Responsibility-Center Budgeting

History Of RCB

Originated by Harvard's President, James Conant as cost center budgeting.

"Every tub stands on its own bottom, each dean balances his own budget"-James Conant

Responsibility Center Budget had only been implemented in private Universities such as Cornell University, Harvard University, Johns Hopkins University, University of Miami, University of Southern California, University of Pennsylvania, Vanderbilt University, and Washington University.

In 1989 Thomas Ehrlich became president of Indiana University, he was the former provost at University of Pennsylvania...he implemented Responsibility Centered Budget in the public sector. To this day Indiana is the only major research university using this model.

What is Responsibility Centered Budgeting?

• Colleges and Schools within a university are responsible for their revenues and expenditures.
• The individual units will keep most of the money they bring in and pay for incurred expenses.
• This type of system will motivate the college and schools as well as faculty to develop new programs, classes and research to attract students and draw more revenue in the form of tuition, grants and research funding.
• The schools will get to keep the money which is generated and can be reinvested.
• Units are "charged" for faculty salaries, utilities and building operations and maintenance.
• Central administration charges for support services such as information technology and student affairs.

Responsibility Centered Budgeting

Arguments Against Responsibility

Center Budgeting

Presented By:

Carol Kamen-Kannel

Lauren Napolitano

Nicole Cea

•Difficult to apply

•Difficult to categorize units

•Difficult to keep things equitable

•Don’t have resources to calculate for allocation

•Encourages institutional politics

Final Thoughts

If we were taking the argument from the Engineering perspective, it would be beneficial to use this budgeting model.

However, at a large research university, not all programs would be able to be self sustaining on their own therefore making this budget model insufficient.

References

Paulsen, M., & Smart, J. (2001). The finance of higher education:

Theory, research, policy & practice. New York: Agathon Press.

Arguments From a Humanities Standpoint

Dubeck, L. W. (1997). Beware higher ed’s newest budget twist. Thought and

Action, 12, 81-91.

Watson, R. N. (2010). Humanities really do produce a profit. Chronicle of

Higher Education, Retrieved from http://chronicle.com/article/The-Humanities-Really-Do/64740/

• Anecdotal example of Indiana University (Dubeck, 1997):
• At Indiana University, the fierce inter-college competition led to a plunge in enrollments in the core courses taught by the College of Arts and Sciences
• Humanities departments usually smaller enrollment but still require a large amount of funding support services
• The belief that other departments subsidize humanities is false
• Example of UCLA in the 1990’s (Watson, 2010)

RCB was ultimately abandoned

• Overall, it does not make sense to utilize RCB
• Especially true from a humanities standpoint as it adds complications that could be avoided by utilizing a different budget plan

Arguments Against Responsibility Center Budgeting Continued

•Academic programs may lose sight of educational mission

•Academic programs may offer unnecessary courses to generate enrollment, therefore generating income

•Decentralization allows for inconsistency and confusion throughout university

•Pointless additional program fees may be added

•Increases in each college’s share of the state appropriation may also be tied to enrollments