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Fund for the Improvement of Postsecondary Education Association for the Study of Higher Education *Budgeting

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Fund for the Improvement of Postsecondary Education Association for the Study of Higher Education *Budgeting DOCUMENT RESUME ED 245 602 2E 017 327 AUTHOR Van de Water, Gordon TITLE Theoretical Perspectives on Budget Reform. ASHE 1984 Annual Meeting Paper. INSTITUTION AVA, Inc., Denver, CO. SPONS AGENCY Education Commission of the States, Denver, Colo.; Fund for the Improvement of Postsecondary Education (ED), Washington, DC. PUB DATE Mar 84 NOTE 26p.; Paper presented at the Annual Meeting of the Association for the Study of Higher Education (Chicago, IL, March 12-14, 1984). PUB TYPE Reports Descriptive (141) Speeches/Conference Papers (150) EDRS PRICE MF01/PCO2 Plus Postage. DESCRIPTORS *Budgeting; Case Studies; Decision Making; *Financial Policy; Financial Problems; Governance; Governing Boards; *Government School Relationship; *Higher Education; *Institutional Autonomy; Public Policy; *State Colleges IDENTIFIERS *ASHE Annual Meeting; Colorado; Minnesota ABSTRACT Two case studies of states that illustrate innovations in higher education budgeting are presented, based on a project of the Education Commission of the States. The two states, Colorado and Minnesota, took different approaches. In Colorado, the impetus for change came from key legislative members interested in providing greater autonomy to the higher education governing boards. Five key conditions provided the impetus for change: legislative leadership, governing board readiness, fiscal austerity, the presence of a mediator, and the success of more modest changes. The governing boards were given greater financial autonomy and responsibility for conducting their own business affairs. In Minnesota, the state coordinating board realized that the incremental approach appropriate in a growth environment was not well suited to an era of fiscal constraint. The board initiated a study of new approaches to budgeting and tapped a reservoir of support in the governor's office, legislature, and among the institutions. The results in both cases were similar: greater decision-making authority forthose with more direct responsibility for running the institutions. (SW) *********************************************************************** * ReproductioAs supplied by EDRS are the best that can be made * * from the original document. * ************************************************/.********************** Theoretical Perspectives on Budget Reform Gordon Van de Water* March 1984 Prepared for the Association for the Study of Higher Education 1984 Annual Meeting Chicago, IL Mach 12-14, 1984 *Dr. Van deWater is a partner in the firm Augenblick, Van de Water & Associates,".0. Box 20276, Denver, CO 80220 U.S. DEPARTMENT OF EDUCATION NATIONAL INSTITUTE OF EDUCATION "PERMISSION TOREPRODUCE THIS EDUCATIONAL RESOURCES INFORMATION MATERIAL HASBEEN GRANTED BY CENTER (ERIC) 4 (-141-11ocument has been reproduced as received from the person or organization originating it. Minor changes have been made to improve reproduction quality. Points of view or opinions stated in this docu TO THE EDUCATIONAL RESOURCES ment do not necessarily represent official NIE INFORMATION CENTER (ERIC)." Position or policy. 2 Association for the Study of HigherEducation The George Washington University /Ono Dupont Circle, Suite 630/Washington,D.C. 20036 (202) 296-2597 This paper was presented at the Annual Meeting of the Association for the Study of Higher Education held at the Conrad Hilton Hotel in Chicago, Illinois, March 12-14, 1984. This paper was reviewed by ASHE and was judged to be of high quality and of interest to others concerned with the research of higher education. It has therefore been selected to be included in the ERIC conection of ASHE conference papers. Annual MeetingMarch 12-14, 1984Conrad Hilton Chicago, Illinois Theoretical Perspective on Budget Reform Introduction My assignment today is to report on a project of theEducation Commission of the States that seeks toidentify and analyze innovations in higher education budgeting, particularly those aimed atproviding greater 1 managerial flexibility in the use of scarcepublic resouEces. A companion project, under the direction of John Folger atVanderbilt University, focuses Fund for the on budgeting, for quality. Both projects are funded by the Improvement of rostsecondary Education (FIPSE). One goal ofthe joint bring projects is to highlight' innovativepractices around the country and them to the attention of the state level policvmakers inthe form of a catalog that will be simple to read,brief in its descriptions, andlist contact points for getting more detailedinformation. Through this device we effort for hope to speed up the disseminationof new ideas and save time and busy policy leaders. 1. My firm, Augenblick, Van de Water & Associates(AVA), is completing the work on this project through asub-contract with ECS. - 1 - Theoreti r ,l Perspertives While not designed to support or disprove anytheoretical position, this work is compatible with what. Richard Elmore calls the programmaticview of policy implementation.' Elmore argues that in a programmatic approach the instead of hierarchical control," and focus is ". on delegated control the important issue is not compliance but the capacity todeliver a service.- Translated to the budget process, we could all cite numeroushorror stories about the bureaucratic bungling resulting from state level regulations and controls designed to produce compliance(for example, pre-audits, line item controls, hiring lists, purchasing restrictions and the like). The complexity of such controls - blizzards of paper,layers of sign-offs, and unwarranted delays in decisions absorbs substantial resources and diverts attention fro:7 the real work of a univcrsity. "Professor Elmore presents the thesis the traditional attempts to control the system from the top down may well be part of te problem. He maintains that influence can come only if policymakers recognizethat the most important part of implementationtakes place at the bottom of the system, not at the top. The more control exerted at the top, theless likely the desivd results at the bottom, where the client is." 2. Richard F. Elmore, Complexity and Control: What Legislatorsand Administrators Can Do About Implementing Public Policy,National Institute of Education, 1980. 3. Ibid., p. 7 4. Ibid., p. v. f,1( 11ennot t , 1',1:11 .1110 (iii 'Atitt !--:ewit or ,Inmet; A. impre: it vt...cornii?(.. the 1iffri of itt rument , conc. 1 wle:;, "Policynkikert-; nioywell need to control theyhaveover the system and delegate moreof that control to the r". people delivering the services."' In this case the system is public higher education, the peopleproviding the services are institutionalfaculty and administrators, and theinstrument of control is the budget. As we gathered case material for this project, it became clear that many state level policymakers werenot only interested in the kind of approach Dick Elmore espouses but were in facttaking concrete steps to change the way budgeting iscarried out by pushing decision making authority down closer to the user level. This is, incidentally, not a new idea. My favorite advocate of this approach in the business world is Robert Townsend, who writes:"All decisions should be made as low as possible in theorganization. The Charge of the Light Brigade was ordered by an officer who wasn't Therelooking at the n6 territory. This morning J want to share with you two cases where stateshave recently moved in this direction. The two states, Colorado and Minnesota, took different approaches. In Colorado, the impetus for change came irom key legiSlative members interested in providing greaterautonomy to the higher education governing boards. In Minnesota, the state coordinating board 5. Ibid., p. vi. 6. Robert Townsend, Up the Organization,1970, p. 27. 3 CHVil(iNMCHt teali,,e0 that tiu HI( appionch appropriate in N The hoard init i nt ed it was not we.] 1 stt i t ed t o 1111 era ()I I I se a1 c onst rll.l nt . of support in the study ofi.ew approaches tobudgeting and tapped a reservoir governor's ottire, legislature, and among the intitutions. The results in authority for the those both cases were similar greater derision making with more direct responsibility tor. running the institutions. The Colorado Case Colorado, once a state with considererJedetailed budgetary control by t'Jv le4cslature, has become, through action of thelegislature's Joint Budget public higher Committ.,e, a state that p: oxide extensive fiscal autonomy to educc-1, co Aming boarls. This case is a grcd example of a mixed strategy lea -,s toward tiei ree market app] )ach. The Prohdem Until three or four years ago, Colorado legislativeinvolvement in determining the details of the stateappropriation for higher educationhad been high. Almost a decade ago, the legislature disapprovedcertain actions of one by institution presidents and attemptcd,primarily through the efforts 7. Condensed from "Providing Public Colleges andUniversities More Fiscal Commission Autonomy: The Experience inColorado" by William Hyde, Education of the States, March 1987'. - 4 -- I W., cnutreI of I he II:1 .1110 into I v in es i !; Iiittit, hiflit Iit III CO Ilk PI c dela i 1 blItH`l I I Ile iI HMI by p 1 ni 114',C(111;;I rtt i nl ittheW HMI V,111'11 TIll';';e prov i!; iew were i nceriiernred i nt n t hi c I were t(1bi :1)0111.. iwpropriotiom; act. by fiscal 19H1-8, the Act specified some 5"i iin it mis in the budget for campuses; general funds reverted to the state titthe end of the year; savings were subject to rescission; no institutional governing, hoard had authority to transfer funds among line items without
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