I would like to talk briefly today about efforts underway to improve the University's academic planning and budgeting function.
Our current goals can be summarized as:
Eventually we will look at updating and reforming Responsibility Center Budgeting to achieve the most effective allocation of financial resources.
The work that is furthest along--which was begun last year-- involves integrating the operating budget and the capital budget.
In speaking today I am reminded of a conversation that I had with my colleague Irving Kravis about ten years ago. Irv said that the great weakness of the University budgeting system was that we had no capital budget. He believed, I think correctly, that the University was making these decisions in an ad hoc way.
Investing in buildings is one of the major investments that the University makes. Our physical structures have enormous planning and budgetary implications for the schools. In constructing a building, a school is making an investment that will shape its future ability to support its research and teaching mission. If done wisely, it enables the school to improve its contribution to its mission. If done poorly, it forces future school deans and department chairs to spend time and energy attempting to get around the building's costs and program impact.
The new process, which was started last year, is being done in a way that meets the University Council's instruction that the Academic Planning and Budget Committee play a central role in the University's budgeting mechanisms.
Specifically, beginning last year, a subcommittee of AP&B was established to review the intended capital investments of all of the schools. This subcommittee reviews all of the school projects that are either over $250,000 or require University funding.
The subcommittee reviews all of the requests in terms of their contribution to the academic mission of the school and the University and the reliability of its funding mechanism. The subcommittee then reports back to AP&B, which then either approves the subcommittee's proposals or modifies them.
Among the projects discussed last year are the IAST, Perelman Quad, and continuing renovations in College Hall, and Logan Hall investments. There were also numerous smaller projects.
Under the current structure, the recommendations of AP&B then go to a Provost level committee called the Capital Planning Committee.
This committee is attended either by me as Deputy Provost or by Provost Chodorow. It also includes two faculty members of AP&B. This committee integrates academic side projects with those academic-support projects coming from the administrative side.
Its recommendations then go to the Capital Council, which is chaired by President Rodin. The final step, of course, is approval by the Board of Trustees.
There are two important features of this process:
First, it replaces an ad hoc process with a regularized process with clearly delineated responsibility--and a requirement to make sure that major capital investments do meet the academic priorities of the University.
Second, its work includes an integration of capital and operating budgets. Capital investments draw on University funds, and in doing so, restrict the operating flexibility of the schools and the University. Those restrictions must occur when the buildings meet the process, but they should be planned for and should contribute to the academic mission.
(To next page of reports.)
Tuesday, November 14, 1995
Volume 42 Number 12