Swarthmore, like virtually all American colleges and universities, is presently engaged in serious collective scrutiny of its spending habits. The hope in our case and many others is that small, incremental frugalities will head off any need for more drastic measures to control spending.
There are two big problems with this approach to cost control in a relatively decentralized academic institution.
The first is a lack of information about the importance or impact of any single change to spending. If you go to the often-considerable effort of changing a personal habit, you tend to get fairly immediate feedback in your own life routines or in your body about the positive consequences and whether those results justify the effort of maintaining a new routine.
Institutional budgets by contrast are opaque and they operate at annual or longer time cycles. It’s hard to know whether a change in practice is worth the trouble. It’s always easier to believe that difficult choices can be avoided by squeezing excess and waste out of existing spending, but sometimes that kind of cost-cutting just ends up imposing performative hassles and strictures on everyday business while the tough choices get deferred, and at no real savings. On the other hand, sometimes there are tons of little economies that are easy to achieve that add up to a structural solution to general budgetary woes.
What most people need in order to decide whether changes in habit are worth the trouble is a more transparent account of the savings derived from small changes in behavior in relationship to a total institutional budget and in relationship to the total range of costs and expenditures within that budget.
I’ll give a really trivial example here at Swarthmore to illustrate. I play tennis once or twice a week at Swarthmore’s indoor tennis court. There are three courts. In the past, when there’s only one group on a single court, the building staff have allowed the players to have one bank of lights on the adjacent courts on in addition to the lights over their own court. (This leaves two banks of lights on the adjacent courts dark.) Otherwise, with just the lights over a single court on, the visibility is relatively poor, the court fairly dark. It’s been decided that one austerity measure we can take is to turn off the one row of lights on the adjacent courts, leaving just the lights on over the one court.
This is a trivial sacrifice that I and I think all other tennis players are happy to make. It’s only a slight inconvenience to play with poorer visibility against the context of the luxury of having a court to play on at all. And yet, you can’t help but be curious about the exact savings involved. How much does it cost for those two extra rows of light for the 90-120 minutes of a game, and how often in an average week would the college be paying that cost? If it turned out that the total weekly savings was $25, and thus the annual savings was $1,300 (less a few weeks when the facility is closed or on highly restricted hours), well, is it worth it? How many $1,300 habits need to be given up before the savings start to matter against the current shortfall, and are there anywhere near that many habits of that kind? If the total weekly savings from this change was $100 or $500, that starts to feel psychologically substantive.
Of course, if the lights cost that much or more to operate, then that raises completely different budgetary questions. Are there cheaper lights? Maybe we should shut the indoor courts any time the weather outside is decent enough to play there. Maybe we should charge tennis players a small fee to offset the cost of the lights. Maybe we’d be better off allowing outsiders to play on the courts for a substantial membership fee (but one well short of the local competitors).
There’s a sweet spot of “This small change produces meaningful savings” between “This change is a hassle that saves us a handful of pennies” and “The significant budgetary impact of a small change reveals that the entire expenditure on some routine practice is insane and needs immediate review”.
Every single change of habit needs an informational feedback loop if it’s to take hold and make sense. Otherwise, it just disappears into a black box.
The second major issue is a classic game-theoretic problem. You have little motivation to change your own habitual practices if you get a sense that others are not doing (or being made to do) the same. If one unit in an institution gets with the new religion of austerity while another remains profligate and there are no consequences that follow to either, then the people who are careful spenders feel taken advantage of.
This problem is really exaggerated by an inclination in a lot of colleges and universities to take all disciplines and departments as entitled to the same dispensation of resources but also as subject to the same kinds of cost-cutting imperatives, a kind of faux-egalitarian rhetoric. So, for example, when administrations direct libraries to cut journals budgets, libraries often have to turn to departments and ask each of them to volunteer a few titles that they can get rid of, so that the cost-cutting seems to fall evenly on all, to be a collective responsibility. But if you did a relatively dispassionate cost/benefit analysis, you might note that you could cut three hugely expensive journals (usually but not always in the sciences) at the cost of thirty or forty journals in the humanities and social sciences.
Mostly academics avoid having that kind of conversation, where we have to ask what the relative worth of one important but expensive journal in one discipline is over ten such journals in another discipline. Instead we tend to say, “You tend to your knitting, and we’ll tend to ours; we’ll cut one journal and you cut one journal”. We don’t tend to want to talk about which disproportionately expensive projects or commitments are worth it and which aren’t worth it, because then we’d have to try and convert our divergent apples and oranges to some common fruit standard.
If you want people to economize, they have to know and see that everyone else is economizing, and they have to trust that the economizing is happening in a way that is proportional to the expenses involved in other units and divisions of the institution. No one wants to spend a lot of time scrimping and saving only to find that across the quad, the champagne and caviar is still flowing with cheerful abandon. No one wants to be told that they’ve got to cut ten percent of their budget when they’re already a bare-bones operation while another unit or department can get rid of ten percent just by cutting one of a number of luxurious expenditures.
(I’m leaving aside here the very different situation in large universities of divisions or schools that “sit on their own bottom”, that have completely separate streams of revenue that only barely intermingle with the general budget.)
So imposing austerity both equitably and rationally is sometimes not possible, and yet you have to persuade people that both principles are in play.
The way that budgets in most academic institutions work aggravates the problem still further. I’m not the only person who has been struck by the absolute absurdity of what often happens near the end of an annual budgetary cycle. If you’ve got a budget which has some fluctuations in how heavily it’s used from year to year, say a line item for speakers and events, you are often under serious pressure as the end of a budgetary year approaches to spend the whole thing down so that you don’t get an automatic cut on the grounds that you don’t need the budget. But if you used the whole of the budget in the two years previous, and ran out of the budget early in the year in the two years before that, cutting back in the one year you don’t use it is a totally counter-productive practice. The message that gets sent, in fact, is that saving money is not at all rewarded, that being a careful steward is punished. So you often see a big rush of unnecessary spending at the end of a budgetary cycle just to ensure that a line item gets brought to zero in order to avoid a permanent adjustment downward in that line item.
So if you want managers of departmental and divisional budgets to be good stewards of those funds, you have to assure them that everyone is being a good steward (or else) and you have to reward rather than punish units which manage to come in under budget for the year. Otherwise, the first person to cross the finish line in the savings race is just the first-prize chump.
In both cases, the first requirement for encouraging good decentralized management of budgets is information and transparency, down to a fairly fine-grained level of expenditure. It’s worth the squirming that this kind of transparency is likely to produce, at least if an institution is serious about producing distributed rather than centralized budgetary mindfulness, about making everyone feel responsibility for analyzing cost and benefit.
With regards to the mad rush of spending at the end of a budget year, I read about a university (in the South, I think, perhaps Tennessee) which dealt with a budget shortfall in part by changing the rules so budget surpluses at the department level would carry forward to future years. This is resulted in a few percent reduction in spending for that fiscal year.
One way to provide incentives for good stewardship is to push responsibilities and money down to lower levels, and then let these units keep at least a portion of any savings they get from improved stewardship. For instance, at my university we’re in the process of having departments pay for their own energy costs. A few years ago, energy was paid for at the level the statewide university system from a separate budget and so there was no incentive to conserve. Now it’s down to the level of the individual colleges on each campus, and already conservation measures are being taken (e.g. upgrading lighting fixtures) though, as you say, it’s not clear to me when a particular such measure is worthwhile.
The roll-over idea is a great one. I think the main reason that it makes budget directors uncomfortable is that it provides an incentive to pad your budget (but in my view, such incentives exist even without a roll-over) and it’s a tempting target for embezzlement or misuse (e.g., this is how you end up with slush funds). But seems to me you could solve the second problem just with some appropriate safeguards and reporting requirements.
I had a meager budget, especially compared to the $1.5 million budget I had in a corporate setting. I don’t even like managing my own personal money, so when I’m managing someone else’s, I’m quite careful. The first or second year of my tenure, I only spent half my budget. I thought it ridiculous to go out and spend the rest of it just because. When I asked about this, I was told the department could use it as we were over budget in some areas. I was happy to help, but a year or two later, people started filching from my budget. People came and said, you haven’t spent your money yet and we need more for x, so can we have it. That pissed me off, since in some years, I did spend all my budget and then some, when I replaced an entire lab of equipment. The last year I was there, after I’d had this happen to me a couple of times, I blew all my money at the end of the year on stuff we really didn’t need. Great lesson I learned, huh? I mentioned this a couple of times and yes, they talked about rolling over budgets, etc. I said I’d be happy with some kind of small token–a gift certificate or iPod perhaps, and recognition and some college wide meeting. But no, nothing was done.
At one point there was talk of making the budget more transparent, but that didn’t really happen. It sure would make things easier now if it were.
Great post.
Does Swarthmore make it easy for you (and others) to examine the budget? Williams makes it very hard for outsiders (read: non-administrators) to have any meaningful sense of where the money goes.
It’s not easy for me or anyone else to examine the fine-grained details of the budget on demand, e.g., if I suddenly decided I wanted to look at the spending of another academic unit in the college, I couldn’t. But on the other hand, faculty and staff do get a variety of looks at the more detailed side of the budget in the course of committee work, sometimes looking at quite specific (though often appropriately redacted) allocations. There’s also some effort to rotate faculty and staff through a major standing committee that meets on the budget every year, not so much because the faculty and staff on that committee have a lot of governance or authority over budgetary decisions through the committee but in order to increase literacy about the basic architecture of the budget.
Though I’m arguing for transparency in this post, I can see why it might be counterproductive to allow me (or any outsider) to look at the line-item specifics of spending. It’s a bit like the Golden Fleece awards phenomenon: sometimes Proxmire and his successors really get it right in picking out something that’s a waste of money, but sometimes they just read off the surface of a funding decision and decide it’s self-evidently silly without looking at what’s actually going on. Some of the most sober, mainstream sounding funding (at the federal level or inside a college or other institution) might be where the real waste or malfeasance lies, but if you’ll miss that if just rely on reading out from the paper record of a budget.
That said, I think a lot more sunshine would help for the reasons I lay out in this post. It’s a bit like the energy bills that are popping up in parts of the country where your own energy consumption gets compared, anonymously, to your neighbors. That’s a bit obnoxious, but if you want to people to adjust their usage, it helps them to know just how their usage compares to others. To use a local example, one part of our annual Honors examinations where we invite external examiners to evaluate our Honors students are departmental dinners the night before the exams conclude. The faculty has been asked to make sure that those dinners are kept relatively low-key and affordable this year–something we’ve been asked before, but the request has a new urgency this year. It wouldn’t be a bad thing after the expenses come in, every department got back a document that said something like, “Your department had average per capita expenses for your Honors dinner” or “You were the most expensive per capita department on campus for your Honors dinner”–something that gave you some information about where your financial behavior stood in relationship to everyone else.
Of course, the harder budget decision isn’t the dinners, but rather the discussion of the cost of the outside examiners, which much run into tht six figures. That’s a real sacred cow at Swarthmore and a budget discussion nobody wants to have.
Prof. Burke, could you put the the tennis court lighting discussion into some context. If that discussion occurred after many discussions of more substantive budget issues, then it would seem the deliberations are quite thorough. On the other hand, if that were discussed early on as the best cost-cutting idea anyone could think of, then…
Well, the costs of the entire Honors program were actually a huge subject of concern the last time there was a major campus review of the program (right about when I started at Swarthmore, so a while back). I don’t think faculty or administrators were reluctant to talk about the major costs, and some even argued it was one significant reason to just jettison the whole system. But a lot of alumni felt very passionately about the Honors program, as did many faculty. So supporting the costs of the program were a fairly significant part of the last major capital campaign the college embarked upon. I think there’s a lot to be said for not constantly revisiting a commitment like that every year even when money gets tight or priorities seem to shift, even if you yourself might argue for some other use for those resources.
The court lighting case is just an example of the kinds of savings that people are trying to come up with on a distributed basis. Since we try to decentralize at least some decision-making, that leaves a lot of units within the college trying to come up with something to offer back to senior staff as possible savings. So these mostly aren’t savings ideas that are coming down from a single centralized decision-maker, but ideas that are floating up in response to a centralized request that we all look for savings. Some comparable initiatives include cutting out coffee or food at some meetings, strong reminders to shut down computers after hours, requests that we draw our Honors examiners with a consciousness of the relative costs of travel, that sort of thing. But these aren’t substitutes for thinking about big-ticket shifts in the budget–as I understand it, there’s also a lot of thinking going about some of the bigger decisions too. Naturally that’s a big complicated when we’re transitioning from one president to another.
Thank you. That helps put the court lighting example into context.
I would hate to see the outside examiner’s program cut. In addition to being a significant contributor to what make Swarthmore Swarthmore academically, I believe that it has played a major role in marketing the College’s brand to the academic community. 75 years of enjoyable visits has surely provoked more than a bit of word of mouth.
I was simply using the program as an example of the kinds of hard cuts that are going to have to be discussed going forward.
The transition from President Bloom to President Chopp may also be a blessing. Both are obviously familiar with the limited options to cut big chunks of a college operating budget. There just aren’t that many choices. So Bloom can do a Rebecca Chopp a big favor by being the “bad guy” on a few tought cuts on his way out the door. Honestly, though, I expect the Swarthmore community to largely accept the concept of shared sacrifice.
I was all set to take issue with your post until I saw your followup from 3/11/09:9:23. There’s a huge difference between the whole faculty making decisions about the relative service priorities of the athletic center and the whole faculty examining the question of whether to save $22,000 by turning off this set of lights, and your latter post sees that.
You are right about the limitations of this kind of budgeting, which is why so many leaders find it easier to impose across-the-board cuts rather than go through the hard work of demonstrating that there are no free riders. If leaders do not enjoy the trust of their constituents — for good reasons or ill — they will take this route.
A good leader will celebrate the managers who economize successfully, and find ways to reward and punish people that go beyond use-it-or-lose-it budgeting. Good leadership of this kind is hard to find — especially when so many faculty decide that it’s beneath them to provide such leadership.