Jeff Millman: Academics don't get fair shake in budget

As our peer universities are laying off employees and hemorrhaging endowment principles, Penn remarkably expects continued increases for its academic budget in the next fiscal year. But in a sluggish economy, the School of Arts and Sciences' capital needs, such as Bennett Hall renovations and construction on the Life Sciences Building, could remain disturbingly unfulfilled. Because universities are measured on the strength of their programs in liberal arts and sciences, Penn's process of tuition allocation among the schools is the wrong approach and may starve the heart of our "One University." Penn's tuition allocation function is a component of its innovative Responsibility-Centered Management style. This budget organization was established by former University President Martin Meyerson, who sought to make each of Penn's deans more aggressive fundraisers in the face of a University-wide financial catastrophe in 1970. At the time, Penn was heavily invested in the Pennsylvania Central Railroad, and its bankruptcy on June 21 sprung talk on campus that Penn should become a state school, like what happened to Temple and the University of Pittsburgh. RCM forced the faculty to face fiscal realities -- ultimately, it was the engine that drove Penn's recovery from near-ruin to today's improved, but still relatively modest, circumstances. RCM allocates tuition dollars, the largest of Penn's revenue sources, to each dean depending on the number of students who take classes in a given school. The de-emphasized central administration is allocated only 20 percent of tuition in addition to a small cut of grant money. Central funds support central administrative costs, shared University resources and the priorities of the Provost's Office. The problem is that Penn's core academic priority is not supported enough. When he instituted RCM, Meyerson envisioned large gifts to be given to the provost to balance budget inequities, but it did not turn out this way. Most gifts go to the schools, and each school keeps all the proceeds it generates from fundraising. Therefore, this budget system exacerbates the disparities in operating revenue between the rich schools, like Wharton, and the poor schools, like SAS. It has dramatized the central problem within this University -- the richness of one's education can vary so much despite uniformly lofty standards. For example: per student, Wharton's budget for Fiscal Year 2002 is twice that of SAS. English students would probably appreciate the flat-screen monitors and electronic blackboards -- let alone some air conditioning -- which are provided in abundance to the Wharton students. However, Penn's flat tax is fair. Wharton has more money in large part because its MBA students pay tuition; Penn's Ph.D. candidates receive stipends. But this fairness is certainly not progressive, and it creates broad problems. RCM has erected barriers to discourage interdisciplinary study. When students from one school take courses in another, the home school gets only 8 percent of the tuition. This has caused each school to offer fewer credits for courses taken outside of the home school. No surprise, but Wharton has clearly gamed this system. Right after RCM was instituted, Wharton created the OPIM Department, which offers courses that are very similar to those offered in the School of Engineering and Applied Science's Electrical Engineering and Computer Science Departments. By creating OPIM, Wharton retains the full 80 percent of the tuition for the subjects it requires its students to learn. Wharton Dean Patrick Harker said this was not the motivation behind OPIM's creation -- its goal was to use engineering and math skills toward a different business end. "It's these cracks in the field that leads to so much innovation," he says. But there's no denying that Wharton benefits from keeping its students in-house, and there's less tuition redistribution to the other schools. One could make the same argument with Legal Studies, as it seems that this subject could be taught in our very own Law School. Engineering clearly suffers from RCM. It not only loses tuition dollars due to Wharton's protectionism, but makes its students take required courses in the SAS Math and Physics departments, losing 92 percent of tuition for courses which Provost Robert Barchi says SEAS faculty "could teach tomorrow." The provost has tried to address these disparities and inefficiencies by giving more of the tuition dollars to the home school regardless of where its students take courses. However, flattening the Penn tax further will not cause these redundant departments to vanish because they're firmly established and are valuable in many ways. But since Wharton is a net-exporter of students and SAS is net-importer of students, this new plan will redistribute money away from the school that needs it more. Rich and strong Arts and Sciences programs enhance every school at Penn and its aggregate prestige. To support them, the budget should be more liquid, and the provost should control more of it. Because right now, even if he wanted to, it's very hard for him to make up the remaining fundraising gap for Bennett Hall. Jeff Millman is a senior Philosophy, Politics, and Economics major from Los Angeles, Calif.

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