financial, reasons. But School of Engineering and Applied Sciences Dean Gregory Farrington said responsibility center budgeting may create disincentives towards interdisciplinary study. "It can tend to discourage a school from having their students take courses outside the school," Farrington said. And School of Arts and Sciences Interim Dean Walter Wales concurred, explaining that the system is particularly harmful to undergraduates, who, unlike graduate students, are not studying specialized topics and often require a broad education. But Farrington added that despite such disincentives, a number of programs at the University require course work outside the home school. In Engineering, for example, over half of tuition credit is taken in other schools. Wachter said the current budgeting process is preferable to the alternative of a completely centralized system. "In a centralized system there is no incentive to schools to raise money because they can't keep it," Wachter said. He added that this system also discourages deans from making necessary budget cuts since they will not benefit from the savings. "The incentives to cut budgets are that if you as a dean take the hard steps to cut expenses you will get to use the money yourself," Wachter said. "Centralized budgeting takes that away." He added that many universities with centralized budgets simply rely on the same budget every year, since the center does not have as much information as the schools with regards to changing needs. This method causes stagnation in the budget process and a certain expectation from schools that they will receive at least the same funds as the year before, he said. And University President Judith Rodin said the University cannot abandon the current system for fear of plunging SAS into further debt. SAS -- which is projected to end the fiscal year with a $2.1 million deficit -- receives large tuition transfers from Wharton, SEAS and the Nursing School, whose students must take up to 50 percent of their classes in the College. But Wales said the system does not serve the needs of students. "The present system puts too much emphasis on financial resources and not enough on [the University's] educational responsibility," Wales said. He added, however, that the University has benefitted overall from decentralized budgeting. "We are much better off because of that system," Wales said. "It just does not work as well as it might where the undergraduate education is concerned."

Please note All comments are eligible for publication in The Daily Pennsylvanian.