Monday, October 20, 2008

 

"Find the Money in the Budget"

If you want to watch a dean's eyes roll back into her head, just ask for something and tell her to “find the money in the budget.”

I've heard this phrase dozens of times over the last several years, but it still strikes me as slightly odd. It gives the impression that funding new projects is a matter of looking for change between sofa cushions. And, in a way, it is.

Budgets are comprised of line items, each of which is supposed to be dedicated to a particular expenditure. Some of those commitments are 'hard,' and therefore inviolate: contractually-guaranteed salaries, matching funds for grants, utility payments. The rest are varying degrees of 'soft,' ranging from travel funding to office supplies to software training workshops. This isn't to say that they're unnecessary or frivolous, but that they're fungible; if needed, it's possible to move money from workshops to office supplies or vice versa. (The softest of all is the increasingly mythical “contingency” line, which is the “in case of emergency, break glass” line. In tight times, this is always the first to go. And you'd be surprised how many different ways people can define “emergency.”) “Finding the money in the budget” consists of deciding that you could probably take a given line a little lower without disaster striking, and using the proceeds to pay for something else.

From the outside, it's probably easy to imagine that 'soft' money is just sitting there for the taking, a slush fund to bankroll all manner of perfidy. But that's pretty much only true when there's a huge stinkin' pile of it. In fact, those 'soft' accounts are what we look to when people propose new projects, repairs, affiliations, accreditations, or whatever else wasn't planned over a year in advance. If we didn't have something soft, we couldn't respond to anything less than a year in advance. The server died yesterday? Can you wait a year?

When the cuts come, as they have, those soft accounts get hit first. That's not because they're flush, but because everything else requires more lead time. Over two-thirds of the college budget is personnel, most of whom are under annual (or lifetime) contract. That means that midyear cuts have to come from the remaining less-than-one-third, just by default. The trick, and it's a mean one, is in guesstimating just how low you can take each of those 'soft' lines without running aground by June.

(There's a great old Dilbert cartoon in which the boss asks for an itemized list of all unexpected expenses for the coming year, so he can budget for them. If only...)

Unexpected expenses happen. Yes, good management can usually discern reasonable ballpark figures for various things, but nobody is omniscient. Boilers die when they die, and any given winter can be snowier or less snowy than the one before it. On the personnel side, I don't know which professors will drop out sick this year, but I can bet that some will, and that we'll have to have money for long-term subs. And anybody who would care to share insights about the price of oil in the next six months is welcome to do so. (My guess is like the economist who was asked to predict interest rates over the next year: “I believe they will fluctuate.”)

Several years ago, Eric Klinenberg wrote a wonderful book about the 1995 heat wave in Chicago. Among the many points he made, he noted that part of the reason the city was so underprepared for the heat wave was that it had made so many cuts to so many “inefficiencies” over the years that there wasn't enough slack left in the budget for when something catastrophic happened. (The book came out before Katrina hit; reading it now, it seems prescient.) If the state wouldn't mess with our budget, we could leave enough 'soft' money to handle most reasonably-foreseeable disasters. When the state makes itself a disaster, we're really at the mercy of the fates.

Back before “Keynesianism” became a dirty word, some people grasped that when the economy implodes, the Feds should increase aid to states, specifically to prevent services from collapsing precisely when they're most needed. During recessions, the opportunity cost of education is unusually low; this is precisely the time to invest in it. There was once a time when policymakers grasped that. Perhaps soon they will again. Until then, I have to find some more money in the budget. Here's hoping for a mild winter...

Comments:
If I ran the country, there would be a financial mechanism where government agencies could sequester a given amount of money every year, in a sort of disaster escrow account. Something with an impartial, unelected governing board, which would release the money only in genuine crises. (I'd also see to it that if the account was properly "topped up", perhaps as judged by a fifteen-year rolling average of necessary crisis expenditures, additional funds would be returned to the taxpayers.)

As DD mentioned previously, often the only way to "save for" an emergency is to spend more than is needed most years, so you have painless cuts you can make if you need them. This is damned wasteful. I think it'd be much smarter to actually, you know, save the money in case you need it. That can be politically difficult, though, since it looks like the state is taxing away more revenues than it actually needs.

The thing that has me grumpy about things like Social Security is that the money I am being taxed as a way of "saving for my retirement" is being spent now. If I expect to actually get a check, it will have to be funded by new taxation. My idea would only work if the money really was stored separately, and could not be used to back other projects--a sort of financial strategic reserve.
 
"judged by a fifteen-year rolling average of necessary crisis expenditures"

Ahh....that would be a fifteen-year rolling maximum.
 
Don't worry - if Al Gore is right, you'll get those mild winters more and more over the next few decades or so.
 
Have you seen this: http://www.phdcomics.com/comics.php?f=1086, and if so, can you say something inflammatory about the comparative worth of football coaches and deans or professors? ...or WOMEN professors?
 
I get that interest rate question every year at budget time since certain fund types earn internal interest at my institution. The department working on their budget calls up and asks what the interest rate will be next year so they can budget the income, but we use a particular commercial interest rate to pay our internal interest so it fluctuates. I've just started saying, "It's X% right now and if I could accurately predict exactly what it's going to be next year, I wouldn't be working here."

-I'm accounting as fast as I can
 
That's why most companies require their employees or suppliers to liquidate expenses using contingency money. If not, then they totally cut contingencies off the budget. We can't blame them because unexpected expenses ARE unexpected, so some would rather spend the money on certain things than have it sit around. It's a matter of what you're willing to risk.
 
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