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thesis entitled

THE APPLICATION OF FORMULA AND COST ANALYSIS
PROCEDURES TO THE BUDGETING OF
ACADEMIC DEPARTMENTS

presented by

Douglas Allen Stuart

has been accepted towards fulfillment
of the requirements for

@sz f $444.51 "

Major professor

Date November 18, 1966

1
0-169

 

 

 

JUL 5-21». 9.2.003

/

THE APPLICATION OF FORMULA AND COST ANALYSIS
PROCEDURES TO THE BUDGETING OF

ACADEMIC DEPARTMENTS
BY

Douglas Allen Stuart

AN ABSTRACT OF

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY
Department of Administration and Higher Education

1966

ABSTRACT

THE APPLICATION OF FORMULA AND COST ANALYSIS
PROCEDURES TO THE BUDGETING OF
ACADEIVIIC DEPARTMENTS

By Douglas Allen Stuart

Statement of the Problem

 

Budget formulas and cost analysis techniques have been
employed with reasonable success in a number of states to obtain
more adequate support for and greater equity in the distribution of
funds to publicly supported colleges and universities. While these
budgetary procedures appear to have gained acceptance for their
usefulness in the determination of the total budget requirements
of an institution, they have not been considered applicable to the
internal management of such institutions. Nevertheless, the problem
of internal allocation of resources is just as critical as the allocation
of appropriations among institutions. The purpose of this study, there-
fore, was to examine some of the various types of formulas and cost
analysis procedures currently employed in state -wide budgeting for
higher education to determine which concepts or procedures, if any,
might be relevant and appropriate to the development of improved

operating budgets of academic departments.

Douglas Allen Stuart

Organization of the Study

 

Three representative budget procedures employed by the
States of California, Florida, and Ohio were applied to 15 selected
departments of Michigan State University in order to develop alter-
nate budget estimates for comparison with each other and with actual
departmental budget patterns. The 15 academic departments included
in the study are found in all major universities and were selected for
their similarities as well as their differences. The departments were
divided into laboratory and non-laboratory groups according to the
extent to which laboratory instruction enters into the total instruc-
tional load.

Historical data on the selected departments were extracted
from various documents prepared by the Office of Institutional Research
at Michigan State University for the years, 1962-65. Three year
weighted averages of the historical data and statistical data derived
therefrom were developed to portray certain characteristics or
operational patterns of each department, each group of departments,
and the combined group. To supplement the application of weighted
average normative data in the three budget procedures and to gain an
understanding of the relationships of certain cost factors, simple
correlation and regression analysis was also employed.

Applying both the weighted average and regression norms

to Fall, 1965, instructional volumes, various combinations of staffing

ii

Douglas Allen Stuart

and budget estimates were developed for each department utilizing
l) a factorial budgeting approach based on certain cost rates per
student-credit-hour at selected student levels; 2) a staffing approach
based on student-credit-hour productivity; and 3) a staffing approach

based on course-classification and related class sizes.

Major Findings of the Study

 

The variation in budget projections derived from different
combinations of objective procedures and various combinations of
normative data indicate that the degree of equity achieved depends
upon the way in which workload is defined and measured. For some
departments it makes little difference which procedure is employed,
but for certain departments the budget allocation resulting from the
application of objective procedures varies considerably, depending
upon whether objective measures of departmental input or output
are the primary determinants of staffing requirements. Similarly,
budget allocations can be influenced greatly by unusual faculty—mix
requirements.

However, in spite of the caution with which normative data
or standards should be applied to objective procedures, such pro—
cedures appear to offer a rational basis for allocating resources and
a better means of evaluating the effectiveness of resource utilization.

In order to select a suitable objective procedure and appropriate

iii

Douglas Allen Stuart

normative data, academic officials must first provide answers to
several questions concerning those factors which should be standard-
ized and those which should be determined on an individual basis. By
reducing appropriate budget considerations to objective terms, uni-
versity officials can better utilize their time and talents in giving
closer attention to those budget factors or activities which must be
evaluated subjectively.

The most significant contribution of objective budget pro-
cedures may very well be in the area of long-range planning and
program development, where they may be employed to project a
wide variety of alternative courses of action for evaluation and
subsequent selection of preferred alternatives. Given such long-
range perspective and direction, annual operating budgets should
thus be reasonably simple to derive objectively and, most certainly,
they would then reflect a planned rather than an accidental develop-

ment of academic departments and their various programs.

iv

THE APPLICATION OF FORMULA AND COST ANALYSIS
PROCEDURES TO THE BUDGETING OF

ACADEMIC DEPARTMENTS
BY

Douglas Allen Stuart

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

DOC TOR OF PHILOSOPHY

Department of Administration and Higher Education

1966

ACKNOWLEDGE MEN T5

The writer wishes to express his sincere
appreciation to Dr. Paul L. Dressel for his guidance
and helpful criticism throughout the study and for his
making available the facilities of the Office of Institutional
Research during the study.

The writer also wishes to express his appreciation
to Dr. Margaret F. Lorimer and Dr. Joseph L. Saupe
for their encouragement and helpful suggestions throughout
the study. '

ii

TABLE OF CONTENTS

. Page
ACKNOWLEDGEMENTS ....... . . . . . .......... ii
LIST OF FIGURES . . . . ......... . . . . . ....... iv
LIST OF APPENDICES ...... . . . ............. . v
Chapter
I. RATIONALE OF THE STUDY . ............. . 1
II. RELATED IDEAS AND LITERATURE ..... . . . . . . 10

III. ANALYSIS OF FORMULA AND COST ANALYSIS
PROCEDURES EMPLOYED IN STA TE-WIDE BUDGETING 28

IV. APPLICATION OF OBJECTIVE BUDGET PROCEDURES
TO THE INTERNAL BUDGETING OF ACADEMIC
DEPARTMENTS ...................... 45

V. COMPARATIVE ANALYSIS OF ALTERNATE BUDGET
PROCEDURES .............. ‘ ........ . 69

VI. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS

FOR FUTURE RESEARCH . ..... . ....... . . 103
APPENDIX A: Definitions . .................... 113
APPENDIX B: Historical Data . . . . . . . . . . . . . ..... 117
APPENDIX C: Budget Projections . . . ............. 131

BIBLIOGRAPHY...........- .......... 146

iii

Figure

1.

LIST OF FIGURES

Page

Combination of objective budget procedures and normative
data applied to selected academic departments ....... . . 50

Classification of laboratory and non-laboratory academic
departments.................... ...... .53

Comparison of departmental budget projections derived
from the application of alternate budget procedures with
attual 1965-66 budget levels . . . . . . . . . . . . . . ..... 71

Comparison of departmental budget projections derived
from the application of alternate instructional cost norms
(unit cost approach and regression analysis) . . . ....... 78

Comparison of departmental budgetprojections derived
from the application of alternate productivity norms
(SCH productivity approach) . . . . . ............. . 79

Comparison of departmental budget projections derived
from the application of alternate staffing norms (course
classification approach) . . ..... . . . . . . . . . . . . . . 82

‘Compatisonmf departmental budget projections derived

from the application of alternate salary norms (SCH
productivity approach) . . . ................... 84

.Caomparison of departmental budget projections derived

from the application of alternate operating expense
unit cost norms .......................... 86

iv

LIS T OF APPENDICES

APPENDIX A

Page
Definitions ........................... 113
APPENDIX B
Table
l-a. Weighted average instructional volume in student-credit-
hours, fall quarters, 1962-65 . . . . . . . .......... 118

l-b. Weighted average full-time-equivalent students of selected
departments, fall quarters, 1962-65 . . . . . . . . . . . . . 119

l-c. Academic year and weighted average student-credit-hours
of selected departments, 1962-65 . . . . . . . . . . ..... 12.0

l-d. Proportion of weighted average fall student-credit-hours
taught at each instructional level of selected departments,
1962-65 ..... o o o o ...... o 0000000000 o o o 121

l-e. Actual fall 1965 and projected 1965-66 student-credit-hours
of selected departments ........ . ....... . . . . 122

Z-a. Weighted average full-time-equivalent faculty of selected
departments, 1962-65 (by function). . . . ....... . . . 123

2-b. Weighted average staffing ratios of regular faculty,
graduate assistant, and clerical personnel of selected
departments. 1962-65 . . . . . . . . . . . .......... 124

3 Weighted average fall instructional productivity and
student-faculty ratios of selected departments, 1962—65 . . . 125

4 Weighted average academic year general fund budgets
for selected departments, 1962-65 . . ............ 126

APPENDIX B (Continued)

Table

5-a.

5-b.

6-b.

Page
Weighted average salaries cost per student—credit-hour
(all levels) of selected departments, 1962-65. ..... . 127
Weighted average salaries cost. per student-credit—hour
by level of selected departments, 1962-65. . . . . . . . . 128
Weighted average overhead cost per student—credit-hour
of selected departments, 1962-65, , , , ..... . . . . 129
Weighted average operating expense per student-credit-
hour (by level) of selected departments, 1962-65 , . . . , 130

APPENDIX C

Table

7-a.

7-b.

8-b.

Projected 1965-66 budget requirements for selected
departments of Michigan State University, based on the
cost analysis approach (academic and clerical salaries). . 132

Projected 1965-66 budget requirements for selected
departments of Michigan State University, based on the
cost analysis approach (operating expenses). . ....... 133

Projected l965—66ibudget requirements for selected
departments of Michigan State University, based on
regression analysis (total budget on total fall SCH). . . . 134

Projected 1965-66 academic staff for selected departments
of Michigan State University, based on SCH productivity
rates and related staffing ratios (departmental norms). . . 135

Projected 1965-66 academic staff for selected departments
of Michigan State University, based on SCH productivity
rates and’related staffing ratios (group norms). . . . . . 136

Projected 1965-66 academic staff for selected departments
of Michigan State University, based on SCH productivity
rates and related staffing ratios (combined group norms). 137

Projected and actual 1965-66 academic staff for selected
departments of Michigan State University, projections

based on regression analysis (total FTEF on total fall
SCH) ..... 138

vi

A PPENDIX C (Continued)

Table

9-a.

9-b.

lO—a.

lO-b.

lO-c.

ll-a.

ll-b.

Page

Projected 1965-66 salary budgets for selected departments
of Michigan State University, based on the SCH productivity
approach with alternate staffing and salary norms ...... 139

Projected and actual 1965-66 salary budgets for selected
departments of Michigan State University, based on
regression analysis (total FTEF on total SCH) ........ 140

Projected fall, 1965 teaching units of selected departments
of Michigan State University, based on the course classi-
fication approach ....................... 141

Projected academic staff requirements of selected
departments of Michigan State University for 1965-66,
based on course classifications and units-of-teaching . . . . 142

Projected academic staff requirements of selected
departments of Michigan State University for 1965-66,
based on course classifications and credits-of—teaching . . . 143

Projected 1965-66 salary budgets for selected departments

of Michigan State University, based on the course classi-
fication approach with alternate staffing and salary norms
(units-of-teaching) ....................... 144

Projected 1965-66 salary budgets for selected departments

of Michigan State University, based on the course classi-
fication approach with alternate staffing and salary norms
(credits-of—teaching) ......... . ........... 145

vii

CHAPTER I
RATIONALE OF THE STUDY

Introduction

 

Comparisons of workload and cost data of apparently similar /
academic departments at Michigan State University reveal wide
variations in operational practice and raise a number of questions
concerning the reasons for such differences. For example, when
departments offering similar academic programs differ appreciably
on such measures as average teaching load, average section size,
percentage of faculty time devoted to departmental research or
administrative activities, some examination of the means by which
such differences and possible inequities have developed appears to
be in order. Variations in departmental operations which occur by
design or as a result of specific policy decisions are understandable
and possibly defensible; variations which result from improper or
inadequate budgeting of institutional resources are much more sub-
ject to question.

The resources, both human and financial, available to

educational programs and organizations are limited. In times of

prosperity, institutions of higher education may find themselves
with unprecedented amounts of financial support, and yet may not be
able to recruit the faculty or staff required to carry out desired
programs. 1 In times of rapid enrollment growth, an institution
may have the finances for capital improvements but may not be able
to design, build, and equip new facilities fast enough to keep up with
the increasing demand. Even the 24-hour day and the typical 252-day
work-year impose certain limitations on the amount of service or
scholarly activity which may be expected from any given combination
of human, physical, and financial resources. A primary objective
of administration and the major task of the budget process, therefore,
is the achievement of the most effective utilization of all resources,
limited as they may be, in order to provide the greatest possible
return on the educational investment.

In times of economic crisis, and sometimes even during
prosperous years, colleges and universities are called upon to achieve
greater "economy and efficiency” in their educational operations -- as

an alternative to increased appropriations. 2 Although the concepts

 

lBetter Utilization of College Teaching Resources (New York:
The Fund for the Advancement of Education, 19591. P. 7.

 

2David S. Hill and Fred J. Kelly, Economy in Higher Educa-
tion (New York: The Carnegie Foundation for the Advancement of
Teaching, 1933), p. v.; Milwaukee Journal, June 24, 1965; Article
presenting Wisconsin Chamber of Commerce demands for reduction
in costs of higher education to taxpayers.

 

 

of efficiency and economy serve a useful function in the sound man-
agement of all sorts of enterprises, they must be considered within
the context of program effectiveness or contribution to the overall
objectives of an institution. The optimization of institutional re-
sources to achieve the greatest return certainly involves, but is not
limited to, matters of efficiency and economy. Consequently, the
allocation of resources within an inStitution requires many value
judgments which attempt to balance various cost factors, all of
which involve questions of efficiency or economy, with the anticipated
or desired outcomes. The extent to which the budget process contri'n
butes to the formation of sound judgments determines its worth as an
administrative tool and, undoubtedly, the extent to which institutional
objectives may be fully realized.

At the state level, a similar situation exists where there is
keen competition among publicly supported institutions for ever-
increasing support. Particularly in those states which support a
large number and variety of institutions of differing sizes and states
of development, is the problem of what constitutes a ”fair share'hbf
the total state appropriation for each institution. The difficult question
of what constitutes a reasonable level of support for each institution
has fostered the development of a variety of procedures or formulas
for relating budget requirements to certain measures of workload.

Miller has traced this relatively recent development in state -wide

4
budgeting for higher education and has noted that in spite of the initial
reluctance on the part of educators to employ such budgetary devices,
there has been a general agreement that the overall support for higher
education has been improved in those states which have adopted such

procedures.

While these budgetary procedures appear to have gained
reasonable acceptance for their usefulness in the determination of
the total budget requirements of an institution, they apparently have
not been considered equally suitable for internal budgeting or adminis—
tration of colleges and universities. 4 Such caution may be well
founded, but the problems of internal allocation of resources appear
to be quite similar to those encountered at the state levbl, neverthe-
less. Therefore, any search for improvement of budgetary procedures
at the institutional level might well include an examination of formula
or cost analysis concepts or techniques employed in various states.
For, as Miller suggests, ”budget formulas might make a positive
contribution to more effective management of higher education

institutions . ”5

 

James L. Miller, Jr. , State Budgeting for Higher Education--
The Use of Formulas and Cost Analysis, _P-ublication of the Institute of
Public Administration (Ann Arbor: The University of Michigan, 1964),
pp. 94-149.

 

 

Western Interstate Commission for Higher Education,
Yardsticks and Formulas in University Budgeting. (Boulder: Western
Interstate Commission for Higher Education, 1959), p. 68.

 

Miller, _c_>_p. <_:_i_t., pp. 167-68.

Purpose of This Study

 

The purpose of this study was to examine the various types
of formula and cost analysis procedures currently employed in
state-wide budgeting for higher education to determine which con-
cepts or procedures, if any, might be relevant and appropriate to the
development of improved operating budgets for academic depart.-
ments of colleges and universities. The study was designed to serve
two major objectives: (1) the development of greater understanding
and appreciatidnpof important budget considerations through analysis
of the underlying assumptions of various budget approaches, and
(2) the achievement of a greater degree of rationality in the budget
process through incorporation of objective procedures where

applicable.
Basic A s sumptions

A primary assumption of this study was that all academic
departments of an institution possess certain similarities which are
identifiable, measurable, and which can be described in objective
terms. At the same time, most academic departments possess
certain differences which affect budgetary needs. It was further
assumed that certain comparisons of educational operations can be
made by informed educators and that such comparisons are both
desirable and necessary to the effective management of institutional

ICSOLIICBSo

6

Although workload and cost data present no direct measure
of the actual quality of programs and activities of academic departe-
ments, it must be assumed that the quality of the educational environ-
ment created by an institution and its operational units is determined,
for the most part, by the combination of cost factors employed at any
given point in time. Thus, in order to produce an educational environ-
ment of a given quality, educators must be able to translate into
quantitative terms what reasonably should be expected in the way of
human and material resources for various types of programs and for
the various levels of student development. It was assumed, therefore,
that the quantitative analysis of such input factors should provide
some measure:,of departmental needs and, indirectly, a partial
indication of program quality -- both of which relate to budgetary

considerations .

Definitions of Te rms

 

The increasing emphasis and importance attached to cost
studies and statistical analyses within and between institutions of
higher education in recent years have contributed to and resulted
from the development or refinement of certain concepts and termin-
ology for describing various input and output factors of university

operations. 6 Various efforts to produce useful cost data for inter-

 

6Ca1ifornia and Western Conference Cost and Statistical
Study. (Berkeley: (University of California, n. d. ).

institutional comparisons have demonstrated the need for increased
standardization of definitions and/or classifications. Consequently,
educators have today a rather extensive taxonomy of operational
concepts and terminology which provides the necessary tools for
institutional analyses. 7 For any given study, however, the intended
purposes may dictate certain modifications of some definitions in
order to make the data collected more useful for a given type of
analysis. Definitions of the major terms employed in this study
follow those governing the collection of the data utilized 8 or suggested

by Miller, 9 and are presented in Appendix A.

Limitations of the Study

 

Formulas based on objective data have been employed to
some extent in higher education budgeting in such areas as physical

plant operation and maintenance or auxillary enterprises, each of

 

7Handbook of Data and Definitions in Higher Education.
(American Association of Collegiate Registrars and Admissions
Officers, 1962), p. 6.

.8Manual for the Preparation of Uniform Cost Reports:
Michigan State Colleges and Universities (Lansing: Michigan Council
of State College Presidents, 1962); Memorandum of May 11, 1962,
from Task Force Committee re: Definitions of Terms for Incorpo-
ration in ”Manual of Procedures”

 

 

9Miller, op. cit., pp. 4-7.

8

which has its counterpart in the business or industrial world. How-
ever, since objective data on academic programs typically have not
been incorporated into the budgetary process, this study focused

I upon the budgetary considerations common to academic departments
of publicly supported universities. The study was limited to the
various classifications of departmental expenditures financed by
current general funds which, for the most part, are derived from

state appropriations and student fees.
Organization of the Study

From an analysis of representative procedures employed in
the state-wide budgeting of public colleges and universities, three
alternate approaches were selected for use in projecting budget re-
quirements of academic departments. These objective budget pro-
cedures were applied to selected departments of Michigan State Uni-
versity to develop budget estimates for comparison with each other and
with actual staffing and financial patterns of the departments. The
implications and underlying assumptions were analyzed for their
relevance to internal budgeting of academic departments.

Chapter I has presented the rationale and applicability of the
study for practice. Chapter II presents the related ideas and literature
upon which the study was developed. Chapter III presents an analysis
of three objective budget approaches employed in inter-”institutional

budgeting. Chapter IV describes the nature of the data utilized in the

study, its source, the application of objective budget procedures, and
the results obtained. Chapter V presents a comparative analysis of
the alternate budget procedures when applied to departmental opera-
tions in terms of their results, their meeting of budget criteria, and
their contribution to program review and planning and improved
management of institutional resources. Chapter VI presents a sum-
mary and conclusions of the study along with suggestions of areas

deserving further re search.

CHAPTER II
RELATED IDEAS AND LITERATURE

The budgeting of college and university operations is, or should
be, a continuous process which both reflects and shapes the educa-
tional purposes and programs of the institution. Properly employed,
the budget process can and must help administrators to focus their
attention, at all times, upon the fundamental purposes of the institution
and the basic policy decisions necessary to the effective and efficient
utilization of available resources. Similarly, budgetary considerations
must be oriented to the needs of the future-- in accordance with
institutional objectives -- rather than simply a perpetuation of pro-

grams and activities geared to the needs of the past.

The Buckjet Process and Stigested Reforms

 

Budgeting is the principal tool of financial administration.
As a tool it cannot insure good or responsible financial
management, but a well conceived budget system can and
should provide the opportunity for efficient and responsible
management and equally important, the opportunity to
determine if management is efficient and responsible. 1

 

1John F. Briggs, A Refined Program Budget for State
Budgets (Washington, D. C.: The American University -- Center
for Technology and Administration, School of Government and Public
Administration, 1962), pp. 4—5.

 

10

1 1

As typically employed in colleges and universities, the budget
process is often regarded as a necessary evil -- a distasteful chore to
be endured solely for the purpose of gaining the largest measure of
financial support possible during any given fiscal period. Similarly,
the subsequent control over expenditures imposed by the adoption of a
final operating budget is quite often a source of irritation to members
of the academic community and a handy scapegoat for administrators
who need an explanation for mediocre or unsatisfactory management
results.

Such attitudes toward the budget process, particularly among
publicly supported universities, may stem from the notion that educa-
tors should be free to establish the level of financial support necessary
to meet society's needs and then state legislatures should be expected
to appropriate that amount. Although educators make a point of revising
and proposing new educational services to better meet society's needs,
they may not consider the overall social and political considerations
inherent in the legislative appropriation process. Not only do publicly
supported colleges and universities compete with each other for
necessary support, they also compete with other governmental service
agencies. In all agencies, the opportunities for service are unlimited,
but resources are limited. Thus the ultimate responsibility for deter-
mining the degree to which the various governmental programs of a
state are to be supported with public tax money must be assumed by

the elected representatives of the people.

12

Nevertheless, in order to gain the most favorable appropri-
ation level possible under such heavy competition, a commonly em-
ployed tactic of most agencies is to include sufficient padding to allow
for the customary shrinkage at all levels of review. Typically, the
major focus of budget requests is upon the matter of dollar support
necessary for proposed expenditure levels. Seldom are budget requests
justified in terms that invite comparison with the requests of similar
departments or institutions. In fact, the justifications offered for
ever increasing support often involve only those factors which are
most apt to create the best image of the organization and to present
the most convincing case during budget reviews.

The keen competition faced by most institutions and their
component departments during budget review time encourages tactics
suggestive of those illustrated in the book, How to Lie with Statistics. 2
Certainly the traditional budget approach often involves the use of the
selected statistic, cloudy exhortation, personal persuasion -- or any
other form of lobbying which might prove effective in gaining the max-
imum possible support for a given department or institution. It is
perhaps little wonder that under traditional budgetary procedures,

"educators, in their eagerness to receive sufficient funds are often so

 

2
Darrell Huff, How to Lie with Statistics (New York: W. W.
Norton and Co. , Inc. , 1954), 1.42 pp.

 

13

preoccupied with how to get money that they neglect careful attention
to how it is used. "3

As Walker suggests, ”When colleges operate on limited funds,
every dollar is presumed to be employed enonomically. "4 Consequently.
budgetary reviews and the resulting decisions are most likely to re-
volve around questions of how additional resources should be spent.
Traditional budgetary presentation and review practices are summed
up by Harris:

Neither trustees nor faculty, nor administration, tend to
examine the allocation of funds in the existing budget. Once
$250, 000 is allocated to paleontology, or $1 million to inter-
collegiate athletics, these outlays are sacred, and no cut is
likely except in the midst of a great depression. Even budget
officers of state governments tend to accept past budgets and
only raise questions concerning additional funds requested.

Thus as typically employed, traditional budgetary procedure is often
unsatisfactory because no genuine attempt is made to examine existing

budgets to discover the possibilities of cuts on past budgets.

The university budget has been referred to as "an expression

of the hopes and dreams of educators," which would suggest that each

 

3John Dale Russell, in Yardsticks and Formulas in Univer-
sity Budgeting (Boulder: Western Interstate Commission for Higher
Education, 1959), p. 11.

 

 

4Ernest W. Walker, "To Measure Operating Efficiency, "
Collegeand University Business, August, 1960, p. 24.

 

5Seymour E. Harris, Higher Education: Resources and
Finance (New York: McGraw-Hill Book Co., 1962), pp. 561-62.

 

6Ibid.

 

l4
year's requests were derived from basic policy decisions calculated
to make the best possible use of resources available for the implemen-
tation of institutional objectives. In reality, the usual Operating budget
is more apt to reflect a large number and variety of random decisions
of the past which have ongoing implications for the future. As Dodds

points out:

The freshman president soon realizes that the hand
of history is heavy on him; he does not write his budget on a
clear slate. Basic operations must go on and be paid for
against rising costs. So innocent a document as the catalogue
listing of curricular offerings embodies continuing commitments,
as do research programs that must be allowed to continue,
even though current support has failed them, and the guarantee
of tenure to large elements of the faculty.

Dodds then goes on to reiterate the basic difficulty with most financially
oriented budget procedures and suggests the influence objectives should
have over budgetary decisions:

Thus the very fact that budgets must be adopted periodically
tends to raise forward-looking questions and to call attention
of administration and faculty to the danger of laissez-faire
assumption that there are no imbalances, inequities, or in-
efficiencies in earlier expenditure patterns, that yesterday's
programs are unquestionably those most suited to society's
needs tomorrow. Thus with all its aspects of inflexibility,
the budget provides the chief central instrument of control over
the future.

Other writers have suggested changes in budgetary procedures

which would permit all parties concerned to consider departmental or

 

7Harold W. Dodds, The Academic President -- Educator or
Caretaker? (New York: McGraw-Hill Book Co., Inc., 1962), p. 182.

 

81bid, p. 183.

 

l5

institutional requests in relation to prior accomplishments as well as
previous expenditure levels. Heneman, for example, stresses the
importance of basing budget needs in terms of the purposes or objec-
tives to be carried out and of the workloadinvolved:

Each level of management from departments on up should be
asked to determine, on an annual basis, the job it is to do
and what itwill take by way of people, supplies, materials,
equipment, services, and facilities to do it. This should
then be translated into dollar requirements. All estimates
of expenditure prepared in this manner then should be consoli-
dated into an over-all budget consistent with the university's
income position. . .

This provides a basis on which to determine needs and
offers an opportunity to transfer or direct money and people
to the areas of highest priority or importance. This system
of building up estimates of expenditure provides standards
and yardsticks against which performance can be measured.

Unfortunately, many colleges and universities do not re-
quire such supporting data for proposed expenditures but
instead make comparisons only with amounts spent in the
preceding year or years . . .

Of course it is not known whether the funds spent during
the preceding year were too great or too small, and it is
difficult, if not impossible for the finance committee to
determine what workload was involved, whether objectives.
were accomplished, and what standards of performance were
followed. Requirements for services may change from year
to year, and in many cases standards of performance should
be improved. These will have an effect on both the number
of people and the amount of dollars required to carry on a
particular function.

The utility of comparative cost data on past operations and

realistic cost estimates of proposed programs or activities, incorporated

 

9H. J. Heneman, in Dexter M. Keezer, ed., Financing
Higher Education -- 1960-70 (New York: McGraw-Hill Book Co. , Inc. ,

1959, pp. 129-30.

 

16

10
with budget requests, has also been stressed by various writers.

Unit cost data, taken out of the context of the budget process, are
generally regarded as interesting statistics which are of little value
unless they lead to further analysis of how and why the costs happen

to be what they were at some point in time. Properly used in conjunc—
tion with budget preparation and review, there appears to be some
agreement that unit costs can be “useful in raising questions about
departmental practices, in calling attention to undernourished depart-

ments and schools, and in combating extravagance in others. ”11

Related Developments in Governmental Budgeting

Many of the recommendations for improving college and
university budgeting cited above appear to be derived from or ‘at least
parallel similar developments in governmental budgeting during the
past two decades. The growing complexity of governmental programs

and services at the federal, state, and local levels with their increasingly

 

0Logan Wilson, "Analyzing and Evaluating Costs in Higher
Education," The Educational Record, April, 1961, p. 103; John Dale
Russell, Finance of Higher Education Rev. Ed. (Chicago: University
of Chicago Press, 1954), p. 75; Thad L. Hungate, Finance in Educa-
tional Management of Colleges and Universities (New York: Bureau of
Publications, Teachers College, Columbia University, 1954), p. 103ff.;
and Lyman A. Glenny, Autonomy of Public Colleges (New York: McGraw-
Hill Book Co., Inc., 1959). PP. 111-12.

11

 

 

 

 

 

Dodds, op. cit., pp. 174-175.

l7

diverse sources of financial support has demonstrated the need for
more meaningful budgetary presentations and greater refinement of
the budget process as a tool of sound public administration. As a
consequence, a relatively new budgetary approach known as program
and/or performance budgeting has received gradual but steady accept-
ance as it has been increasingly adopted by governmental units at all
levels. As Hudson has pointed out, the concept of program derived
budgets is not a new idea, but is one which was given impetus in the
federal government by the Commission on Reorganization of the Fed-
eral Government, popularly known as the Hoover Commission, during
the late 1940's. 12 Although employed by several federal departments
both. prior to and since the endorsement of the Hoover Commission,
the program budget appears-to have received its greatest publicity
from its application to the complex and critical budgetary considerations
of the Department of Defense. Nevertheless, there is a growing body
of literature on the application of the program budget concept to state
and municipal governmental affairs.

The development of program and performance budgeting has

1
been detailed by Kammerer, Burkhead, and others. 3 Briefly, the

 

12Cathryn Seckler Hudson, "Performance Budgeting in the
Government of the United States, " Public Finance, Vol. VII, No. 4,
pp. 327-30.

 

l3Jesse Burkhead, Government Budgeting.(New York: John
Wiley 8: Sons, Inc. , 1956) Ch..6; Gladys M. Kammerer, Program
Budgeting An Aid to Understanding. Public Administration Clearing
Service, University of Florida, Civic Information Series No. 32
(Gainesville, Florida: University of Florida, 1959).

 

 

18
program budget approach directs the attention of all concerned away
from the detailed listing of objects of expenditure for some future fiscal
period to an explanation of those programs, functions, and activities
which each governmental department proposes to conduct. At the
operating agency level, performance budgets present estimates of
future resource needs based on measures of past performance or
accomplishments and thus provide certain benchmarks or yardsticks
by which agencies' future performances can be assessed.

Since public supported colleges and universities must compete
with the many other public service agencies for their financial sus-
tenance, it is understandable that the influence of program and per-
formance budget concepts has found its way into educational budgeting.
A partial explanation of this is the fact that several of those states
which have been noted for their experimentation with adoption of
program budgeting have also-been proponents of coordinated systems
of higher education -- both formal and informal. Where coordination)
of public colleges and universities has occurred, there have been
serious efforts to establish meaningful and reliable measures by which
the collective and individual needs of the higher education system can
be assessed.

To a large extent, the resulting budget procedures have been
designed by state budget analysts rather than educators and thus have

been imposed from without rather than having developed out of

19
institutionally recognized needs. 14 As might be expected, full accept-
ance of such procedures has lagged behind their incorporation in many
instances. However, it appears that the development of more objective
budget procedures has resulted in much improved relations between
higher education officials and budget analysts in the executive and
legislative branches of state governments. Apparently, such efforts
have been fruitful in building confidence in existing operations and in

justifying increased financial support for expanded operations.

Development of Iflher Education Budget Formulas

 

Glenny has noted that the creation and development of state-
wide coordinating and governing agencies for higher education have
resulted in part from an intense interest shown by legislative and
state executive officers in the budgeting of colleges and universities.
And, while they have generally been granted functions of greater im-
portance, coordinating agencies have tended to concentrate their
attention on matters of inter-institutional budgeting -- the function
which produces the most tangible and immediate rewards for the effort
expended. Typically, such agencies have sought to provide budgets

equitable and reasonably satisfactory to all institutions according to

 

14Miller, _c_>_p_. <_:_i_t_., p. 81.

20
relative needs; to provide uniform, comparable, and convincing
fiscal information for legislators and executive officers; and to pro-
mote economy and efficiency where possible. 15
Efforts to achieve these budgetary goals have resulted in the
adoption of various methods of organizing, analyzing, and presenting
meaningful data on the many diverse types of educational operations;
in some states these methods have resulted in formalized procedures
which may or may not be labeled formulas, depending upon the conno-
tation such a term carries in the particular area. Miller has presented
a detailed review of the development of such formula or cost analysis
budget procedures employed by various states. He notes that such
objective procedures have generally been used to assist in the analysis
of budgetary needs and in the presentation of budgetary information,
but occasionally they have been used as a basis for distributing sup-
plemental funds among institutions when enrollments exceed estimates.
On the basis of his many interviews across the country, he reports:
The prevailing attitude of state officials and higher

education officials is to regard a formula as a device

whose usefulness is limited to quantifying the status-quo

and then projecting it into the future, with appropriate

allowance for inevitable increases in enrollments and in
the level of salaries.

 

15Glenny, op. cit., p. 115

1()Miller, op. cit., p. 167

21

General agreement to limit the use of budget formulas may
well stem from the fear of additional loss of institutional autonomy to
the coordinating agencies or other central government officials. Or,
such an attitude may be simply another illustration of educators' con-
cern over ways of getting money rather than with the complex problem
of resource optimization. Certainly, if formulas are useful in projecting
the status-quo into the future, it should follow that they should likewise
be suitable for projecting institutional needs as they M33113 -- if
educators were only willing to examine the relationships between
resources used and the achievements to be realized.

With the growing variety and complexity of university pro-
grams, the current and anticipated problems associated with increasing
enrollments, and the ever-present concern over mounting costs of
higher education, the need for top-level management of institutions
becomes apparent. 17 To meet such a need, administrative practi-
tioners must be ready at all times to examine any administrative tool
or technique for possible adaptation to their specific needs -- regardless
of the particular origin of such techniques, be it business or industry,
governmental, or military operations. While the wholesale adoption of
any procedure or administrative device -- even among like operations --
is generally subject to question, the skillful incorporation of relevant
and useful tools or techniques into a continuing effort to improve the

administrative process is both feasible and desirable. Educators

 

17”The Affluent Professors," Forbes, June 1, 1966, p. 58.

22

probably need to examine Some of their basic assumptions about
budgeting of university operations and of the relevance of objective
procedures to internal management. At the same time, they need to
take a closer look at some of the major procedures employed in state-
wide budgeting to see if they are truly as limited in their usefulness as

the literature suggests.

 

Representative Approaches to Objective Budgeting

It has been noted that with few exceptions, formula or cost
analysis procedures employed in state-wide budgeting differ some-

18 There have emerged, however, at least

what from state to state.
three different approaches to-the analysis of budgetary needs. The

first of these, the base year approach, uses the operations of a

 

given year as a basic reference point and then gives major consider-
ation to the necessary increases in budget requirements in accordance

with the various changes that have occurred since the base year. In

 

a sense, this approach is similar to the traditional budget presentation
and review cited previously, except that it portrays changes over a
longer period of time. At the same time, a given fiscal period may be
selected as the base year because of general‘acceptance of a given
input-output relationship as being reasonable or desirable.

The second approach, which also appears to characterize the

 

18Miller, op. cit., p. 151.

23

formula approach to budgeting, is the budget base concept. Under

 

this scheme, the primary reason for an institution's existence is used
as the base and all other functions or supporting activities are related
in some arbitrary manner to the basic function. In spite of increasing
importance being given to the research and public service functions,
universities which operate under the budget base approach still use
the instructional budget as the basis for determining all other budget
allocations, expressed as a percentage of the instructional budget.

A variation of the budget base approach utilizes agita-
in}; o_f_service procedure, which relates all expenditures of a depart-
ment or institution to some measure of instructional load -- the
student-credit-hour or full-time-equiv'alent student (FTES) by level
(freshman, senior, graduate, etc. ). In other words, the costs of all
activities, both related and unrelated to the instructional function, are
folded into the unit cost figure as though they were essential to the
teaching-learning process.

The third and less common budgetary approach involving
formulas calls for the analysis of budgetary needs according to
functions performed -- permitting each activity to justify its existence
and resource requirements on its own merits. The functional approach
requires a general acceptance of the many and diverse functions of a

university -- as well as rather extensive supporting data or norms

from which evaluations of performance and budget needs can be made.

24

Criteria for Evaluating Budget Procedures

Burkhead's model of budgetary decision-making takes into
account the interaction of three major functions which he defines as

expertise, communications, and responsibility. 19 As the terms imply,

 

 

the expertise aspect is concerned with the measurement and comparison
of the probable effects of several courses of action; communications
involves the identification and evaluation of the views and sentiments

of the various groups which are affected by budget decision; and

responsibility involves the weighing of facts and values derived from

 

the first two aspects, and the making of an informed judgment as to
the best course of action.

Burkhead's budgetary model thus provides the proper per-
spective for any study concerned with a particular segment of the
budgetary process in that it calls attention to the fact that any modi-
fications or improvements in one phase must eventually be evaluated
in terms of how much they contribute to or impair the results of the
other aspects of budgetary decision-making. Thus, while the central
concern of this study is the possible contribution of formulas or cost-
analysis to the expertise aspect of Operational budgeting, the criteria
for evaluating the various procedures examined were selected for their

significance to the whole process.

 

19
pp. 44-50.

Burkhead, op. Cit. , p. 56; amplified by Miller, 0p. cit.,

25

The criteria employed in the evaluation of the alternate
budget approaches examined in the study were:

Objectivity Methods employed for measuring budgetary

 

needs must be capable of describing in quantitative terms the types of
programs, functions, and activities for which they are designed. The
use of objective data and relationships derived therefrom makes ex-
plicit some of the rationale behind many subjective decisions and allows
for checking of estimates or for comparisons of subsequent performance.
Equity One of the primary objectives of formulas or
objective budget procedures is the equitable treatment of competing
programs and organizations. Such procedures should contribute to
the achievement of adequate budgetary support for all authorized pro-
grams and activities, but should also provide some means of assessing
the cost-value relationship of established activities in light of changing
objectives or goals of an institution.

Flexibility In view of the dynamic nature of higher educa-

 

tion, objective budget procedures must lend themselves to change in
concert with the evolutionary (or revolutionary) forces at work in all
areas of programming, methodology, etc. Such procedures should be
so'designed as to aid, or perhaps even force, the changes necessary
in higher education operations needed to contend with changing social
problems.

Focus Objective procedures must help to focus the atten-

 

tion of all concerned with the budget process on the major goals to be

26
pursued -- and the policy decisions necessary to their achievement.
Budget formulas and cost analysis procedures, to be of assistance to
the policy or decision-making process, must direct the necessary
attention to the essential value questions which must be answered.

Sensitivity Formulas or objective budget procedures

 

should be sensitive to important program and organizational differences
and should be responsive to Changes therein.

Utility To be of maximum utility, any formula or cost
analysis procedure should be capable of making a contribution to all
phases of the budget cycle -- formulation, allocation, implementation,
and evaluation. At the same time, any procedure employed must be
able to justify its own use in terms of the values derived from the cost
and effort involved.

Validity Formula or cost analysis procedures are a form
of fiscal shorthand which can be useful in organizing, summarizing,
and presenting great quantities of operational or budget data in simpli-
fied form so that the essential questions relating to basic policy decisions
can be answered. Such a shorthand must, however, be based on valid
measures of workload -- the relationships of cost factors to the pro-

jected work to be accomplished.

27

Summary

Chapter II has presented the context in which the central
concern of this study must be considered. The nature of the budget
process, as employed in public higher education, and some of the
currently recognized shortcomings of traditional practice were ex-
amined. Other considerations which relate to the problem of the study
included the similarity of budget problems between higher education
and other governmental or public service agencies, as well as the
competitive nature of the appropriation process at the state level.

The development of program- and performance budgeting in various
governmental operations was cited for its influence on recent develop-
ments in the coordination of state systems of higher education and the
accompanying development of more objective approaches to institutional
budgeting. Finally, several cr-iteria were suggested for evaluating

the possible contributions that might be made to the entire budget
process by the application of various formula or cost analysis pro-
cedures to the internal affairs -of an institution. In the following chapter,
three representative objective budget procedures employed in state-wide

budgeting for higher education will be examined in some detail.

CHAPTER III

ANALYSIS OF FORMULA AND COST ANALYSIS PROCEDURES

EMPLOYED IN STATE-WIDE BUDGETING

Miller has described in detail the various formula and cost
analysis procedures currently employed by a number of states and
has noted the basic similarities and minor variations among these
objective budget approaches.l For the purpose of this study, a cost
analysis and two formula procedures which constitute current practice
in the states of Indiana, Florida, and California, were selected for
application to internal budgeting problems of colleges and universities.
Each of the three major approaches is discussed briefly in the sections

to follow.

The Ratio Approach

 

 

The Student-Faculty Ratio For many years, colleges and
universities have used the student-faculty ratio to describe their aca—

demic environment in their promotional literature and accrediting

 

1Miller, 32. cit., pp. 94-149.

28

29
reports or, on occasion, to justify requests for additional staff
and corresponding budget increases. In some states the student-
faculty ratio is still used as the primary basis for relating institutional
budgets to the size of student enrollment. 2 However, the relative
merit of the student-faculty ratio as a budget base depends in large
measure upon the degree of similarity of academic Objectives and
programs. The more heterogeneous the programs, the less desirable
the student-faculty ratio becomes for budget purposes.

In the case of small single-purpose colleges, for instance,
the student-faculty ratio possesses some meaning in that it approxi-
mates the average class size --- or the theoretical index of the inter-
action possible in the teaching-learning process. It says nothing,
however, about the actual workload of faculty, nor about the kind of
instructional environment actually created by an institution.

In the large multi-purpose university, the student-faculty
ratio becomes merely an indicator of the relative size of two partially
related sets of statistics. At any major university, instruction of
students constitutes only one of several functions performed by faculty
members. As the proportion of faculty time devoted to instruction
decreases and the proportion of effort expended on research or public
services increases, the student-faculty ratio becomes less meaningful

and possibly even misleading. Consequently, the appropriateness of

 

2

'Milleryogp. c_i_t_., p. 131.

30
of any given ratio is always subject to question by economy minded
legislators e- and is not easily defended.

Recognition of the differences among state institutions and
their operations, which can be concealed by such a ratio, has led to
the adoption in some states of different sets of ratios for different
types and sizes of institutions. In other states, the inequities which
resulted from the application of standard ratios to all kinds of insti-
tutions have served as a necessary stimulus to the development of
other budgetary measures designed to correct such inequities and to

better portray the actual higher education needs of a state.

Student-Credit-Hour Productivity Ratio As an alternative

 

to the student-faculty ratio, certain states have developed a productivity
ratio which describes the average instructional output in terms of
student-credit-hours (SCH) generated per full-time equivalent (FTE)
faculty member. Although the student-credit-hour represents process
as much as actual production, the fact that it is commonly employed by
institutions as a form of currency for establishing degree eleigibility,
or for fee assessment purposes, etc., suggests that the student-credit—
hour is not inappropriate as a measure of instructional workload.

In some states, SCH productivity and unit cost rates are

standardized by instructional level and are expressed as a fixed part

 

3’Western Interstate Commission for Higher Education, Yard-
Sticks and Formulas in University Budgeting (Boulder: February, 1959),
pp. 51-52.

 

31

of the budget formulas. 4 Florida, on the other hand, employs SCH
productivity rates by instructional level which differ with each insti-
tution according to the nature and purpose of the instructional programs
or the particular stage of developmentthereof. In addition, the Florida
budget procedure leaves blank all rates and ratios which constitute
policy questions that should be considered each new budget period.
Although this approach provides no guarantee that the productivity

rates will not become fixed in time, it does call attention to the fact
that such productivity rates or related staffing ratios should be subject
to periodic review and modification where necessary.

The first step in the Florida approach, as in all objective
budget procedures, involves the estimation or projection of probable
enrollments or volume of instruction at selected course or student
levels. Once the anticipated volume of instruction has been determined,
various SCH productivity rates which have been deemed appropriate
for each type and level of program are then divided into the volume of
instruction estimates for each level to derive the total number of FTE
teaching positions required. The total number of teaching positions
then serves as a base for determining, on a ratio basis, the number
of FTE staff members to be authorized for other functions such as
research, public or professional service, academic counseling, or

administrative and committee assignments.

 

4Miller, op. cit., p. 107.

32

When the total academic staff requirements have been ascer-
tained, the next step in the procedure involves a policy decision con-
cerning the number or proportion of academic positions which should
be filled with temporary staff members such as graduate assistants,
assistant instructors, etc. When the most desirable faculty-mix has
been established in light of market conditions, institutional objectives,
and/or prior commitments, the financial support required for academic
salaries is determined by multiplying the average salary appropriate
to each major category by the number of positions recommended therein;
the summation of the salary requirements in each personnel category
selected gives the total academic salaries requirement for the com-
bined functions to be performed.

The next policy question to be answered under the Florida
procedure concerns the appropriate level of clerical and technical
support to be provided. When the proper ratio of academic to non-
academic personnel has been determined, the total number of technical,
clerical, and student assistant positions is derived by applying this
ratio. The appropriate number or percentage of student-assistant
positions must be determined and subtracted from the total number of
positions to establish the number of regular FTE non-academic positions
to be filled. As with the academic positions, the average salary levels
appropriate to the various classifications involved are applied to the
number of corresponding FTE positions to derive the total outlay re-

quired for support personnel.

33

The combined personal service budgets constitute the major
portion of the total Operating budget of an institution and thus receives
the greatest amount of attention in budget formulas or cost analyses.
Because of the heterogeneous nature and relative size of general
operating expenses such as supplies and services, equipment, etc. ,
such expenditures are typically subjected to much less scrutiny than
the salaries budget. Consequently, it is conceivable that the various
efforts put forth to achieve equitable distribution of finances among
institutions on the basis of workload and staffing requirements may
well be negated by a lack of comparable effort to determine adequate
levels of implementary expense.

Under the Florida budget procedure, however, instructional
operating expenses are estimated on the basis of a certain rate per
SCH for the anticipated volume of instruction -- a rate which may
approximate prior spending levels or which may reflect more "reason-
able" levels of support. The Florida procedure then utilizes the instruc-
tional expense budget as a base for estimating the operating expense

budgets for research activities —- according to some acceptable ratio. 5

 

5Budget Director's Office, Analysis of Legislative Budgets:
University System of the State of Florida -- 1961-63, (Tallahassee:
Budget Director's Office, 1961).

 

 

34

The Course Classification Approach

California has developed a different approach to objective
budgeting for application to its rapidly growing and expanding State
College System. 6 The California proCedure is based on a functional
approach which utilizes various formulas, ratios, or rates appropriate
to the function under consideration. The budgetary requirements of
the instructional function are determined by a rather detailed and

complex faculty staffing formula which suggests a greater degree of

 

accuracy of prediction and sensitivity to differences among institutions
than achieved by other approaches. On the other hand, the classifica-
tion system possesses a degree of rigidity which the Florida procedure
attempts to avoid.

Under the faculty staffing formula, the total number of
teachers required for the instructional programs of each institution is
determined on a course-by-course basis, in which projected enroll-
ments in each course offered during a given semester is related to a
pre-determined optimum section size. The number of sections re-
quired for each course then determines the number of FTE teachers
to be employed. Optimum section size and the corresponding cut-off

points are determined by the particular classification assigned to each

 

6Jon S. Peters, Genesis: The Faculty Staffing Formula
(Sacramento: Educational Planning Office, Division of State Colleges
and Teacher Education, California State Department of Education,
June, 1961), (Mimeographed).

 

35

course according to the nature of the subject matter, the method of
instruction, and/or the limitations imposed by the nature of the
physical plant. Thus, courses or segments of courses may be class-
ified as lecture, lecture-discussion, seminar, laboratory, or activity
type instructional programs. Each classification carries a specific
weight, based primarily on the number of contact hours involved.

The teaching load of a full—time-equivalent faculty member is
standardized at 12 work units, or approximately 36 hours per week of
classroom teaching, preparation, and grading activities; an additional
3 units, or approximately 9 hours per week, are added for such functions
as student advising, public service activities, and administrative or
committee work. Thus, for budgetary purposes, the standard work-
week of the FTE faculty member employed by one of the California
State Colleges is set at approximately 45 hours or 15 work units.

The total faculty requirements for the projected budget period
are thus determined by calculating the total number of teaching units to
be provided for a given volume of instruction. The number of teaching
units for each section of a course is the product of the number of credits
awarded (or imputed) to the section and the particular weight assigned
by the specific course classification. The total number of teaching
units required, when divided by the standard load of 12 units, determines
the total number of FTE faculty positions required for regularly
scheduled instruction. To provide additional FTE positions to cover

those faculty members whose instructional responsibilities include the

36
supervision of student teachers, undergraduate or graduate research,
etc. , the total enrollment in each of such activities is divided by an
appropriate student-teacher ratio.

Because Of the nature of the institutions to which the faculty
staffing formula applies, departmental research apparently does not
constitute a major function. Thus, any faculty effort which is directed
to such activity appears to be handled on a released—time basis or
carried as an overload.

As in the Florida budget procedure, administrative and non-
academic personnel requirements are related to the size of the teaching
staff on a proportional basis. Although the faculty staffing formula
contains no provision for graduate-assistant positions as a component
of the teaching faculty, each institution's needs are apparently consid-
ered on an individual basis. Those colleges which do list such positions
presumably maintain substantial graduate programs in contrast to some
of the more recently established institutions which employ no graduate-
assistants. The overall allowance for faculty-related clerical and
technical or student personnel offers no breakdown of the various
classifications, as does the Florida approach, and thus is a matter
that is determined by each particular situation.

The financial support required for the number of personnel

 

7”Released time" might represent the margin between
budgeted and actual staffing requirements if estimates exceed enroll-
ments, or time which may be created by scheduling fewer and larger
class sections than the faculty staffing formula calls for.

37
projected under the California approach is calculated by applying
appropriate salary averages to the various personnel classifications --
as under the Florida procedure. 8 The estimation of instructional
operating expense is handled on a functional basis and makes use of

current expenditure levels as a guide to future needs.

The Cost Analysis @proach

 

A relatively simple and direct method of projecting budget
requirements of academic programs, the cost-analysis approach
simply applies a pre-determined cost rate to a projected number of
cost units to arrive at the total financial support needed for a future
budget period. However, the actual determination of the unit-cost
rates to be used generally involves a rather detailed and complex cost
analysis procedure.

Although several states employ unit-cost data in various
aspects of their budget procedure, Indiana uses the cost approach to
determine the total financial needs of its two major universities and
its two smaller regional universities. The Indiana procedure, first
of all, determines the direct costs of teaching each class offered
during the previous year and then allocates all other indirect or over-

head costs of the institution to each class on a proportional basis.

 

8Division of Insitutional Research, 1964-65 Status Report of
the California State Colleges -- Part G: Fall Instructional Faculty
(Inglewood: Office of the—Chancellor, California State Colleges,
January, 1965).

 

 

38
The total cost of each class is then divided among various instruc-
tional levels according to the proportion of students in the class who
were classified as freshmen, sophomores, graduate, etc. The final
unit cost, instead of relating to student-credit-hours as is customary,
is expressed as a cost per student, classified by instructional level.
This unit cost is determined by adding all class costs assigned to each
level and then dividing by the number of (head count) students enrolled
at that level.

The resulting cost rate per student at each level presents in
broad summary form the amount of financial support required (or ex-
pected) for each student enrolled during the future budget period.
Appropriate adjustments to account for changes in price or salary
levels would, of course, be made to translate historical cost patterns
into future needs. Although much of the detailed information generated
through the cost analysis procedure may be utilized internally, such
gross cost estimates tend to conceal much more than they reveal about
the operation of each institution. It would seem, therefore, that legis-
lators and state budget analysts might come to raise serious objections
to the Indiana approach. However, the assumption that all operating
costs of an institution ultimately relate to the size of the student body
apparently is acceptable to those concerned with the budget process in

Indiana .

39

Similarities in the Alternate Procedures

 

In spite of their differences in emphasis and methodology,
each of the approaches described appears to have been reasonably
successful, in its own peculiar setting, in meeting the challenges
which brought about their development. Educators and state budget
officials apparently are in general agreement that the adoption of these
objective budget procedures has resulted in 1) increased public support
of higher education in keeping with increased demands for educational
services, 2) increased evidence of Operational efficiency and economy
in colleges and universities, and 3) greater equity in the allocation of
public funds among higher education institutions.

As indicated at the beginning of this chapter, the various
objective budget approaches have much in common,and, to some extent,
can be converted from one system to another qUite readily. For example,
given the definition of a full—time-equivalent student at the various instruc-
tional levels and the desired student-faculty ratio, it is a simple matter
to convert such ratios to a SCH productivity rate. Given a certain SCH
productivity rate and the average teaching load in credit-hours, it is
possible to calculate the average section size that must be achieved.
Conversely, given certain limitations such as academic space and time,
along with average teaching load, one may determine the maximum
productivity rate which can be achieved in regularly scheduled instruc-

tional programs.

1 1‘1 1‘1

40

Moreover, given the average faculty salary along with either
the average teaching load and average section size or the average SCH
productivity rate, it is possible to determine the average salary cost
per SCH for a department -- or an institution. Conversely, given a
certain amount of financial support and a specified SCH productivity,
one can quickly find the average faculty salary that is possible under
such constraints. In equation form, these cost factors bear the follow-

ing relationship:

 

Average Salary Cost Average Instructional Salary
per Student- =
Credit-Hour Student-Credit—Hours per FTE

Faculty Member

 

or
Average Salary Cost Average Instructional Salary
per Student- =
Credit-Hour Average Credit- Average Section
Hours of Teaching Size

The relationship of the instructional cost factors expressed
in the above equations raises significant policy or management
questions relating to the effective allocation of resources and the achieve-
ment of educational quality. 9 The inter-relatedness of these cost fac-
tors also provides a means of analyzing the three different budget
approaches described earlier.

It is perhaps Obvious that the use of any kind of budget format

which attempts to provide for systematic analysis of budget needs tends

 

9$tanley Ikenberry, "Instructional Cost and Quality, " Colle e
and University, Spring, 1962, pp. 242-250.

 

41

to impose a certain degree of standardization. Whereas some stand—
ardization is desirable and necessary for greater equity in the alloca-
tion of resources, a certain amount of flexibility, or freedom to innovate,
is necessary in the effective management of those resources. Conse-
quently, it may be well to note some of the differences in the three
budget approaches in terms of the degree of standardization imposed,

or conversely, the flexibility permitted each instructional unit.

In the case of the Florida budget procedure, the major policy
question concerns the most appropriate level of SCH productivity and
the desired faculty-mix. The next cost factor to be determined is that
of the appropriate average salary level for each type of institution.
Once these factors have been determined, the average SCH cost is
established and will vary only with the fluctuation in enrollments due
to errors of prediction. It should be noted, however, that the SCH
productivity approach permits the individual institution to modify the
average teaching load and average section size, so long as the pre-
scribed productivity rate is achieved.

With the California procedure, on the other hand, much
greater control over the last-two cost factors is imposed by the faculty
staffing formula; also, the state-wide faculty rank distribution and
central control over salary scales, tends to structure each institution's
personnel and salary administration along standard lines. The only
cost variable over which an institution can exercise some administra-

tive action is in the area of average section size, which is determined

42
by the particular student and course mix. But, if the institution
elects to modify its instructional practice to the extent that it deviates
appreciably from the standard classification scheme, it is likely that
the courses involved will be re-classified in order to reduce any budget-
ary advantages that may have been gained from such innovations.

By way of contrast, the Indiana unit cost approach allows a
much greater degree Of flexibility in the management of each institu-
tion, so long as the overall cost relationship is achieved. As noted
earlier, the budgeting of instructional operations on the basis of a
rate per SCH permits the academic administrator to determine that
combination of average salary and average SCH productivity per FTE
faculty member which is most appropriate to a given instructional unit.
Once the average salary level is determined, the particular faculty
rank and salary mix required to achieve that average may be ascer-
tained. Similarly, questions relating to the average teaching load and
the ave rage section size may be answered in light of the productivity
rate to be achieved and the various other demands being made on the
instructional unit.

Although each of the three state-wide procedures has as its
primary objective the determination of the total financial support
necessary to carry out the various educational programs of an institu-
tion, each method appears capable of making a much greater contri-
bution to effective educational management than it may have been given

credit for. Both the California and Florida procedures emphasize

43

staffing considerations which should be of prime concern to adminis—
trators in both day-to-day operations and in long-range planning. In
addition, the California approach also includes much of the required
ground-work associated with the scheduling Of courses, sections, and
facilities. And, in spite of the fact that the Indiana procedure is con-'
cerned chiefly with financial needs, the cost analyses upon which the
budget procedure is based yield a great quantity of data which could

be of considerable benefit to the management of educational operations.
Thus, in spite of the limitations imposed on these procedures relative
to their use in budget preparation only, it would appear that the various
approaches, or certain aspects thereof, applied in an intelligent manner
to internal budget considerations, might very well extend the utility

of objective budget concepts in a highly significant direction.

Summary

Three distinct approaches to Objective budget preparation
and review are illustrated by the procedures developed for the rather
diverse systems of publicly supported higher education in such states
as Florida, California, and Indiana. The formula type procedure
adopted by Florida and California have their roots in earlier appli-
cation Of the concept of student-faculty ratios. However, the two
procedures differ considerably in that the Florida approach imposes a
model based on institution-wide averages determined for selected

instructional levels, while the California procedure focuses upon the

44
staffing requirements of each individual course, as determined by a
particular combination of course and student mixes. The Indiana cost
analysis procedure, on the other hand, differs markedly from the other
two approaches in that it is concerned entirely with the cost implications
of student enrollments at the various instructional levels.

The similarity of inter-' and intra—institutional budget con-
siderations suggests the possibility that such objective budget pro-
cedures may have some utility in the budgeting of internal operations,
particularly in the budget category: Instruction and Departmental
Research. Thus, Chapter IV will discuss the implications of applying
each of these three state -wide budget procedures to the internal budget-

ing of academic departments of Michigan State University.

CHAPTER IV

APPLICATION OF OBJECTIVE BUDGET PROCEDURES

TO THE INTERNAL BUDGETING OF ACADEMIC DEPARTMENTS

General Considerations

 

Budget formulas and cost analyses have been employed with
reasonable success in a number of states to obtain more adequate
support and greater equity in the distribution of funds to various types
of public colleges and universities supported by a state. To allay fears
of greater external control of institutional operations through the mis-
use of formula derived budgets, however, there has been a general
agreement that such objective budget procedures are to be used for
budget preparation and review purposes only. Considering the extent
to which research data have been mis-used on occasion by well-meaning
but un—informed or partly informed administrative officials, some
authorities in the area of educational administration and finance have
even discouraged the use of Objective budget procedures in the internal

management of institutions. 1

 

lJohn Dale Russell, in Yardsticks and Formulas in University
Budgeting, p. 68; James Doi, "The Proper Use of Faculty Load Studies, "
in Studies of Coll_eg§ Faculty, (Boulder: Western Interstate Commission
on Higher Education, 1961), pp. 55-57; and John M. Evans and

 

 

45

46

Nevertheless, the problems of effective resource allocation
within an institution are of such importance to everyone concerned

that efforts to discover some of the proper or appropriate uses of

 

objective data and/or procedures in the budgeting of academic depart-
ments might prove highly beneficial and posSibly serve to counter some
of the mis-application of research or operational data in the future.
Moreover, the fact that each of the major objective budget procedures
utilized by the various states focuses upon the instructional program
as the primary determinant of budgetary need suggests that the oper-
ating units most closely associated with the instructional program
might well be the most appropriate level for applying objective budget
procedures. This would permit a return to the principle that budgets
should be built from the bottom up, rather than from the top down. 2

In spite of the wide variations in budget procedures illustrated
by the major approaches outlined in Chapter III, and in spite of the
general lack of concensus as-to the most important factors or consid-
erations in academic budgeting, an inspection of the basic elements of
each procedure reveals nothing to suggest that an Objective approach is

totally unsuited to the internal allocation of institutional resources. On

 

John W.. Hicks, Studies in Higher Education, Vol. 'XCI: An Approach
to Higher Educational Cost Analysis (Lafayette: Division of Educational
Reference, Purdue University, 196l),p. 26.

2 Thomas E. Glaze, Business Administration for Collgges and
Universities (Baton Rouge: Louisiana State University Press, 1962),
p. 129.

 

 

 

 

47

the contrary, the very fact that some of these procedures are designed
to focus attention on key policy questions is an indication that decisions
relating to operational budgets should have a comparable focus.

Regardless of the kind of budgetary approach followed --be
it laissez—faire or objective -- key policy decisions are made --
consciously or unconsciously. In the final analysis, therefore, the
soundness of all policy decisions depends upon the quality of judgment
exercised by responsible administrators. On such Officials rests the
responsibility for determining-the proper, or most appropriate rela-
tionship of the various educational cost factors at the operating level
in accordance with the expected contribution of each department to
the achievement of the overall objectives of the institution.

The basic danger in the application of formula or cost
analysis procedures to departmental budget considerations is that
inappropriate standards or performance expectations may be imposed.
Certainly, arbitrary and insensitive measures might be imposed on
departmental budget requests which could have a crippling effect on
some of the programs and activities that an institution might be
attempting to carry out. In this respect, the individual department

is typically concerned with the possibility of budgetary reductions;

 

from the point-of-view of the institution, however, the major concern
is that inappropriate measures of budgetary need might lead to over-
nourishment of some departments and corresponding under-nourishment

of others. In spite of the possibility of applying the wrong performance

48
standards or related budget measures in an Objective budget procedure,
there is little or no reason to suspect that the quality Of the judgment
exercised by the same officials would be any better under a traditional
budget approach.

One of the major objections to formula or cost analysis budget
procedures appears to be the fact that such approaches employ averages
and other statistical data as a form of fiscal shorthand in order to pro-
ject budget needs on a factorial basis. A general concern over the use
of averages with academic departments is that the practice is likely to
result in a leveling of all departments to a standard of mediocrity.
Although certain averages might be used as norms in an objective
budget approach, there appears to be no reason to assume that such
procedures are entirely dependent upon the use of institution-wide
averages if applied at the Operating level.

Consequently, to gain a better understanding of the feasibility
of, or relative contribution of formula or cost analysis procedures to
the budgeting of academic departments,three different budget approaches
similar to those used in the three state plans were applied to a number
of departments of Michigan State University. Also, to provide an em-
pirical basis upon which to judge the results of applying various types
of normative data, three sets of weighted averages, covering a variety

of factors, were developed for use with each procedure. The weighted

 

iLogan Wilson, “Analyzing and Evaluating Costs in Higher
Education,qucational Record, April, 1961, p. 102,

 

49
averages or "norms" were based on the performance and other
characteristics of 1) individual departments, 2) two groups of depart-
ments having similar instructional patterns, and 3) the combined
group of departments having .mix ed instructional patterns. For the
two procedures which base budget projections on staffing data, addi-
tional budget estimates were made using current salary data pertaining
to 1) the departments selected for the study, 2) the colleges represen-
ted by the selected departments, and 3) the entire university. Alter-
nate budget projections using regression analysis were developed from
group and combinedflllp historical data, to take into account the
relationship of cost to the size of a department's enrollment.

Figure 1 charts the various combinations of procedures and
norms applied to each of the academic departments, along with the
factors to be considered in subsequent analyses. In each combination,
certain variables are held constant to provide a 'measure of the dif-
ferences among procedures or in other variables. For example, the
objective budget methods were compared by applying departmental
norms throughout each procedure; the differences due to gr_ou_p and

combined group averages pertaining to staffing ratios (i. e. regular

 

faculty, graduate-assistants, and clerical and technical personnel)
were determined by applying a constant workload and FTE salary

under the course classification approach.

50

Fig. l. -- Combinations of Objective budget procedures and
normative data applied to selected academic departments

 

 

 

 

 

:5:
Procedure Norms Norms Norms Variable
Cost
Analysis C1 _______ C2 —————— C3—-— —Unit
(Indiana) I Costs
1
I
I
SCH l
Productivity :
(Florida) X1Y1Z1:—— X2Y221—-—X3Y3ZI~- Product.
| \ Norms
I \
l \
| X1Y1Z2—--X1YIZ3---—Sa1ary
l Norms
1
Course :
Classification Xllel-i- — Xlez 1---X1Y3Z 1-- —-—Staffing
(California) I ‘-\ ' Norms
I
l \
. X1Y122~~-—-—X1YIZ3--—--Salary
i Norms
Variable Budget Method
* C = Average Instructional Unit Cost subscripts:
X = Productivity or Student-Faculty Ratio 1 = Departmental
Y = Staffing Ratios -- Graduate-Assistant, 2 = Group/College
Clerical, etc. not 3 = Combined
Z = Average Salaries Group/University

Mg Includes Research, Public Service, and Admin. FTE
under the SCH Productivity Approach

51

Selection of Departments used in the Study

The departments included in the study are found in all major
universities. They were selected on the basis of both similarities
and differences. Although they vary cOnsiderably in size, each pro-
vides instruction of a service nature as well as advanced courses for
departmental majors. Each department offers both undergraduate and
graduate instruction -- leading to the doctorate. However, the depart-
ments also fall naturally into two groups which characterize laboratory
and non-laboratory type instruction.

The relative similarity of these departments was also pointed
up by the fact that, with one exception, all of the instructional units had
been affiliated with the College of Science and Arts prior to its reorgan-
ization into three separate colleges at the beginning of the 1962-63
fiscal year. Following this re-organization, three of the departments
were assigned to the College of Arts and Letters, seven to the College
of Natural Science, and four to the College of Social Science. The re-
maining department, formerly administered by the College of Business,
was assigned to the College of Social Science during the years 1962-64,
but was subsequently transferred back to the College of Business. Be-
cause of its natural relationship to the social sciences, however, it
was retained in the study.

Comparable data on any selected group of departments is

difficult to get over any length of time. This is illustrated by the fact

52
that one of the social science departments was divided into two sepa-
rate administrative units at the beginning of the 1964-65 fiscal year.
Because of the relatively small size of the newest department and the
difficulty in separating previous data, the two units have been treated
as one department. In addition, a new unit was created in 1964 to take
over the lower division service courses of two Of the natural science

departments included in the study.

Grouping Of the Departments for Comparison

 

The 15 departments selected for the study were divided into
two groups to facilitate comparison of departmental operations with
those of similar instructional units and to provide normative data based
on comparable programs. Although academic departments might be
grouped on a variety of characteristics, the distinction between labo-
ratory and non-laboratory instruction is essential for an analysis of
workloads, productivity, etc. , since the issue of credit-hours vs.
contact-hours as appropriate measures of workload becomes rather
acute with these two instructional patterns.

Because of their common reliance upon a lecture-discussion
approach to their instructional programs, nine of the departments
(including the departments in the Colleges Of Arts and Letters and
Social Science) were designated as Group I departments; the remaining
six departments were designated as Group II because of their common

use of laboratory experiences in the greater part of their instructional

53
Offerings. Fig. 2 charts the position of each department with
respect to its proportion of Fall quarter class sections taught in
laboratory-type instruction and the proportion of total departmental
student-credit hours produced in laboratory sections.

Fig. 2. -- Classification of laboratory and non-laboratory academic
departments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

>~
§ 3 .
1‘3 ' (k)
0
.O
53 s
.E 1L)
'8 (5)
g o (J)
“U N
8 (M)
p.
:12
U S
33 <A)(B)(c (N)
o D F G
g I (:E)
L (1H5)
o 10 20 5o 60 70 80

% Of Sections Taught in Laboratory

Source and Development Of Normative Data

Historical data on the selected departments were extracted

from various documents prepared by the Office of Institutional Research

 

4Section Size Analysis, Fall Term(s) 1962-65 (East Lansing:
Office of Institutional Research, Michigan State University, June, 1963,

1964, 1965).

54

(OIR) at Michigan State University for the years, 1962-65. Data on
instructional unit costs were-taken from cost study reports of the
Michigan Council of State College Presidents, or from data collected

by OIR for use therein. Some of the historical and statistical data de-
rived therefrom relative to the departmental characteristics or opera-
tional patterns of the departments included in the study are presented in
Tables l-a through 6b of Appendix B. Where possible, a three year
weighted average of the operationalyears, 1962-65 has been computed
as follows:

Wtd. Avg. = 3A + ZB + C where "A" represents the most

6

recent year, "B" the next most recent year, etc. The use of three
years' data provides a more realistic estimate of a department's Oper-
ations than that portrayed by a single year. And, by weighting the data
as indicated above, the influence of recent Operations is given primary
emphasis to account for any trends that may be developing. The
weighted average is also useful in the projection Of long-range work-
load. 5

The various data used with objective budget procedures

typically represent only one segment of an academic year -- generally

the Fall Quarter or Semester. The primary reason for this is that the

 

5Elwin F. Cammack, "A Projection of Student Credit Hours
by Department, for 1967-68 and 1972-73" (East Lansing: Office of
Institutional Research, Michigan State University, November, 1963),
(Mmeographed).

55

budget calendar seldom allows time for the compilation of complete full—
year data on the most recent year's operation. Thus, estimates are
generally based on Fall data, under the assumption that the resources
which are adequate for that term will prove adequate for subsequent
academic periods. It is generally also assumed that departments will
endeavor to equalize the workloads among the various terms of the

academic year.

Departmental Volume, Productivity and Staffing Data

 

Since both formula procedures employed in the study are
based upon Fall data, most of the material presented in the tables in
Appendix B represent the Fall Quarter of each academic year. Table
l-a, for example, presents the weighted average (SCH) instructional
load of each department during the Fall Quarters of 1962-65; Table l-b
presents the same instructional load, expressed as FTE Students.

Similar SCH data for the regular academic year are presented in

 

Table l-c along with an index figure which represents the proportion of
the three-term student—credit—hours which are produced during the Fall
Quarter. Although the departments average a little over one third of
their SCH production during the Fall, it will be noted that certain depart-
ments experience a considerably heavier load during that period, due to
the heavy enrollment in certain of their lower division service courses
and/ or the fairly heavy attrition involved.

The proportion of student-credit—hours produced at each level,

56

shown in Table 1-d , provides a clue to the nature of a department's
instructional program as well as an indication of the probable cost
picture. In other words, the department which produces a large pro-
portion of its student credit hours at the freshman and sophomore
level and correspondingly few SCH at the graduate level may be ex-
pected to have larger sections, lower salary costs per student credit
hour, and relatively fewer faculty members than a department which
has the same total SCH volume but which conducts the major portion
of its instructional program at the upper-division or graduate levels. 6

The chief determinant of departmental budget requirements is
the overall size of the academic staff which is predicated on the functions
to be performed, or the manner in which faculty resources are em-
ployed. Table 21-8. presents the three year weighted averages of each
department relative to the number of FTE faculty assigned to each of
the functions performed by academic departments at Michigan State

University. As defined in the FaculEy Time Distribution Report(s)

 

from which these data were extracted, a full-time-equivalent position

is one in which a staff member received 100 % Of the salary prescribed

 

6The University College at Michigan State University presents
an example Of relatively low-cost instruction attained through "efficient"
scheduling of very large enrollments. While enrollment patterns at
the various student levels generally produce higher unit costs at the
more advanced levels, it is interesting to note that one of the depart-
ments of the study which happens to produce an unusually large per-
centage of upper division student-credit-hours actually shows a lower
unit cost at the upper division than it has at the lower level.

57

for a given period according to the annual rate of the appointment. 7
In other words, a staff member receiving only half of the rate pre-
scribed for a given term would be reported as a O. 50 FTE by the
employing department.

As defined in OIR data, two graduate-assistant appointments
constitute an FTE faculty position. In the absence of such staffing data
in departmental budget records, the number Of graduate-assistant FTE
positions allocated to each department of the study was determined by
dividing the total sum listed in the annual budget for such positions by
the FTE salary of $4, 800. It should be noted, however, that the actual
number of graduate assistants employed at any one time may vary con-
siderably from the annual FTE positions shown in Table 2-a. Neverthe-'
less, it was necessary in subsequent budget projections that the annual
relationship of graduate-assistant and regular academic positions be
maintained in order to present the most realistic picture of depart-
mental staffing needs.

Table 2-b presents the distribution of faculty time among the
various functions of each department, expressed as a ratio Of the‘num-l

ber of FTE faculty positions in instruction to each FTE position in re-

search, professional service, etc. , along with the proportion of total

 

NO distinction is made between 10 and 12 month appointments
in Office of Institutional Research data at present. However, for the
particular departments of the study, there were few 12 month faculty
appointments other than those of department chairman.

58

academic positions filled by graduate-assistants and the ratio of
clerical personnel to regular academic positions.

The relationship of instructional volume to the size of staff
is Often expressed in terms of a student-faculty ratio or as an instruc-
tional productivity rate which represents the average number of student-
credit-hours to be produced per FTE faculty member. Table 3 presents
the weighted average productivity rates and student-faculty ratios cov-
ering both the instructional faculty and the total faculty of each depart-

ment during the period, 1962-65.

Departmental Cost Data Lacking comparable unit cost data

 

for the three-year period included in the study, the weighted average
salary cost per student-credit-hour (all levels) was estimated for each
department and group from the budget data presented in Table 4 by
dividing the combined academic and clerical salaries by the weighted
average SCH for the same period. Similar treatment of the labor,
supplies and services, and equipment allocations produced estimates
of the weighted average operating costs per SCH.

Additional estimates of the instructional unit costs by student
level were derived from the weighted average unit cost data by applying
established relative cost figures to the particular student mix of each

department and group. 8 Upon determining the average unit costs for

 

"Unit Cost Study: Instruction and Departmental Research, ‘
1963-64, " Michigan Council of State College Presidents. (Lansing:
MCSCP, June 1965), (Mimeographed); "relative costs" are determined

59

each group and the combined group of departments by student level,
these cost rates were then applied to the corresponding proportion
of SCH produced at each level to derive the weighted average unit
cost for each department under different normative classifications.

Unit costs by student level for salaries and operating expenses
are presented in Tables 5—a and 6—a; weighted average costs per SCH
developed for subsequent budget projections, are presented in Tables

5-b and 6-b .

Application of Objective Budget Procedures

The Cost Analysis Approach Once the necessary cost

 

data on past operations have been obtained, the cost analysis approach
provides a simple and direct method of estimating total budget require-
ments of an organization or activity. This method involves the pro-
jection Of probable workload in appropriate units and the subsequent
application of the corresponding cost per unit, adjusted as required

for anticipated changes in price or salary levels of the various cost

 

by dividing upper division or graduate level costs by lower division
unit costs; "average unit cost" refers to the overall unit cost of all
student-credit-hours generated by a department; the contribution of
each instructional cost level to the average unit cost may be deter-
mined by the equation:

Ca = ClPl + CZPZ + c3p3 +C4p4, where c = unit cost by level
and p = proportion of SCH at each level; average relative cost follows
a similar relationship: .

C1. = rlpl + rzpz + r3p3 +..r4p4, where r = relative cost by
student level.

Then: Ca/Cr = C1, c2 = Cer’ c3 = clr3, etc.

60

factors involved. The product of the projected work volume and the cost
per unit provides an overall estimate of budget requirements for a given
category such as salaries, operating expenses, or total budget.

Utilizing 1965-66 enrollment estimates Of instructional unit
costs based on departmental, group, and combined group data (Table l-e)
three sets of budget projections were calculated for each department
and are presented in Tables 7-a and 7—b of Appendix C. Table 7-c
presents supplementary projections based on regression analysis of
group and combined group data.

Although the salaries and operating expense budgets would
normally be combined to determine total departmental budget require-
ments, the two categories were kept separate for subsequent analyses.
As indicated in Chapter III, the Florida and Indiana budget procedures
both employ the cost approach in the projection of operating expense; the
California procedure considers individual requests based on historical
trends, which is similar to the cost approach. Thus, the major
differences among the three budget procedures occur in the area of
staffing and/or salaries budgets, rather than with the overall budget

procedure.

The SCH Productivity ApprOach As previously indicated,

 

the productivity approach employs a series of steps which first provide
estimates of the various departmental cost factors required for a given
instructional volume and then applys appropriate dollar values on each

element to arrive at the total budget needs. Because faculty and staff

61

salaries constitute the major portion of the typical academic budget,
the major effort under the SCH productivity approach is directed
toward the calculation of the number of staff members required to
handle the anticipated volume of instruction, given certain levels of
SCH productivity. The number of positions or the proportion of total
staff time which can be assigned to other departmental functions such
as research, professional service, or administrative and committee
work are then related to the size of the teaching staff.

Utilizing actual Fall '65 student-credit-hour data as the
instructional volume and the weighted average SCH productivity
rates established for each department, group, and combined group,
three different estimates of the teaching staff requirements were ob-
tained for each department. Then, to determine the number of additional
staff positions to be allocated to the other academic functions of each
department, the three corresponding sets of staffing ratios obtained
previously were applied to the three teaching staff estimates. The sub-
total of the teaching, research, and professional service FTE positions
then served as a base for determining the number of administrative
positions required. The projection of clerical personnel requirements
was similarly derived by applying the appropriate ratios to the estimated

number of regular faculty positions. 9 The results of these staffing

 

9The Florida procedure relates clerical FTE to the total
academic FTE staff. However, to insure that the budget projections
for the selected departments would approximate the existing situation,
the number of regular FTE faculty positions was used as a base for

 

62

estimates are presented in Tables 8-2, 8-b, and 8-c.

It will be noted that the total faculty requirements derived
from the three sets Of weighted average productivity rates tend to in-
crease as group heterogeneity increases. The application of avera e
productivity rates of like departments generally favors the larger de-
partments which generally have productivity levels that exceed the
group mean; thus, when the mean productivity rate is applied to the
high volume of the larger departments, additional positions are indicated.
By the same token, the mean productivity rate for the combined
group Of laboratory and non-laboratory departments is considerably
lower than the actual productivity rates of the larger departments,
regardless of the type of programs. Once again, the mean produc-
tivity rate, when applied to a large volume, calls for more teaching
staff members than suggested by either the departmental or group
norms.

As indicated in Table 8-d, the application of regression
analysis in the determination of total FTE faculty requirements re-
sults in a more equitable distribution of faculty resources among large
and small departments. In contrast to the results of average productivity

rates, the total FTE faculty requirements actually decline under the

 

 

estimating clerical positions. Product moment correlations of actual
staffing patterns of the 15 departments indicate a much greater relation-
ship between regular faculty and clerical personnel (r. = . 60) than
between £231 academic and clerical personnel (r. = . l4).

63
regression approach.

Following the development of staffing requirements, average
salary data for 1965-66 on each department, the three colleges repre-
sented in the study, and the entire university, were then applied to
each of the projected number of FTE positions in each category of
academic and clerical personnel to determine the financial support
needed under the various staffing and salary combinations. The re-
sulting budget projections for personal services are presented in

Tables 9-a and 9-b.

The Course Classification Approach Unlike the previous

 

approaches, which employ gross performance or workload data re-
lating to relatively broad segments of the instructional program, the
course classification procedure recognizes the budgetary implications
of curricular offerings at the level of the individual course. Assuming
a relatively even distribution of course Offerings throughout the year,
each authorized course which is normally Offered during the Fall term
is classified according to the nature of the course -- the objectives,
methodology, etc. EaCh classification suggests an optimum section
size and the corresponding—cut-off points at which student enrollments
dictate the scheduling of additional sections.

The classification of courses, under the California Staffing
Formula, gives primary emphasis to instructional arrangements or

methodology, such as lecture, lecture-discussion, seminar, and

64

various types of laboratory or activity experiences. Each classification
imposes a certain weight upon the number of credits awarded for each
course (section), to account for differences in contact hours and credits
of teaching among different types of instructional programs. 10

With the California classification scheme as a guide, each of
some 700 fixed credit courses taught by the 15 departments of the study
was assigned a classification which most nearly approximated the
manner in which the course had been conducted during the past three
years. Where decided Changes had occurred during the period, how-
ever, the most recent instructional pattern was used as the basis for
classifying a course. The prescribed cut-off points associated with
each classification were then applied to the actual course enrollments
for the Fall Quarter, 1965, to determine the number of required
sections for each course.

The number of FTE faculty required to handle each depart-

ment's fixed-credit course load was then determined from the total

 

wggged units_c_>_f teaching required for the number of sections esti-
mated. A standard number of teaching units per FTE faculty member
was then divided into the total units of teaching required to derive the
instructional FTE required by each department. In each Of the Cali.-
fornia State Colleges, the standard teaching load is 12 units. Allowing
for the increased emphasis placed on departmental research in an

institution such as Michigan State University, an arbitrary standard

 

lOMiller, op. cit., pp. 174-186.

65

teaching load of 9 units was applied to the departmental course-load

to allow 25 % of the average faculty assignment to be devoted to depart-
mental research. 11 However, the resulting staffing estimates produced
a total complement which fell short Of the actual 1965-66 budgeted
positions and projected FTE positions derived by the SCH productivity
method; thus, the standard teaching load was reduced to 7. 25 units tO
allow for more realistic comparison of the three budget approaches.

To provide additional comparative budget projections based on regular
creditspf teaching instead of weighted credits (units) a standard (mean)
teaching load of 6. 29 credits was divided into the total credits of teaching
required for the number of projected sections to be Offered by each
department.

The California standards pertaining to independent study and
research type courses, which specify student-faculty ratios of 36:1 and
25: 1 at the undergraduate and graduate levels, were applied to all Inde-
pendent Study/Variable Credit course enrollments (IND/VAR) Of each
department in the calculation of total FTE faculty requirements.

Because the classification of fixed-credit courses was based
upon actual practice, the number of sections and the corresponding
teaching units projected for each department approximated the actual

registration pattern for the Fall Quarter, 1965. In the area of IND/VAR

 

11
Since the time distribution data of Table Z-a show approxi-

mately 77-79 % of the total faculty time devoted to instruction, this
approximation of a standard faculty load appeared reasonable.

66

courses, however, the application of student-faculty ratios resulted
in a marked variation from existing practice.
In accordance with state -wide cost study definitions, Michigan
State University expresses IND/VAR workload as the average number of
credits carried by the students enrolled with a given instructor under
a separate section number. For example, a variable credit course
enrolling 6 students for a total of 27 student-credit-hours would credit
the instructor involved with 4. 5 credits of teaching for the course. By
the same token, the instructor who supervises one student in an inde-
pendent study or research project is reported as teaching the same
number of credits as the student has enrolled for -- which also happens
to be the average credits carried. It is entirely possible, therefore, to
show a faculty member as teaching 18-20 credits or more, when in
fact his total teaching load may be limited to supervising only 3-5 students
who happen to be enrolled under different courSe numbers. Such wide
variation in the actual workload represented by the average credits
carried in IND/VAR courses in turn creates an erroneous picture of
the actual teaching loads of an individual staff member or department.
The application of the course classification procedure results
in a single estimate of the total faculty requirements of a department,
given a standard teaching load, the specific course offerings and their
classifications, and the particular enrollments projected for a specific
quarter. Nevertheless, the actual financial support required may be

varied considerably according to policy decisions relative to the

67
distribution of faculty ranks, the relationships of average faculty
salaries from rank to rank, the extent to which temporary faculty or
graduate-assistants are utilized in the instructional program, and
the level of clerical and technical support to be provided.

Since the majority Of the California State Colleges are basic-
ally undergraduate institutions, the California staffing formula makes
no specific allowance for graduate-assistant type teaching positions.
Consequently, to make the results of the course classification approach
comparable to the unit cost and SCH productivity approaches, the three
sets of ratios employed in the SCH productivity procedure were applied
to the staffing estimates derived under the California system to deter-
mine the number of regular faculty, graduate-assistants, and clerical
personnel for each department.

A breakdown of the number of teaching units required under
each course classification is presented for each department in Table
lO-a of Appendix C; the related academic staff requirements are pre-
sented in Table lO—b. Academic staff requirements based on credits-
of—teaching are presented in Table lO—c. The application of departmental,
college, and all-university salary averages to each personnel classifi-
cation provided several budget combinations for comparison with budget
projections derived from the other budget approaches. The result of

eight such combinations are presented in Tables ll-a and ll-b.

68

Summary

Historical data on 15 selected academic departments of
Michigan State University were applied to 3 different Objective budget
procedures employed in state-wide budgeting to provide a basis for
comparison of the alternate procedures and an analysis of the
implications of their use in internal budgeting. Various staffing
and budget estimates, based on instructional volume recorded for the
Fall Quarter, 1965, were derived from the application of departmental
and group averages pertaining to such factors as instructional unit
costs, SCH productivity, staffing ratios, etc. The results Of the
application of the various normative data in each of the budget pro-
cedures are presented in Appendix C and will be analyzed in the

following chapter.

CHAPTER V
COMPARATIVE ANALYSIS OF ALTERNATE BUDGET PROCEDURES

An analysis of the Objective budget procedures examined in
this study must take into account a number of factors. First of all,
the results obtained from the application of the alternate procedures
should be examined from the standpoint of their similarities and differ-
ences to determine the extent to which the budget projections reflect or
deviate from current practice. Second, since the actual results depend
to a great extent on the nature of the normative data utilized in the
computations, the underlying assumptions and the influence of various
normative standards should be thoroughly examined. Third, the pos-
sible contributions of each Objective budget procedure to more effective
budgeting and management of departmental resources should be consi-
dered. Finally, an estimate of the overall utility of objective budget
procedures for departmental budgeting must be made in terms of the
complexity of the procedures and the relative values derived for the

costs incurred.

69

70

Analysis of the Results Obtained from the

 

Application of Objective Budget Procedures

 

The equitable distribution of resources is an ideal toward
which all Objective procedures are supposedly aimed. However, the
elusiveness of such a goal becomes readily apparent upon examining
the results of applying the various procedures, for the rather extensive
variation in budget projections raises the question of which approach is
the most equitable, and ultimately, the question, "What makes a budget
allocation equitable ? "

As illustrated graphically in Fig. 3, the differences in salary
budget projections are rather extensive for certain departments, and in
some cases all objective estimates differ appreciably from the actual
1965-66 departmental salary budgets. Each radial line of Fig. 3, (p; 71);
represents a department of the study and the level of support allocated
by each procedure is represented by the length of the line segment with-
in the closed figures. 1 In each configuration, the total funds available

have been adjusted to the actual funding level of the 1965-66 academic

 

1Illustrations adapted from Harry Williams, Planning for

Effective Resource Allocation in Universities, American Council on
Education, Commission on Administrative Affairs (Washington, D. C. ,
1966), pp. 4-5.

 

 

71

Fig. 3. -- Comparison of departmental budget projections derived
from the application of alternate budget procedures with actual
1965-66 budget levels

(A) /"'

11
\\ /f'
\ f",

 

..
\

\.
/
/

 

 

 

(B 'Z' \
\\‘ \ .
m ft"?
(M
i 1
(11'
LEGEND

(1) Actual 1965-66 Budget (4) Course Classification Approach--

(2) Unit Cost Approach Units-of-Teaching

(3) SCH Productivity (5) Course Classification Approach--
Approach Credits-of-Teaching

72
year. 2 The resulting budget allocations illustrate the situation
faced by the academic administrator who is confronted with the task
of dividing up limited resources among highly competitive programs
or activities; a decision to increase the support in one area requires
a corresponding decrease in certain others. While few departments
would quarrel with a possible increase in support, those. departments
which would stand to have their budgets cut in any way under any or all
of the Objective approaches could hardly be expected to welcome the
adoption of such procedures.

The salary budget projections presented in Fig. 3 resulted
from the application of departmental norms to each Of the three pro-
cedures examined. That is, instructional staff requirements were
based on weighted average departmental productivity data, departmental
staffing ratios determined the particular faculty mix and the level of
clerical support, and departmental average salary data for the 1965—66
academic year were applied to the staffing requirements to derive
the total departmental salaries budgets. In the case of the cost approach,
weighted average departmental unit costs were used to project total

salary requirements

 

ZBudget adjustments were based on the percentage increase

or decrease necessary to make budget totals equal actual 1965-66
level. Other adjustment procedures were utilized involving unit-

cost rates per SCH and per FETF. While the various adjustments
resulted in fairly similar results, the percentage increase or decrease
method is the only one in which the shape of the budget configuration
remains the same as the original.

73

The extent of the similarity of each objective budget configu-
ration to the actual 1965-66 allocation pattern is revealed by the gen-
eral shape of each configuration and by product-moment correlations
of . 93, . 96, and . 88 for the cost analysis, SCH productivity, and
course classification approaches respectively, when compared to the
actual budget distribution. The fact that SCH productivity correlates
the highest with actual budget support suggests that some form of
student-faculty ratio has apparently been used in conjunction with en-
rollment estimates in the allocation of departmental budgets during the
years covered by the study. In those departments where the actual
budget level varied appreciably from all objective budget estimates,
much of the difference can be explained by the fact that the actual
instructional volume of these departments also differed considerably
from expectations based on previous SCH levels.

For example, all SCH estimates of Department (L) fell short
of actual SCH volume during the fall of 1965 by some 3, 000 student-
credit-hours; Department (G) exceeded estimates by at least 900 SCH
due to a recent increase in the credit value of all courses from 3 to
5 credits. On the other hand, Departments (C), (K), and (O) experi-
enced a decline in anticipated enrollments amounting to some 800 to
l, 800 SCH during the Fall Quarter, 1965.

As might have been expected, the patterns of budget distri-

bution Of the cost analysis and SCH productivity approaches are quite

 

 

similar (r. = 0. 98). Given the same relationship Of cost factors and

74
the same student mix, the resultingbudget projections would be
identical. A partial explanation of the differences between the unit-
cost and SCH productivity estimates is that different student mixes
may be represented in the Fall totals utilized under the productivity
approach and the full academic year estimates employed under the cost
approach. Also, the instructional unit-cost mix of each department was
based on the relative cost patterns reported for the 1963—64 academic
year; increased enrollments and possible changes in student mix sub-
sequent to that year may have altered the departmental cost patterns
somewhat. At any rate, the major differences seem to occur primarily

in the larger departments where any errors of projection are magnified

 

by being spread over a greater number of units.
The budget configurations portrayed in Fig. 3 for the course-

classification approach differs considerably from either of the other

 

two objective procedures and from the actual budget distribution pattern.
The first of the two sets of course-classification derived estimates
followed the exact California procedure which weights certain teaching
situations such as laboratory or activity programs according to the

contact hours rather than credit hours involved. The second pattern

 

shown in Fig. 3 for the course-classification approach was derived
from unweighted credits-Of-teaching to provide an indicationof the
amount of influence laboratory sections have played in the determination
Of actual departmental budgets.

The configurations of the two sets of budget projections

75
under the course-classification approach are fairly similar (r. =. 93).
However, the credits-pf—teaching allocations tend to resemble some
of the patterns obtained when various combined—group normative
standards were applied to the other budget procedures, in that the lab-
oratory science departments were consistently penalized while the non-
laboratory programs were benefited. Since the California procedure
imposes a standard teaching load and, in effect, a standard allowance
for all other functions, those departments which tend to place
greater emphasis on research and less emphasis on instruction (D)
(G)(N), were allocated considerably less support under the California
procedure than they received under the other approaches. At the same
time, however, Departments (D) and (G) manage to achieve a reasonably
high SCH productivity level by employing large lecture sections for
much of their instructional programs. Thus, those departments which
produce the largest proportion of their SCH insmall sections with
correspondingly larger teaching loads profited considerably under the
California faculty staffing formula.

Therefore, one of the basic issues confronting academic
administrators, with respect to the internal application of objective
budget procedures, concerns the question of whether _i_zlp_l_it or o_l_1t_p_l_l£
is the more appropriate workload to employ for an equitable distribution
of resources. The next question to be answered concerns the feasibility
of standardizing faculty workload. If the assumption is made that work-

load is best expressed in terms of a standard number of teaching units

76
per FTE faculty, then the course-classification approach appears to
be suitable.

On the other hand, if it is assumed that the number of students
taught, or the number of SCH generated, per FTEF is a more appro-
priate measure of teaching load, then one of the other Objective pro-
cedures appears to be in Order. In view of the actual budget allocation
pattern, it appears that the latter assumption has prevailed in most of
the departments of the study. However, in the absence of specified
teaching load standards, the different types of departments included in
the study may well practice a combination approach which takes into
account both credit—hours and contact-hours.

For example one study conducted on M. S. U. teaching loads
revealed that faculty members tend to regard both credit-hours and
contact-hours as important considerations in the assignment of a per-
centage of their full time workload. Except in TV or large lecture
sections, faculty members listed the number of students enrolled as
of secondary importance. Faculty members who had had experience
with closed circuit TV instruction generally reported spending con-
siderably more time in preparation than they would have for regular
lecture type courses (presumably because of their increased exposure
to students and colleagues). 3

Thus, the percentage of full-time workload reported for a

 

3Joseph L. Saupe, "Relationships Among Various Measures

of Teaching Load --' From Fall, 1962 Faculty Load Data" (East Lansing:
Office of Institutional Research, Michigan State University).

77
course offering a given number of credits or requiring a certain
number of contact hours is likely to reflect a number Of factors such
as the preparation involved for the initial and subsequent offering of
a given course, the preparation and coordination required for multiple
sections of the same course, the number of different courses Offered
in one term requiring individual preparations, the amount of written
work or examinations to be read, etc. Some institutions have attempted
to work out various weighting schemes to take into account such factors
in order to equalize teaching assignments. However, in a major uni-
versity the size of Michigan State, such a detailed accounting of staff
effort involving hundreds of faculty is hardly feasible -- considering
the price that would be paid just to achieve uniformity Of workload.
Moreover, total standardization of workloads, as revealed by some of
the budget projections, may not prove to be as appropriate a policy

as one might suspect.

Analysis of the Results

 

of Applying Alternate Normative Standards

 

Staffing Norms As illustrated in Fig. 4 and Fig. 5, (pp. 78—

 

79), the budget configurations resulting from the use of group or com-
bined group averages are quite similar in the cost and SCH productivity
approaches. Under both procedures,- the use Of group averages pertain-
ing to similar departments resulted in a major shift of funds away from

the smaller departments to certain Of the larger departments. When

78

Fig. 4. -- Comparison of departmental budget projections derived
frOm the application of alternate instructional cost norms (unit cost

approach and regression analysis)

 

/’ \\ // // i
. \ / [I ----(4)
‘ a—"T—fl. -::=‘4-'_ ‘ J)
(' .. s /. K’" -’“".
,~.‘\ \,\ /,' ‘ ’ ;<(
\ \ s/ 0' .—-- \ _ 1’ 1.--?!

LEGEND

Unit Cost Approach Regpession Analysis
(1) Departmental Cost / SCH (4) Group Norm

(2) Group Cost / SCH (5) Combined Group Norm
(3) Combined Group Cost / SCH

79
Fig. 5. -- Comparison of departmental budget projections derived

from the application of alternate productivity norms (SCH produc-
tivity approach)

.(L)

 

(1)--

 

 

(NU / / \\ (D)

 

 

(3W ./ — (J)

(5)\ ‘ / /, ,--"/,
(4 “‘\ I. V ' \tK)

\

.'

 

 

I N .1.
LEGEND ( 2'"
"'""""""""' ( ) )
SCH Productivity Approach Regression Analysis
(1) Departmental Norms (4) Group Norm
(2) Group Norms (5) Combined Group Norm

(3) Combined Group Norms

80

averages relating to the combined group of departments were applied

 

as normative standards, the shifting of funds became even more
necessary. However, in this case, the laboratory science departments,
which generally have lower productivity rates and correspondingly
higher instructional unit costs, received sizable reductions in their
salary budgets, while the social science and humanities departments

generally profited from the use of combined group averages. Here

 

again, those departments which produce a large percentage of their
student-credit-hours in large sections and/or at a relatively low cost,
received the largest increases in budget support.

The use of regression data under both the unit-cost and SCH
productivity approaches resulted in allocation patterns which correlated
higher with the actual 1965-66 budget pattern than did the corresponding
allocations determined on the basis of average . Under the unit-cost
approach the correlation of regression estimates increased from . 85

to . 87 and from . 79 to . 90 under group and combined group norms

 

respectively. With the SCH productivity approach, regression data
produced budget allocations which correlate the same as average data
with actual 1965-66 budget pattern (r. = . 93 and . 90). However, under
the use Of regression data, the effect of size was reduced to the extent
that smaller departments received allocations which equaled‘or ex-

ceeded the levels projected under departmental norms.

 

The changes which occur in alternate budget projections when

different normative data are applied to the course-classification

81
approach are illustrated in Fig. 6 (p.82). In this case, the general
distribution pattern is not as greatly affected since the teaching load
and related functions are already standardized under the California
procedure. Once again, the larger departments show the largest
variation in budget allocation because any deviation from rou or

combined group averages becomes magnified when spread over a

 

larger number of faculty positions, etc.

Under each of the objective budget procedures, the most pr-
nounced changes in allocation patterns derived from group or com-
bined group norms occur chiefly in those departments which have
shown unusual faculty-mixes, or to a lesser extent, different levels
of clerical support. Department (L), for example, employs more than
half of its total FTE faculty at the graduate-assistant level -- almost
twice the average percentage -- because of its heavy laboratory re-
quirements. Thus, each time a group standard is imposed, Depart-
ment (L) receives a considerably larger proportion of regular faculty
positions, requiring an increase in salary support of some $6, 600 to
$7, 200 per FTEF.

Another example of unusual staffing pattern is found in
Department (A), which employs one graduate assistant for every 5. 9
regular teaching positions -- as contrasted with Department (L)'s ratio
of 1. 9:1. Thus, Department (A) is consistently penalized under an
average ratio derived from group or combined group staffing patterns.

At the same time, Department (A) is further penalized for its smaller

82

Fig. 6. -- Comparison of departmental budget projections derived
from the application of alternate staffing norms (course classifio
' cation approach)

(A) ///f/:l&‘(‘/ J4.“(3)
M5; \ /'\.
\ \ / 1
\ ( \
\//
\ /‘\.

 

 

(B ,. '_ \ / / I], jl/(G)
\

i \ \ \ ////
\ ‘ \\ // "I \
(It ___....... / :-~ .. 71....
\ /.L \\ , //
( ) . . ‘7?)
( ) ) )
LEGEND ‘
Units-of-Teachixi Credits-of-Teach‘ipg

 

 

(1) Departmental Staffing Ratios (4) Departmental Staffing
(2) Group Staffing Ratios Ratios
(3) Combined Group Staffing Ratios

83
sections and larger teaching loads because of the below average SCH
productivity which results; consequently, budget projections are sub—
stantially lower under group or combined group staffing norms than they

are under the level suggested by departmental averages.

Salary Norms The application of different salary levels

 

based on departmental, college, and all-university averages is illus-
trated in Fig. 7 ( p.84). In about half of the departments, chiefly the
smaller ones, the application of different faculty and clerical salary
averages makes little difference in the overall salary budgets.
Generally speaking, the larger departments of this study tend to have
salary averages which differ somewhat from that of their respective
colleges or the all-university salary level -- probably due to differ-
ences in faculty rank distribution related to faculty mix.

While it is possible that significant differences in salary
levels exist between various departments of the study when examined
in detail, it is quite probable that the largest measure of difference
is due to variations in faculty mix. In other words, the use of college
or all-university salary averages for the ranks of instructor through
professor carries with it the assumption that each department's
rank and salary distribution is the same as the larger unit. Seldom,
however, do departments have the same requirements for faculty
members at the various ranks or for the same salary increments with-

in ranks .

84

Fig. 7. -- Comparison of departmental budget projections derived
from the application of alternate salary norms (SCH productivity '
approach)

(1)-7/ . (L)

’ \ /

 

\ /
\
(I) ‘-——--"""". ”‘rxm ' ---(3)

(M \ / / \\ \ .v/
' 1' . ' (J)
LEGEND
(1) Departmental Salary Averages

(2) College Salary Averages
(3) All-University Salary Averages

85

Under normal conditions, the average departmental salaries
for either faculty or clerical personnel are determined largely by
such factors as l) the relative maturity or length of service Of the
various staff members, 2) the rate of departmental growth and the
availability of junior faculty to fill new positions, 3) efforts to develop
new programs or upgrade existing departmental programs by import-
ing faculty at the higher ranks, and 4) the general range of Opportunities
of departmental staff members both inside and outside the academic

market.

Operating Expense Norms The sharp difference in operating

 

expense budgets resulting from the application Of group and combined
group averages is illustrated in Fig. 8 (p. 86). While it would require
considerable investigation to determine whether departmental expense
patterns have any rationalbasis, it is clearly evident that the use of
m or combined gm averages for such heterogeneous categories
of expenditures as labor, supplies and services, and equipment is
totally unsatisfactory -- particularly with such widely different depart-
ments as the laboratory science and humanities departments.

Without exception, the use of combined w operating ex-
pense averages caused a decided shift Of funds from the laboratory to
the non-laboratory programs. Department (A), for example, had its
operational expense budget increased from $7;, 000 under departmental
norms to over $47, 000 under combined group norms; Departments (L)

and (N), on the other hand, suffered reductions from $223, 000 to

86

Fig. 8. -- Comparison of departmental budget projections derived
from the application of alternate operating expense unit cost norms

(L)

 

 

 

LEGEND

(1) Departmental Norms )
(2) Group Norms
(3) Combined Group Norms

87
$51, 000 and $104, 000 to $28, 000 respectively. Part of the reason
for these major shifts in operating expense budgets is of course due to
the fact that certain departments normally require far more in the way
of supplies and materials or equipment for their particular instructional
programs than others. However, since the expense categories are so
broad and cover so many expenditures unrelated to the volume Of SCH
generated, it is entirely possible that some departments have received
Operating expense budgets which cannot be justified on any basis except

historical precedent.
The Validity of Budgptarj Relationships and Group Normative Data

From the results derived from the various combinations Of
budget procedures and normative standards, it becomes quite clear
that the application of any one procedure requires a full understanding
of the underlying assumptions and sound judgment concerning the deter-
mination of appropriate performance standards, rates, or ratios.

The validity of the results of any objective procedure thus depends

on the validity of the normative standards applied. The cause for in-
creased equity and effectiveness in the allocation and management of
institutional resources can be served or defeated by objective budget
procedures -- depending upon the quality of judgment exercised in the
selection of those cost factors which may be appropriately standardized
for all departments and in the determination of suitable levels of per-

formance, appropriate staffing ratios, etc.

88
In other words, to satisfactorily adapt any of the objective

procedures to internal budget considerations, academic administrators

 

must_b_e prepared_t9_ decide which factors may legitimately he standard-

ized fp_r groups (_)_f degagrtments a_n_d which factors must_t_>_e considered o_n

 

 

 

33 individual basis -- in order to properly account for the unique

 

functions and activities of different departments. Thus, the proper
application of objective budget procedures to academic departments

might require ggeater rather than less attention to the particular re-

 

 

quirements of individual departments. However, by making explicit
some of the considerations entering into the allocation of resources
to each department, the Objective budget procedure provides a useful
frame of reference from which departmental performance can be
assessed and the effectiveness of resource utilization can be evaluated.
In each of the budget procedures examined in this study, the
instructional program is recognized, either directly or indirectly, as
the fundamental purpose of higher education institutions. Other func-
tions or supporting activities are treated as a fairly small proportion
of the full-time-equivalent faculty workload, or related in some man-
ner to the overall size of the instructional faculty. In a major univer-
sity, however, functions Such as research and public service are
generally regarded as fundamental purposes of the institution. Where
the various publics served by the institution are willing tO accept such
functions as legitimate ends to be supported as fully as possible, research

and public service activities may be budgeted on their own merits.

89

However, as illustrated by the three objective procedures examined,
research and public service functions are treated more or less as an
instructional complement along with academic advising or administra-
tive or committee work.

Even though the various functions performed by academic
departments should be kept in proper balance, it is doubtful that the
demands placed on individual departments are ever the same, and quite
probably, the research or public service functions of individual depart-
ments are much more related to current societal needs than to the size
of the instructional staff. What appears to be needed, therefore, is
some means of distinguishing those functions or staff activities which
are directly related to the size of departmental enrollments and/or
instructional staff so that the other functions can be properly related
to more appropriate workload measures or otherwise justified on their
own merits.

It is important to note that when the size of the instructional
staff is used as a base for calculating the number of FTE positions to
be allocated to each department for other functions, any errors in the
projection of teaching staff requirements are compounded and thus raise
some doubt about the ultimate achievement of equity. Since all functions
are included in departmental unit cost rates under the Indiana approach,
similar errors in the projection of SCH volume can result in under-
support or over-support of functions that are unrelated to the size of

the instructional program.

90
As already suggested, the use of a cost rate per SCH in
determining gross operating expense requirements is of questionable
validity at the department level if group averages of gross expendi-
tures are employed. In order to derive valid cost rates for use as
normative standards, all operating expenses must be grouped on a
homogeneous basis and should be related to the most appropriate base

obtainable. In other words, certain expenditures that are common tp

 

all departments maype related :0 t_h_e instructional program and vary

 

 

 

 

directly with the sizep£_t_h_e total enrollment; other expenditures may

 

be related to student enrollments 13y instructional level. Some expendi-

 

 

tures may be more properly related to the number of FTE faculty

 

members, or to the total salary expenditures. Other expenditures

 

may relate entirely to the number of office machines to be main-
tained, or to the new Office equipment required to support each new
staff position added, etc.

The budget category covering all types Of equipment should
also be sub-divided into homogeneous groups wherever possible. Many
expenditures classified as instructional equipment often constitute
major purchases which are properly classified as capital expenditures
rather than Operating expenses. Office equipment likewise may repre-
sent a long term investment in some Cases and Operating expense in
others. It is obvious, then, that any attempt to combine such a group
Of heterogeneous budget items as those represented by the gross cate-

gories of labor, supplies and services, and equipment, can hardly be

 

91
expected to result in valid cost rates for application to any type Of
Objective budget procedure.

Unless the various elements that make up the total operating
budget Of academic departments can “be grouped on a homogeneous basis
and related to appropriate measures of workload or need, the indis-
criminant application of group derived normative standards very likely
will lead to results that are generally invalid or inequitable -- even
though impartial. This is not to say that objective procedures and
normative standards are totally inappropriate to the budgeting of
academic departments, however,

Before employing normative standards to individual depart-
ments, administrative officials must first determine what the "reason-
able" levels of performance or activity are for the functions performed
by different Sizes and types of academic departments and then attempt
to ascertain the validity of departmental deviations from such norms.
Since the differences which currently exist among similar departments
may well be due as much to historical accident as to conscious design,
it might present no major problems in the long run if greater stand-

ardization of certain areas of budget support were effected.

92
The Contribution of Objective Budget Procedures to

More Effective Management of Institutional Resources

 

The utility of objective budget procedures must be judged
in terms of the overall contribution they make to greater rationality
in budgeting and greater effectiveness in the management of resources.
An acceptable procedure should not only assist department heads to
spell out the needs of their departments, but also should provide
analytical data necessary for university officials to better evaluate
individual budget requests in light of established objectives and the
total resources available. At the same time, the kind of response
that a given procedure is likely to generate on the part of faculty and
administrators is also of prime importance. In other words, does a
given budget procedure tend to draw a negative response, or does it
encourage faculty and staff to begin asking more meaningful and valid
questions about the application of all resources?

For an institution as complex and diverse in programs as
Michigan State University, the Florida budget procedure based on

SCH productivity appears to most closely approximate the desired

 

features outlined above. Although the Florida procedure places
primary emphasis on the instructional program by relating all other
functions and staffing needs to the size of the instructional staff, it
nevertheless is the only one of the three approaches examined which
makes explicit the amount of involvement in, or committment Of

resources to, such functions as research, public service, administration,

93
etc. The relationship of instruction and other functional expendi-
tures is thus brought out into the open for full consideration. Such a
feature provides needed yardsticks or standards for evaluating both
budget requests and actual operatingperformance.

The SCH productivity approach would undoubtedly prove to be

 

of greatest value to internal budgeting of academic departments if,
instead of applying group averages for normative data, standards de-
rived from regression data were applied to productivity levels, staffing
ratios, etc. Regression analysis takes into account the fixed and var-
iable cost nature of departmental budgets, and the increased produc-
tivity levels which may be expected as departmental enrollments expand.

Another feature of the SCH productivity approach that seems

 

particularly appropriate to a major university is the fact that it makes
explicit the desired ratio of temporary and regular faculty and the
ratio of regular and student employees filling non-academic positions.
Such considerations are very important, not only from the standpoint of
current salary levels and the optimization of faculty-mix, but also from
the point-of—view of fringe benefits to be funded both currently and as
long-range programs; 1. e. , sabbatical leaves, retirement programs,
sick leave benefits, etc.

Each point of decision in the Florida approach has a decided
effect on the tOtal budget requirement of a given fiscal period and carries
important implications for future years as well. However, the various

decision points also provide opportunities for selective adjustments

94
of budget requests to provide a more judicious allocation of available
re sources. With a functional breakdown such as provided under the
Florida approach, various measures are provided for evaluating sub-
sequent performance and for checking on the reasons behind variances
in budgeted and actual performance.

The cost analysis procedure, by way of contrast, provides

 

a simple and direct method of projecting current expenditure patterns
into the future, but by presenting only summary unit-costs it offers
academic officials no information relative to the combination of re-
sources involved, nor to the adequacy of such resources in;achieving
assigned purposes. While detailed unit-costs on each course offered
by a department can be useful in presenting areas in need of manage-
ment attention, it must be remembered that such costs reflect condi-
tions Of the p29 which may or may not be encountered in the future.
Thus, the use of historical costs carries with it the assumption that the
particular combination of resources associated with a particular instruc-
tional volume was most suited to the departmental needs of the time
and that the same combination of resources will be most appropriate

to the objectives of a future period.

 

A more appropriate use of the cost-analysis approach would
involve the projection of future budget requirements on the basis of

estimated costs, which should be derived from careful study of the

 

alternate combinations of resources or cost factors that pertain to

future Objectives and levels of workload. For the most part, such

95
an application Of the cost-analysis procedure would parallel the
development of instructional budgets under the SCH productivity

approach, and the resulting budget projections would be identical-

 

The course-classification procedure appears to be most sen-
sitive to, and thus provides a better picture of, the existing nature Of a
department's instructional program -- and the reasons for differences
in average productivity or unit-costs. While the procedure is perhaps
suitable for application to the small single-purpose institution, it is
rather unlikely that such an approach would prove to be suitable or
acceptable to a large multi-purpose university offering several thousand
courses. Aside from raising the issue of optimum section sizes for
different types of courses, the California staffing formula really does
not encourage much effort toward improvement of teaching methodology
or other innovations to increase efficiency and effectiveness of operations.
The fact that each of the major cost factors -- average salaries, teaching
load, section sizes, and related functions -- are more or less standard-
ized under the procedure would seem to reduce even further any incen-
tive to effect better utilization of resources.

As a matter of fact, any department which cared to subvert
the system could effectively lighten its teaching load by resisting any
efforts to change the classification of discussion type sections to lecture
sections as the total course enrollments increase to the point where many
of the smaller sections must be scheduled. Under the California pro-

cedure, the more sections required, the larger the teaching staff; the

96
larger the teaching staff, the more research, professional service,
or administrative positions may be authorized. Then, even though
contact hours might remain at the standard level, the savings in pre-
paration time for multiple section courses could be utilized for such
other purposes.

Even though such purposes may be perfectly legitimate func-
tions of an academic department, the added strain on the physical
facilities required to accommodate many small course sections im-
poses additional costs -- both capital and operating -- which are
seldom reckoned with and which might be better utilized in direct
support of non-instructional activities. By the same token, under the

SCH productivity approach, some departments might attempt to in-

 

crease the "margin" required to support non-instructional interests
by consistently offering as many large lecture sections as possible in
order to achieve high SCH productivity with the minimum of faculty
effort -- possibly at the expense of students.

The historical patterns of certain departments of this study
suggest that although the size of the faculty is generally increased in
accordance with enrollment expansions, quite often a relatively small
proportion of the added faculty effort is actually allocated to the in-
structional program, while research and administrative activities
receive a much larger share of the increase in faculty resources.
Such a pattern of resource application illustrates the desirability of

budgetingpy function, with due consideration of marginal or

97

or differential needs.

 

Log-Range Planning While the primary focus of this

 

study has been on the application of objective budget procedures to the
preparation and review of operating budgets of academic departments,
some consideration should be given also to their application and possible
contributions to long-range planning and program development. Ade-
quate planning requires the projection of a number of alternative
courses of action to provide a means of comparing and analyzing the
implications and relative payoff of each alternative. 4 The longer the
period of time included in academic plans, the more flexibility educa-
tors have in setting up alternative courses of action; thus, the more
alternatives available for evaluation, the greater the chance that opti-
mization of resources may occur. 5

At each level and time period of planning, the requirements
for objective data differ; the longer the period under consideration, the
less detailed information is required. The Objective procedure called
for in such a situation should thus be concerned chiefly with broad policy
questions and with summary costs. The development of programs to
implement long-range objectives requires considerably more detail

concerning the various combinations of resources required under each

 

C. R. Carpenter, "Imaginative Alternatives to our Present
Methods of Extension Work, " College and University Business,
September, 1960, pp. 33-34.

5Williams, pp. <_:_i__t_., pp. 40-42

98
alternate course of action. Therefore, a different procedure might be
most appropriate at the programming level.

As greater attention is given to long-range planning and pro-
gramming, regardless of the type of Objective procedures and the nature
of objective data employed, problems of equitable distribution and effec-
tive utilization of resources are apt to take care of themselves. Never-
theless, the translation of departmental programs and activities spanning
several years into the future will require the kind of information and
analyses which objective procedures are based upon. As budgeting
becomes more closely geared to long-range plans and programs of the
future, prior years' budgets should assume less and less importance in

the determination of the next year's appropriation.

Practical Considerations in the Application

 

of Objective Budget Procedures

 

As a form Of fiscal shorthand, objective budget procedures
must be capable of translating educational plans into financial terms ~-
quickly and economically. If they are to make significant improvements
in the budget preparation and review process, such procedures must
focus on the right questions and be capable of presenting the subse-
quent answers in quantitative terms. If they are to contribute some-
thing to the logic or rationality of budget decisions, such procedures
must also possess a rational or logical nature.

Of the three state-wide budget approaches examined in this

99

study, the cost-analysis approach is the most simple and direct

 

method for determining total departmental budget needs, assuming

that the necessary cost data are already available. However, if the
detailed procedures followed in the collection and processing of instruc-
tional cost data were to be charged to the budget process alone, the

Indiana cost-analysis approach could hardly be classified as simple,

 

direct, or economical !
Because staffing projections must be determined before finan-

cial need can be determined under the SCH productivity approach, the

 

 

Florida procedure generates considerably more detail in its step-by-

step projection of departmental budget requirements. Both the cost-

 

analysis and SCH productivity approaches provide a degree of sensi-

 

tivity to departmental differences and to changing needs by taking into
account the differential cost rates and productivity rates encountered
at the various instructional levels. Attention to differences in student-

mix adds a few steps to the SCH productivity procedure, but may be

 

considered well worth the effort since the procedure offers considerable
flexibility and sensitivity to differing requirements.

The California course-classification procedure is by far the
most complex and time-consuming of the three approaches -- even
after all courses have been classified. Whereas the first two pro-
cedures base their projections on gross SCH data by instructional level,
the California approach requires a course-by-course projection Of en-

rollments, to which the appropriate cut-off levels are applied. Because

100

of its great amount of detail, the California staffing formula gene rally
has been regarded as a highly accurate means of determining instruc-
tional needs. However, the accuracy of staffing projections and ulti-
mately the corresponding budget projections is highly dependent upon

the accuracy with which future workloads or instructional volume may
be forecast.

In the case of the 15 departments of this study, experimentation

with the projection of instructional volume for the Fall Quarter, 1965,

revealed that total SCH volume, projected by instructional level, pro-

 

vided the most accurate estimates. Total departmental instructional
volume based on course-by-course enrollment projections, derived
from the previous Fall Quarter's enrollment patterns, showed consid-
erably greater error. With student-credit-hour'data fr om the four
preceding Fall Quarters, it was possible to project total SCH volume
within 1 1/2 % of the actual volume of Fall uarter, 1965. On the other
hand, using a refined computer program to project course-by-course
enrollments from the previous Fall Quarter patterns, the resulting
projections fell short of actual volume by 9 1/4 %. 6

Even with the SCH projections, there was substantial variation
between estimated and actual SCH volume, particularly with those depart-

ments which experienced a drop in enrollments. The amount of variation

 

6Joseph L. Saupe, "A Technique for Projecting College or
University Instructional Loads" (East Lansing: Office of Instructional
Research, Michigan State University,.June, 1966.

101

that enters into workload projections thus suggests that the equity of
budget allocations when based on workload projections, depends to a
large extent on the accuracy of forecasting or subsequent adjustment
of budgets according to actual volume.

Since the application of any one of the objective procedures
presented would require computer application for the more than seventy
departments of Michigan State University, the question of complexity
of procedures is one which would become less significant after the
initial program was written. By the same token, the use of objective
procedures based on workload projections would undoubtedly spur the
development of more refined computer projection, and the problem of
accuracy in forecasting perhaps would be ironed out in due time. How-
ever, the quality of the results obtained from any computer program
would still depend on the quality of human judgment that is fed into the

computer .
Summary

The variation in budget projections derived from different
combinations Of Objective procedures and various combinations of
normative data indicate that the degree of equity achieved depends
upon the way in which workload is defined and measured. For some
academic departments, it makes little difference, but for certain
departments the budget allocation resulting from the application of

objective procedures varies considerably, depending upon whether

102

measures of departmental 1_n_p_l_i£ or output are the primary determinants
of staffing requirements. Similarly, budget allocations can be influen-
ced greatly by unusual faculty—mix requirements.

However, in spite of the caution with which normative data
or standards should be applied to objective procedures, such procedures
appear to offer a rational basis for allocating resources and a better
means of evaluating the effectiveness of resource utilization. In order
to select a suitable Objective procedure and appropriate normative data,
academic Officials must first provide answers to several questions con-
cerning those factors which should be standardized and those which

should be determined on an individual basis. By reducing appropriate

 

budget considerations to objective terms, university officials can
better utilize their time and talents in giving Closer attention to those
budget factors or activities which must be evaluated subjectively.
The most significant contribution of objective budget pro-
cedures may very well be in the area of long-range planning and
program development, where they may be employed to project a
wide variety of alternative courses of action for evaluation and subse-
quent selection of preferred alternatives. Given such long-range
perspective and direction, annual operating budgets should thus be
reasonably simple to derive objectively and, most certainly, they
would then reflect a planned rather than an accidental development of

academic departments and their various programs.

CHAPTER v1

SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS

FOR FUTURE RESEARCH

As typically employed by colleges and universities, the budget
preparation and review process generally involves a comparison of
proposed budgets with current levels of support -- with little consid-
eration given to the actual use made of existing resources or to the
values derived therefrom. Under such an approach, academic admini-
strators are forced to compete for limited funds by making the most
persuasive budget presentation possible -- employing whatever assort-
ment of facts necessary to present evidence of the need for increased
allocations. As a result, such budget requests tend to emphasize only
those aspects of departmental operations which dramatize the need
for increased support and tend also to gloss over those areas which
are likely to raise questions concerning the effectiveness of resource
utilization.

The achievement of equitable budgetary allocations and more
effective utilization of institutional resources requires, in some cases,
a complete re-orientation of administrative thinking toward the appli-
cation of_a_l_i resources -- not simply financial resources. Moreover,

instead of accepting a given administrative unit or program as worthy

103

104
of Continuous support merely because it presently exists, adminis-
trators need to focus attention on the objectives to be served by such
programs or organizational units and attempt to determine the best
combination of resources available for the attainment of such goals.
An objective-oriented approach may well turn up areas Of activity
which no longer are appropriate to the times, or which have costs
that are out of all proportion to the values received from the perpetu-
ation of such activities. At the same time, proposed or developing
programs may be judged to be muCh more appropriate to current
institutional objectives and thus worthy of increased emphasis and
support. Consequently, budgetary considerations need to focus on
the job or function to be performed rather than on the expenditure
levels of a previous budget period.

Such a re-orientation of budgetary thinking has occurred in
many governmental operations from the federal government on down
to the municipal level -- under the title of program or performance
budgeting. Similar developments have occurred in some state-wide
systems of higher education where more objective approaches to
budget preparation and review have taken the form of cost analysis
or formula budgeting. These objective procedures have been employed
at the institutional level to assist state budget officials and legislative
bodies in making more equitable distribution of the funds appropriated
for higher education.

Although certain aspects of budget formulas and cost analysis

105
procedures have been associated with sound management practice in
many institutions for a number of years, the determination of total
institutional needs through objective budget procedures is a relatively
recent development. However, the. application of similar procedures
to internal budget matters has been more or less limited to non-
academic areas and has even been discouraged by some authorities --
primarily because Of the possible abuses that might result from their
application to academic departments and programs.

The variety of formula and cost analysis procedures employed
in state-wide budgeting for higher education suggests that the appropriate-
ness of any given procedure is related to the nature of the institutions
covered and the political forces at work at a given point in time. Thus,
an objective procedure which may be considered appropriate for a group
of institutions in one state may not be deemed as suitable for a different
combination of institutions in another state. Similarly, if applied
internally, one type of Objective procedure might be judged suitable
for a particular combination of educational programs at one institution,
while a different procedure might be considered more appropriate for

the kinds Of programs at a different type of institution.

Conclusions

 

The results of applying state -wide budget procedures to the
internal budgeting of academic departments seem to indicate 1) that
university budgeting can be moved in the direction of greater objec-

tivity and equity through the selective application of various types of

106
formula or cost analysis techniques; 2) that a more rational approach to
effective resource allocation and utilization is possible with objective
budget procedures than with traditional budget approaches; 3) that
given adequate study and careful testing, objective procedures can be
developed to the point where they are both sensitive to departmental
differences and flexible enough to accommodate the inevitable changes
that occur from year to year in any dynamic institution; and 4) that by
making explicit the various relationships that enter into resource
utilization, more effective management of resources and better eval-
uation of management effort are possible.

However, the results of applying state -wide budget pro-
cedures to academic departments also suggest that the use of formulas
or cost analysis does not automatically guarantee effective and equitable
budgeting and that considerable caution is required in the application
thereof. Furthermore, the achievement of equitable budget allocations
appears to rest not so much with the procedures as with the kinds of
normative data or standards that are applied under each procedure.
Since each type of objective budget approach is based on certain
assumptions, full understanding of their relevance to a given situation
should precede the adoption of a given procedure. The equity of
departmental budget allocations under an Objective procedure depends
to a great extent upon the definition of‘equity -- expressed or implied --
along with the degree of standardization that such a definition imposes.

The development of appropriate normative data depends upon

107
a clear understanding of those factors which appropriately may be
standardized for groups of similar departments or for all departments
of a university and of those factors which should be determined solely
on the basis of individual judgment. The selection of various budget
devices for inclusion in an Objective procedure should attempt to
counteract the common tendency to avoid the more difficult decisions

by relating non-measurable activities to other quantifiable activities,

 

or. to some "convenient" unit that actually bears no relationship to the
activity in question. Budgeting_by function thus appears to offer the
most rational approach to effective resource allocation -- even though
it requires considerably more subjective analysis and evaluation.
Nevertheless, a functional approach requires a constant search for

and evaluation of appropriate performance standards or other. measures
of activity relating to the various functions performed by academic
departments.

In the last analysis, acceptance of objective budget procedures
and the selection of a particular approach depends to a great extent.
upon the administrative philosophy and practice at a given institution.

If institutional practice follows a. highly centralized pattern of adminis-
trative control, then a much greater degree of standardization of work—
load, staffing ratios, ,etc. can be expected; standards of performance

are apt to be narrowly defined. In such a case, the course-classification
approach might find ready acceptance. If an institution employs a

de—centralized control pattern, a minimum of standardization is likely

108
to be prescribed -- allowing academic departments considerable
latitude for determining their own areas of emphasis and subsequent
courses of action. In this case, the cost analysis approach, with its
high degree of flexibility, might tend to have major appeal.

On the other hand, if an institution's administrators seek to
achieve decentralized control of operations with centralized coordination,
the SCH productivity approach appears to offer an excellent compromise.
Under such a procedure, departments could be free to spell out the
peculiar needs of their programs and to suggest the most effective
combination of resources required to effectively carry out their assigned
objectives. At the same time, however, academic administrators
would have a useful means of reviewing operations to insure that
departmental activities are consonant with the overall objectives and
programs of the institution.

Regardless of the administrative style of an institution, the
achievement of more effective utilization of resources ultimately
requires much greater emphasis on long—range planning and programming,
both of which require objective procedures for estimating or projecting
the various resource requirements associated with future goals and
purposes. Thus, it is at the long-range planning and programming
levels that Objective budget procedures may be able to make the most
positive and significant contribution to more effective budgeting. Never-
theless, if objective procedures do nothing more than insure that

more of the "right questions" are posed during the budget preparation

109
and review process, the increased awareness of the relationships
between departmental resources and Objectives should contribute
greatly to a more effective utilization Of the total resources available
to an institution.

Objective budget procedures in the hands of knowledgeable
and responsible administrators appear to be much like the "wonder
drugs" at the disposal of the modern physician. Used properly in an
appropriate situation, each offers promise of greater control over
the situation; at the same time, neither presents a cure-all for all
problems and the possible side effects demand that they not be used

indi s c riminantly .

Suggestions for Further Research

 

High on the list of additional studies needed in connection
with the application of any objective budget procedure is the need
for more refined normative standards in the area of staffing and in
the area of operating expenses. In both the academic and non-academic
personnel areas, much more needs to be known about departmental
staffing patterns and the major causes of the variation that exists
among departments. An important issue, from the standpoint of
academic quality, concerns the increasing use of graduate assistants
in direct teaching roles where they sometimes produce a disproportionate
share of student-credit-hours for their departments. Thus, further

investigations in the area of faculty-mix might well attempt to determine.

1 10
the Optimum ratios of regular and temporary faculty. Likewise, the
question of desirable and realistic levels of administrative and clerical
support for different types Of faculty bears investigation.

In spite of the relatively small percentage of the total aca-
demic budget allocated to operating expenses, the magnitude of such
budget allocations is certainly sufficient to warrant considerable study
of the various expenditure Classifications included in the budget cate-

gories of labor, supplies and services, and eguipment to determine

 

 

which classifications lend themselves to budget formulas and to what
factors such expenditures appropriately are related.

Another area that is highly significant to any consideration
of budgetary requirements concerns the combined sources of funds
available to academic departments, rather than simply a review of
general fund allocations; i. e. , to what extent do research grants or
contracts, royalties on departmental publications, endowment income,
special student fees, Dean's contingency funds, etc. change the over-
all picture of a department's income and expenditure patterns? The
investigation of the combined source and applicatiOn of funds perhaps
raises a highly sensitive issue which relates directly to such matters
as departmental initiative, achievements, and morale. Nevertheless,
without having some idea of the total resources available to departments--
regardless of the source -- academic administrators cannot begin to

determine the adequacy or equity of any_general fund budget allocation.

 

By the same token, without the total picture of departmental resources

111

and activities, a university administration can never determine to
what extent general fund monies are being used to subsidize such
activities as sponsored research projects or vice-versa.

In most institutions of higher education, the assumption
is often made that the achievement of quality education is simply
a matter of obtaining additional funds to support and extend current
programs and activities. However, since little is presently known
about the budget patterns associated with "high quality" programs or
departments, further research might also include investigation of
the resource allocation patterns of departments which are regarded
as "centers of excellence" to determine the extent to which the
budgets of such departments deviate from "equitable" levels sug-

gested by Objective budget procedures.

APPENDIX A

DEFINITIONS

Academic Personnel -- employees Of an institution who are primarily

 

and directly involved in instructional, research, and pro-
fessional service responsibilities or the administration
thereof. Normally these include all personnel holding the
ranks of professor, associate professor, assistant pro-
fessor, instructor, plus part-time faculty, lecturers,
graduate fellows and assistants or other titles given students
who also have responsibility for teaching a course or part

of a course, professional librarians, deans, and other
administrative personnel associated with the functions listed
above.

Administration and Committee -- committee and other activities

 

related to general administration at the department, college,
or university level. Excludes committee activities that can
be specifically associated with instruction, research, or
professional service, which are properly reported under the
appropriate function.

Administration, General -- with reference to the functional classi-

 

Class --

fication of expenditures -- the general executive and adminis-
trative offices serving the institution as a whole. For budget
purposes, salaries of officers, secretaries and clerks,

office expense and supplies, travel, the office equipment of
the general executives' offices concerned with the adminis-
tration of the institution as a whole are included under this
classification. Such accounts include the governing board of
the institution, the president, and central executive Offices
and their staffs.

a formally organized group of students meeting at the same
time with a teaching staff member in a given place. Some
courses are taught in several different groups meeting at
different times and possibly with different teaching staff
members; each of these groups is considered a class. All
other instruction, e. g. , independent study, thesis direction,
etc. are considered "non-organized" and therefore do not
fall within the definition of a class.

113

114

Class Size, Weighted Average -- the weighted average size of sections
of a given type is calculated by weighting the enrollment in
each section by the credit value of the section. Algebraically,
it is the ratio of student credit hours to credits of teaching.

 

Cost Analysis -- a variety of procedures which utilize objective data
and which is carried on as a series of logical steps. An
objective procedure can be repeated and, so long as the same
objective data are used, the result will be the same.

 

Course -- normally the smallest category of subject matter recog-
nized in the official records of an institution; customarily
assigned a credit hour value indicating the numerical value
it carries toward degree requirements.

Credits of Teaching, Average -- the average number of actual, imputed,
and weighted average credit-hours of teaching performed by a
full-time equivalent teaching staff member.

 

Credit-Hour -- the numerical value a course carries toward degree
requirements; may be a fixed or variable value.

 

 

Equipment -- durable goods or other movable and non-consumable
items.
Full-Time Equivalent Students -- the quotient resulting from the

 

division of student credit hours elected by students at a
certain class level by a figure assumed to represent a full-
time student load at that level. As prescribed by the Michigan
Council of State College Presidents, the quarterly full-time
student load is assumed to be 15. 5 credit hours at the under-
graduate level; 12 credit hours at the Master's level; and 8
credit hours at the Doctoral level.

Full-Time Eguivalent (Personnel) —— for one person, the decimal
number (1. O or less) representing the average full-time
equivalence of that person's total duties and responsibilities
throughout the academic year, generally based on the terms
of that person's employment contract.

Formulas -- an Objective procedure for estimating future budgetary
requirements of an institution through the manipulation
of Objective data about future programs and relationships
between programs and costs, in such a way as to derive an
estimate of future costs. In practice, the term formula is
often applied to an individual device relating to specific
activities or to a series of formulas covering a variety of
activities.

 

115

General Fund -- student fee and State—supported revenue and expense
items -- for educational and general purposes involved with
the State budget process.

 

Imputed Credits -- credit hours assigned to courses which are offered
by academic divisions of the institution but which do not regu-
larly carry credit, or credit hours assigned to sub-courses
(e. g. , lecture, laboratory, or quiz sections) to reflect that
portion of the total course credit which each sub-course
represents.

Instruction -- activities involved in teaching fixed and variable credit
undergraduate and graduate courses, including preparation,
evaluation, and student conferences; academic advising;
direction of or consultation on dissertations; service on
doctoral committees; course, curriculum and program plan-
ning; and other activities associated most directly with the
instructional program.

 

Levels of Students -- categories in terms of which numbers of students
and student credit hours are reported for cost analyses;
include Lower Division (freshmen and sophomores), Upper
Division (juniors and seniors), Master's level (graduate
students working at the level of the Master's degree or the
Sixth-year programs in Education), Doctoral level (students
working beyond the normal Master's level toward the Ph. D. ,
Ed. D. or equivalent) with "special" students assigned to one
Of the above categories as deemed appropriate.

Non-Academic Personnel -- employees of an institution who are not
included in the categories of teaching or non-teaching per—
sonnel.

Non-Teaching Academic Personnel -- professional or administrative
personnel (as opposed to technical, clerical, service and
laboring personnel) who have academic titles in the areas Of
research, counseling, administration, teaching, or the library,

but who are paid for primary functions other than the teaching
function.

Objective Data -- quantified information which is expressed in uniform
units Of measurement which can be manipulated mathematically.
This includes information concerning programs and activities,
costs, or the relationship between programs and costs.

Obyective Procedure -- a procedure which involves the use of objective
data and which is carried on as a series of logical steps. An

116

objective procedure can be repeated and, so long as the same
objective data are used, the result will be the same

Professional Service -- activities in which a faculty member's pro-
fessional competence is made available to the general public
or to special groups. Includes non-credit Continuing Edu-
cation activities; speeches and direct service to lay groups
or individuals; unremunerated consultation within or outside
of the University; radio and television appearances; and
editorial or committee service to scholarly or professional
organizations.

 

Research, Creative and Scholarly -- all unsponsored research,
creative, and scholarly activities, excluding class prepara-
tion and preparation for professional service activities.
Includes planning, carrying out, and reporting of individual
or departmental (including "All University" supported)
research; professional writing; and artistic and other
creative activities.

 

Research, Organized -- with reference to the functional classifi-
cation of expenditures for Michigan institutions -- separately
organized research divisions of the institution, such as
research bureaus, research institutes, and other individually
budgeted research projects and investigations; does not include
departmental research which is not separately budgeted or
financed, and does not include research performed under
contract. '

 

Student-Credit-Hour -- a unit of instructional productivity representing
one student electing one actual or imputed credit-hour of
instruction for one academic term.

 

Supplies and Other Expense -- consumable goods, travel, hourly
labor, telephone, and any other miscellaneous expenses in-
curred by the instructional unit excluding those reported
under “academic personnel, " "non-academic personnel, "
and "equipment. "

 

Teaching Staff Member -- a member of the academic staff who has
direct responsibility for teaching a course or part thereof.

 

Weighted Average Credits -- the credit hour value ascribed to a
4 course carrying variable credit, computed by dividing the
total student credit hours elected by the number of students
enrolled.

 

APPENDIX B

118

TABLE l-a. -- Weighted average instructional volume in student—credit-

hours, fall quarters, 1962-65

 

Lower Division Upper Division

 

 

 

 

 

 

 

 

D Graduate Total
3"“ SCH SCH SCH SCH
Group I
(A) 8,363 3, 927 646 12, 936
(B) 8,649 5,559 627 14,835
(C) 2,912 2,118 202 5,232
(D) 5,518 3,856 1,330 10,704
(E) 2, 322 1,070 256 3, 648
(F) 21,619 3,462 1,133 26,214
(G) 3,740 4,404 687 8,831
(H) 10,145 5,339 1,768 17,252
(I) 4,656 3,775 970 9,401
Total 67,924 33,510 7,619 109,053
Group II
(J) 2, 461 1, 345 383 4,189
(K) 1, 330 987 288 2, 605
(L) 9,048 3,138 840 13,026
(M) 817 644 265 1, 726
(N) 4,880 988 803 6, 671
(O) l, 994 2,828 258 5, 080
Total 20,530 9, 930 2,837 33,297
Combined
Total 88,454 43,440 10,456 142, 350
Source: Volume of Instruction Analysis, Fall '62, Fall '63, Fall '64

 

Office of Institutional Research, Michigan State University

119

TABLE l-b. -- Weighted average full-time-equivalent students of selected
departments, Fall '62 -- Fall '64

 

 

 

 

 

 

 

Dept Undergrad. Masters Doctoral Total
° FTES FTES FTES FTES
Group I
(A) 792.9 34.0 29. 7 856.6
(B) 916.6 46.2 9.1 971.9
(C) 324.5 15.0 3.0 342.5
(D) 604.8 104.0 10.3 719.1
(E) 218.8 13.6 11.5 243.9
(F) 1,618.1 83.4 16.5 1,718.0
(G) 525.4 41.1 24.2 590.7
(H) 999.0 93.5 80.8 1,173.3
(I) 543.9 58.3 33.8 636.0
Total 6, 544. 0 489.1 217.1 7, 250. 2
Group II
(J) 245.5 24.3 11.4 281.2
(K) 149.5 11.1 19.4 180.0
(L) 786.2 35.9 51.1 873.2
(M) 94.3 14.6 11.1 120.0
(N) 378. 6 39.5 41.2 459.3
(O) 311.1 15.4 9.1 335.6
Total 1,965.2 140.8 143. 3 2,249. 3
Combined 8,509.2 629. 9 360.4 9,499.5

Total

120

TABLE l-c. -- Academic year and weighted average student-credit-
hours of selected departments, 1962—-1965

 

 

 

Dept 1962-63 1963-64 1964-65 Wtd. Avg. Fall SCH1
' SCH SCH SCH SCH Index
Group I
(A) 29,163 36, 386 41, 297 37, 638 0. 3437
(13) 37,357 41,008 45,447 42,620 0.3481
(C) 13, 600 13,195 13,654 13,492 0. 3878
(D) 27, 970 31,427 30, 854 30, 565 0. 3502
(E) 9, 011 10,592 12, 372 11,219 0.3252
(F) 52,687 58, 744 72;.647 64,687 0.4052
(G) 20,243 24,845 30,213 26,762 0.3300
(H) 46, 055 49, 902 59,168 53, 895 0. 3201
(1) 27,364 31,688 26,663 28,455 0.3304
Total 263, 450 297, 787 332, 315 309, 334 0.3525
Group II
(J) 9. 950 11,679 13,811 12,457 0.3363
(K) 7,105 7, 697 8,166 7, 833 0.3326
(L) 30,990 31,552 36,442 33,904 0.3842
(14) 4,361 4,762 4,732 4,680 0.3688
(N) 14, 941 16,899 20, 522 18,384 0.3629
(0) 15, 015 15,788 15,034 15,282 0. 3324
Total 82, 362 88, 377 98, 707 92, 541 0.3598
Combined
Total 345, 812 386,164 431, 022 401, 876 0.3542

 

Source: Volume of Instruction Analysis, 1962-63, 1963-64, & 1964-65,

 

Office of Institutional Research, Michigan State University

121

 

 

 

Group

TABLE" l—d. —- Proportion of weighted average Fall student-credit-
hours taught at each instructional level of selected departments,
1962-1965
Lower Division Upper Division 'Masters Doctoral
DeP'~ SCH SCH SCH SCH
GroupI 0.6228 0.3072 0.0539 0.0161
(A) 0.6465 0.3035 0.0315 0.0185
(B) 0.5830 0. 3747 0.0374 0.0049
(C) 0.5564 0.4047 0.0343 0.0046
(D) 0.5155 0.3602 0.1166 0.0077
(E) 0.6365 0.2935 0.0449 0.0251
(F) 0.8248 0.1320 0.0382 0.0050
(G) 0.4235 0.4988 0.0558 0.0219
(H) 0.5880 0. 3094 0.0651 0.0375
(I) 0.4953 0.4016 0.0744 0.0287
Group II 0. 6166 0. 2982 0. 0508 0. 0344
(J) 0.5876 0.3211 0.0696 0.0217
(K) 0.5106 0.3788 0.0511 0.0595
(L) 0.6946 0.2409 0.0331 0.0314
(M) 0.4734 0.3731 0.1019 0.0516
(N) 0.7315 0.1481 0.0711 0.0493
(O) 0.3926 0.5566 0.0364 0. 0143
Combined
0.6213 0.3051 0.0532 0.0204

 

122

TABLE 1-e. -- Actual Fall '65 and projected 1965-66 student-
credit-hours of selected departments

 

 

Department Fall '65 SCH Proj. '65-66 SCH
(A) 16, 546 48,141
(B) 16, 501 47,403
(C) 4, 781 13, 935

.(D) 13,043 37,244
(E) 4, 517 13,890
(F) 34, 395 84, 884
(G) 13, 356 40, 473
(H) 23, 607 73, 749
(1) 11,503 34,815
(J) 6,534 19,429
(K) 2, 014 6, 055
(L) 18, 468 48, 069
(M) 1, 841 4, 992
(N) 8, 249 22, 731
(O) 3,876 11, 661

Total 179, 231 507, 471

 

123

TABLE 2-a. -- Weighted average full-time equivalent faculty of selected
departments, 1962-65 (by function)

 

 

 

 

 

 

 

 

 

 

Dept. Instr. Research Prof.Serv. Admin. Total Grad.Asst.
FTEF FTEF FTEF FTEF FTEF FETF
GroupI
(A) 36.1 3.6 0.2 2.6 42.5 6.1
(B) 27.8 3.0 0.3 2.1 33.2 11.0
(C) 13.9 1.1 0.2 1.6 16.8 3.7
(D) 24.0 4.6 0.2 1.9 30.7 6.0
(E) 8.0 1.3 0.3 1.2 10.8 2.4
(F) 51.3 6.6 1.2 2.9 62.0 18.6
(G) 17.5 7.4 0.2 2.8 27.9 6.2
(H) 27.0 5.3 1.1 2.2 35.6 5.8
(I) 15.5 2.4 0.7 2.5 21.1 5.8
Total 221.1 35 2 4 5 19 8 280.6 65 6
Group II
(J) 14.6 1.7 0.0 2.0 18.3 5.2
(K) 15.2 3.1 0.5 2.7 21.5 5.3
(L) 51.7 4.5 0.6 3.0 59.8 32.0
(M) 9.5 1.7 0.7 1.2 13.1 3.3
(N) 23.9 8.2 0.3 3.5 35.9 12.1
(O) 16.6 3.2 0.0 2.0 21.8 8.5
Total 131.4 22.5 2.0 14.4 170.3 66.4
Combined
Total 352.5 57.7 6.5 34.2 450. 9 132.0

 

Source: Faculty Load 8: Time Distribution Analysis, Fall '62, Fall '63,
8: Fall '64. Office of Institutional Research, Michigan State
University.

 

 

Also: Michigan State University Salary Schedule, 1962-63,
1963-64, and 1964-65.

 

124

TABLE 2-b. -- Weighted average staffing ratios of regular faculty, graduate
assistant, and clerical personnel of selected departments, 1962-1965

 

FTEF(I) FTEF(I) FTEF(I+R+PS) Grad.Asst.FTE ClericalFTE

 

 

 

 

 

Group

Dep‘" FTEF(R) FTEF(PS) FTEF (Admin.) Total FTEF Reg. FTEF
Group 1 6. 3 49.1 13. 2 0.234 0.166
(A) 10.0 180.0 15.3 0.144 0.077
(13) 9. 3 92. 7 14. 8 0.331 0.138
(C) 12. 6 69. 5 9. 5 0.220 0.142
(D) 5.2 120.0 15.2 0.195 0.230
(E) 6.2 26.7 8.0 0.222 0.221
(F) 7. 8 42. 8 20. 4 0. 300 0.132
(G) 2. 4 87. 5 9.0 0. 222 0.177
(H) 5.1 24.5 15.2 0.163 0.197
(1) 6. 5 22.1 7. 4 0. 275 0. 314
Group II 5.8 65. 7 10. 8 0. 390 0.206
(J) 8.6 -0- 8.2 0.284 0.152
(K) 4.9 30.4 7.0 0.246 0.294
(L) 11.5 86.2 18.9 0.531 0.305
(M) 5. 6 13. 6 9. 9 0. 252 0.183
(N) 2. 9 79. 7 9. 3 0. 337 0.132
(0) 5. 2 -0— 9. 9 0. 390 0.158
C b' d
0m me 6.1 54.2 12.2 0.293 0.178

 

125

TABLE 3 -- Weighted average Fall instructional productivity and
student-faculty ratios of selected departments 1962-1965

 

 

 

Group

Dept. SCH/FTEF(I) SCH/FTEF(T) FTES/FTEF(I) FTES/FTEF(T)
Group I 493.2 388. 6 32.8 25.8
(A) 358.3 304.4 23. 7 20.2
(B) 533.6 446.8 35.0 29.3
(C) 376.5 311.5 24.6 20.4
(D) 446.0 348.7 30.0 23.4
(E) 456.0 337.8 30.5 22.6
(F) 511.0 422.8 33.5 27.7
(G) 504.6 316.5 33.8 21.2
(H) 639.0 484.6 43.5 33.0
(1) 606.5 445.5 41.0 30.1
Group II 253.4 195.5 17.1 13.2
(J) 286.9 228.9 19.3 15.4
(K) 171.4 121.2 11.8 8.4
(L) 252.0 217.8 16.9 14.6
(M) 181.7 131.8 12.6 9.2
(N) 279.1 185.8 19.2 12.8
(O) 306.0 233.0 20.2 15.4
Combined
403.8 315.7 26.9 21.1

 

126

TABLE 4. -- Weighted average academic year general fund budgets
for selected departments, 1962-1965

V‘—

 

Total

 

 

 

 

 

 

 

 

Dept. Academic Clerical Labor Supplies Equip- .Total
Salaries Salaries 8: Serv1ces ment Budget
Group I
(A) $389,266 $11, 945 $-0- $4,263 $1,200 $406,674
(B) 275,188 13,345 500 4,310 400 293,743
(C) 134,187 7,602 750 2,543 740 145,822
(D) 312,000 21,796" 808 10,844 1,332 346,780
(E) 101,516 6,245 2,067 5,452 2,753 118,033
(F) 430,185 12,000 750 6,564 1,521 451,020
(G) 264,705 14,110 512 11,488 417 291,232
(H) 340,320 24,690 11, 383 14,025 6,250 396,668
(I) 189,483 19,237 2,000 14,047 4, 667 229,434
Total 2,436,850 130,970 18, 770 73,536 19,280 2, 679,406
Group II
(J) 156,158 6,958 400 5,452 1,077 170,045
(K) 215, 634 14,530 10,800 15,332 1, 482 257, 858
(L) 402,468 29,919 53,250 91,056 12, 922 589,615
(M) 129, 704 4, 900 1, 939 6, 245 448 143, 236
(N) 352, 964 12, 787 54,144 21, 744 8,135 449, 774
(O) 169,679 9,835 5,883 18,474 5,974 209,845
Total 1,426,607 78,929 126,496 158,303 30,038 1,820,373
Comb.
3,863,457 209,899 145,266 231,839 49,318 4,499,779

TABLE 5-a.-— Weighted average salaries cost per student-credit-hour

127

(all levels) of Selected departments, 1962--1965

 

Cost per Student-Credit—Hour

1

 

 

Department (1) (2) (3)
GroupI $ 8.30 $8.30 $10.14
(A) 10.66 7.92 9.43
(B) 6.77 7.47 8.89
(C) 10.51 7.47 8.89
(D) 10.92 9.40 11.11
(E) 9.61 8.58 10.20
(F) 6.84 6.84 8.08
(G) 10.42 9.20 10. 98
(H) 6. 77 9.79 11.64
(I) 7.34 9.75 11.60
Group 11 16.27 16.27 10.1".
(J) 13.09 16.03 10. 71
(:K) 29. 38 18.75 13.04
(L) 12.75 14.98 10.15
(M) 28.76 20.19 . 13.80
(N) 19.90 17.45 12.06
(O) 11.75 15.52 10.14
Combined Group 10.14 10.14 10.14

 

 

1Based on the following norms:

(1) Departmental
(2) Group
(3) Combined Group

128

TABLE 5-b. -- Weighted average salaries cost per student-credit-hour

by level of selected departments 1962-65

 

 

 

Group

 

 

Lower Division Upper Division Masters Doctoral
De?" Cost/SCH Cost/SCH Cost/SCH Cost/SCH
Group I $5. 32 $8.05 $28. 07 $62. 56
(A) 8. 89 10.19 17.17 68.58
(B) 4. 84 7. 68 55.44 114.60
(C) 8. 32 10.61 39.44 50. 60
(D) 5.15 10. 70 32.90 74. 99
(E) 5. 34 7.50 41.23 85.86
(F) 5. 74 9.53 15.83 48. 29
(G) 6. 34 9.65 48.66 91.59
(H) 2. 85 5.02 22. 42 55. 62
(1) 3.85 6. 30 19.12 51.42
Group 11 9. 52 15.54 48.18 96. 52
(J) 11.27 10. 59 26. 42 57.10
(K) 13.27 30.14 54. 69 141.10
(L) 8. 09 15.75 36.50 67. 80
(M) 13.76 20.. 35 69.01 147. 80
(N) 10.84 15.32 59.70 110. 50
(0) 5. 98 11.29 54.00 80.40
b' d
———C°m me 6.28 9. 73 32.52 75. 32

 

129

TABLE 6-a. -- Weighted average overhead cost1 per student-credit-
hour of selected departments 1962-1965

 

Cost per. Student-Credit-Hour 2

 

 

Department
(1) (2) (3)

GroupI $0.361 $0.361 $1.061
(A) 0.145 0. 344 0. 989

(B) 0.122 0. 342 0. 933

(C) 02299 0.324 0.933

(D) 0.425 0.408 1.165

(E) 0. 916 0. 373 1.070

(F) 0.137 0.297 0.848

(G) 0. 464 0.400 1.150

(H) 0. 587 0.425 1.220

(I) 0.728 0.424 1.216
Group 11 3.402 3.402 1.061
(J) 0.556 3.352 1.123

(K) 3.536 3.962 1.366

(L) 4.637 3.132 1.064

(M) 1. 844 4.222 1. 446

(N) 4.570 3.648 1.264

(O) 1. 985 3.245 1.063
Combined Group 1. 061 1. 061 1. 061

 

 

1Includes the MSU Budget Categories: Labor, Supplies and Services,
and Equipment.

 

 

2Based on the following norms:

(1) Departmental
(2) Group
(3) Combined Group

130

TABLE 6-b. -- Weighted average operating expense1 per student-credit-
hour (by level) of selected departments, 1962-65

 

 

Grou Lower Division Upper Division Masters Doctoral

——’i— Cost/SCH Cost/SCH Cost/SCH Cost/SCH
I $0.23 $0.35 $1.22 $2. 72
II 1.99 3.25 10.07 20.18

Combined 0. 66 1. 02 3.. 40 7. 88

 

lIncludes M.S. U. Budget Categories: Labor, Supplies 8: Services, and
Equipment

2Allocated on the basis of salary costs by level.

APPENDIX C

132

TABLE 7-a. -- Projected 1965-66 budget requirements for selected
departments of Michigan State University, based on the cost analysis
approach (academic and clerical salaries)

 

SalaryBudgetsl

 

Department

 

 

 

(1) 1.2) (3)

Group I
(A) $513,183 $381,277 $453,970
(B) 320,918 354,410 421,413
(C) 146,457 104,094 123,882
(D) 406, 704 350, 094 413, 781
(E) 133,483 119,176 141,678
(F) 580, 606 580,606 685,863
(G) 421, 729 372, 352 444, 394
(H) 499,281 722, 003 858,438
(1) 255,542 339,446 403,854
Total $3, 277,903 $3, 323, 458 $3, 947, 273

Group II
(J) 254, 326 311, 447 208, 085
(K) 177,896 113,531 78,957
(L) 612, 880 720, 074 487, 900
(M) 143,570 100,788 68,890
(N) 452, 347 396, 656 274,136
(O) 137,017 180,979 118,242

 

Total $1,778,036 $1,823,475 $1,236,210

 

Combined .Total $5, 055, 939 $5, 146, 933 $5,183, 483

 

1Based on the following norms:

(1) Departmental
(2) Group
(3) Combined Group

133

TABLE 7-b. -- Projected 1965-66 budget requirements for selected
departments of Michigan State University, based on the cost analysis
approach (operating 'expenses)

Operating Expense Budgets1

 

 

Department (1) (2) (3)
Group I
(A) $ 6, 980 $16,560 $47,611
(B) 5,783 16,212 44,227
(C) 4,167 4,515 13,001
(D) 15,829 15,196 43,389
(E) 12,723 5,181 14,862
(F) 11,629 25,210 71,982
(G) 18,779 16,189 46,544
(H) 43,291 31,343 89,974
(I) 53,689 31,270 89,679
Total $172,870 $161,676 $461,269
Group II

(I) 10,802 65,126 21,819
(K) 21.410 23,990 8,271
(L) 222,896 150, 552 51,145
(M) 9,205 21,076 7,218
(N) 103,881 82,923 28,323
(0) 23,147 37,840 12,396
Total $391, 341 $381, 507 $129,172
Combined Total $564, 211 $543,183 $590, 441

 

 

1

(1) Departmental
(2) Group

(3) Combined Group

Based on the following norms:

134

TABLE 7—C. -- Projected 1965-66 budget requirements for selected
departments of Michigan State University, based on regression analysis
(total budget on total Fall SCH)

 

Salary Budgets 1

 

 

 

Department
(1) (2)
Group I
(A) $357,797 $394,013
(B) 357,130 393, 366
(C) 183,569 225,044
(D) 305, 921 343, 703
(E) 179, 659 221,252
(F) 622,123 650, 360
(G) 310, 556 348,198
(H) 462, 363 495,423
(1) 283,115 321,585
Total 3,062,233 3,392,944
Group II

(J) 337,285 250,220
(K) 157,286 185, 304
(L) 812,533 421,616
(M) 150,396 182,819
(N) 405, 582 274,851
(O) 231,436 212,046
Total 2,094,518 1,526,856
Combined Total $5,156, 751 $4, 919, 800

 

1Based on the following norms:

(1) Group productivity and staffing ratios, departmental salaries
(2) Combined group productivity and staffing ratios, departmental
salaries

135

TABLE 8—a. -- Projected 1965-66 academic staff for selected departments
of Michigan State University, based on SCH productivity rates and related
staffing ratios (departmental norms)

w.
.u—: , —v

FTEF FTEF ‘ FTEF FTEF FTEF

 

 

 

 

 

Dept. (Instr.) (Res.) (Pro.S) (Admin.) (Total)
Group I
(A) 46.2 4.6 0.3 3.3 54.4
(B) 30.9 3.3 0.3 2.3 36.8
(C) 12.7 1.0 0.2 1.5 15.4
(D) 29.2 5.6 0.2 2.3 37.3
(E) 9.9 1.6 0.4 1.5 13.4
(F) 67.3 8.7 1.6 3.8 81.4
(G) 26.5 11.2 0.3 4.2 42.2
(H) 36.9 7.2 1.5 3.0 48.6
(I) 19.0 2.9 0.9 3.1 25.9
Total 278.6 46.1 5.7 25.0 355.4
GroupII
(J) 22.8 2.6 0.0 3.1 28.5
(K) 11.8 2.4 0.4 2.1 16.7
(L) 73.3 6.4 0.8 4.3 84.8
(M) 10.1 1.8 0.7 1.3 13.9
(N) 29.6 10.2 0.4 4.3 44.5
(0) 12.7 2.4 0.0 1.5 16.6
Total 160. 3 25.8 2,3 16,6 205,0
b' d
C°m me 438.9 71.9 8.0 41.6 560.4

Total

 

136

TABLE 8-b. -- Projected 1965—66 academic staff for selected departments
of Michigan State University, based on SCH productivity rates and related
staffing ratios (group norms)

 

 

 

 

 

 

D t FTEF FTEF FTEF FTEF FTEF
ep ' (Instr.) (Res.) (Pro.S) (Admin.) (Total)
Group I
(A) 33.5 5.3 0.7 3.0 42.5
(B) 33.5 5. 3 0.7 3.0 42.5
(C) 9.7 1.5 0.2 0.9 12.3
(D) 26.4 4.2 0.5 2.4 33.5
(E) 9.2 1.5 0.2 0.8 11.7
(F) 69.7 11.1 1.4 6.2 88.4
(G) 27.1 4.3 0.6 2.4 34.3
(H) 47.9. 7.6 1.0 4.3 60.8
(I) 23.3 3.7 0.5 2.1 29.6
Total 280.3 44.5 5 8 25 1 355.7
Group II
(J) 25.8 4.4 0.4 2.8 33.4
(K) 7.9 1.4 0.1 0.9 10.3
(L) 72.9 12.5 1.1 8.0 94.5
(M) 7.3 1.2 0.1 0.8 9.4
(N) 32.6 5.6 0.5 3.6 42.3
(0) 15.3 2.6 0.2 1.7 19.8
Total 161.8 27.7 2.4 17.8 209. 7
Vc°m8med 442.1 72. 2 8. 2 42.9 565.4

Total

137

TABLE 8—C. -— Projected 1965-66 academic staff for selected departments
of Michigan State University, based on SCH productivity rates and related
staffing ratios (combined group norms)

 

FTEF

 

 

 

 

 

D t FTEF FTEF FTEF FTEF
81’ ' (Instr.) (Res.) (Pro.S) (Admin.) (Total)
GroupI
(A) 41.0 6.7 0.8 4.0 52.5
(B) 40.9 6.7 0.8 4.0 52.4
(C) 11.8 1.9 0.2 1.1 15.0
(D) 32.3 5.3 0.6 3.1 41.3
(E) 11.2 1.8 0.2 1.1 14.3
(F) 85.2 13.9 1.6 8.2 108.9
(G) 33.1 5.4 0.6 3.2 42.3
(H) 58.5 9.6 1.1 5.7 74.9
(1) 28.5 4.7 0.5 2.8 36.5
Total 342.5 56.0 6.4 33.2 438.1
Group II
(J) 16.2 2.6 0.3 1.6 20.7
(K) 5.0 0.8 0.1 0.5 6.4
(L) 45.7 7.5 0.8 4.4 58.4
(M) 4. 6 0. 8 0.1 0. 4 5. 9
(N) 20. 4 3. 3 0. 4 2. 0 26.1
(0) 9.6 1.6 0.2 0.9 12.3
Total 101.5 16.6 1.9 9.8 129.8
Combined 444. 0 72.6 8. 3 43. 0 567. 9

Total

138

TABLE 8.d. -- Projected and actual 1965-66 academic staff for selected
departments of Michigan State University, projections based on regression
analysis (total FTEF on total Fall SCH)

 

 

 

 

 

 

Projected FTEF Projected FTEF Actual FTEF
Dept. Regular Gr. A. Regular Gr. A. Rejular Gr. A.
(Group Norms) (Comb. Group Norms) (1965-66)
Group I
(A) 30. 7 9.4 30. 7 12. 7 38.3 8.5
(B) 30.6 9.4 30.6 12.7 25.1 14.2
(C) 12.1 3.7 14.5 6.0 16.0 5.5
(D) 25.2 7.7 25.9 10.7 25.2 7.5
(E) 11.6 3.6 14.1 5.9 9.1 3.2
(F) 59.1 18.0 55.3 22.9 45.4 47.8
(G) 25.7 7.8 26.3 10.9 22.6 7.8
(H) 42.0 12.8 40.4 16.8 35.5 8.4
(I) 22.8 6.9 23.8 9.8 16.0 8.7

 

 

 

 

 

108.4 233.2 111.6

K)
\O
U.)
N
0‘
.—l
0‘

Total 259. 8

 

 

 

 

 

 

Group II
(J) 19.6 12.5 17.0 7.0 13.2 13.3
(K) 8.2 5.3 10.8 4.4 13.7 9.6
(L) 50. 2 32.1 33. 4 13.8 26. 3 50. 5
(M) 7.8 5.0 10.5 4.3 10.8 4.4
(N) 24.2 15.4 19.3 8.0 30.2 16.7
(0) 13.0 8.3 13.3 5.5 12.8 15.8
Total 123.0 78.6 104.3 43.0 107.0 110.3
C b' d ‘
°m me 382.8 157.9 365. 9 151.4 340.2 221.9

Total

139

TABLE 9-a. -- Projected 1965—66 salary budgets for selected departments
of Michigan State University, based on the SCH productivity approach
with alternate staffing and salary norms

 

Salary Budgets

l

 

 

 

Dept.

Xllel X2Yzzl X3Y3zl X1lez X1le3

Group I
(A) $582,479 $443,962 $527,475 $560,234 $587,590
(B) 352,808 441,414 523,062 341,506 356,083
(C) 159,371 127,153 149,228 154,535 161,650
(1)) 482,685 412,787 486,132 442,684 410,912
(B) 154,127 131,715 153,944 155,289 144,266
(F‘) 794,318 914,492 1,084,763 819,990 804,712
((3) 451,496 364,255 430,025 482,711 447,815
(11) 569,323 670,310 792,736 584,636 541,408
(1) 297,771 336,196 397,121 296,856 277,088
Txnal 3,844,378 3,842,284 4,544,486 3,838,441 3,731,524

Group II
(J ) 305,499 334,662 222,052 293,139 286,934
(K) 190,362 102,132 67,794 185,460 181,344
(1.) 751,098 927,639 614,403 738,416 725,476
(Km 152,525 92,895 62,655 147,987 144,772
(N) 460,328 427,877 284,102 436,827 427,946
((3) 163,840 198,857 132,159 157,402 154,320
Twnal 2,023,652 2,084,062 1,383,165 1,959,231 1,920,792

 

Combined$5,868,030 $5,926,346 $5,927,651 $5,797,672 $5,652.316

Total

 

1Based on the following normative data:

X = SCH Productivity Rates
Y = Staffing Ratios
Z = Average Salaries

1 = Departmental Norms
2 = Group Norms
3 = Combined Group Norms

140

TABLE 9-b. -- Projected and actual 1965-66 salary budgets for selected
departments of Michigan State University, based on regression analysis
(total FTEF on total SCH)

 

Salary Budgets1

 

 

Department _ ‘ Actual
XZYZZ' X3Y3Z' 1965.66

Group I
(A) $412,394 $430,337 $489,200
(B) 414, 987 432,154 368, 700
(C) 163,256 204,046 217,400
(D) 404, 922 430, 974 412,100
(E) 170,195 215,031 137,400
(F) 79835093 778, 825 769, 000
(G) 354,731 378,391 317,300
(H) 604, 409 604, 934 504, 000
(1) 337,454 365,798 266,100
Total 3, 660, 441 3, 840, 490 3, 481, 200

’Group II
(J) 321,404 257,920 236,500
(K) 133,418 161,850 231,600
(L) 807,813 496, 305 598,200
(M) 126,618 157,584 162,100
(N) 401,111 296, 525 477, 600
(O) 213,851 202,568 243,800
Total 2,004,215 1,572, 752 1, 949,800

 

Combined Total $5, 664, 656 $5, 413, 242 $5, 431, 000

 

1Based on the following normative data:

X = SCH Productivity Rates 1 2 Departmental Norms
Y = Staffing Ratios Group Norms
Z = Average Salaries 3 Combined Group Norms

141

TABLE 10-a. -- Projected Fall, 1965, teaching units of selected departments
of Michigan State University, based on the course classification approach

 

l

 

 

 

 

 

 

Classification
Dept' C ‘ C C C C T t 1
C1 C1+ C2 C3 4 5u 5g 13,14 16 0 3'
GroupI
(A) 61 -- 148 74 34 10 -— 216 -- 543
(B) 121 —— -- 42 5 79 -- -- -- 247
(C) 20 9 48 14 -- -- 12 —- -— 103
(D) 34 26 49 40 -— 4 12 -- —— 165
(E) 16 -- 17 -- -- 6 -- 39 -- 78
(F) 81 -- 152 318 -- -- 15 —- -— 566
(G) 28 75 10 20 51 5 30 -- -- 219
(H) 94 —- 3 40 96 -- 12 34 -— 279
(1) 57 12 30 4 —— -- 4 -- -- 107
Total 512 122 457 552 186 104 85 289 -- 2, 307
Group II
(J) 8 16 29 65 20 -- 8 —— -- 146
(K) 10 —- 16 2 —- -- ‘ 5 —- 80 113
(L) 51 -- 16 9 26 -- 5 -- 573 680
(M) 22 -- 6 6 —- -- 1 —- 40 75
(N) 32 -— 82 —— -— -- 16 -— 62 192
(0) 24 -- 18 -— —— -- -- -— 60 102
Total 147 16 167 82 46 —- 35 —- 815 1,308

 

ComE’rinte‘: 659 138 624 634 232 104 120 289 815 3,615
oa

 

1

C1. (=Lecture, large C4 = Composition, Math
C1+=Lecture, medium C5 = Seminar

C2 =Lecture,—Discussion C13 14: Laboratories,
C3 =Lecture-Composition ’ Remedial work

C16 = Laboratories, Science

142

TABLE 10-b. -- Projected academic staff requirements of selected
departments for 1965-66, based on course classifications and units-
of-teaching

 

Fixed Credit IND/VAR Credit Administration Total

 

 

 

 

 

 

De?" FTEF1 FTEFZ FTEF3 FTEF
Group I
(A) 74.9 1.7 3.1 79.7
(B) 34.1 1.9 1.4 37.4
(C) 14.2 3.2 0.7 18.1
(D) 22.8 2.5 1.0 26.3
(E) 10.8 4.1 0.6 15.5
(F) 78.1 1.7 3.2 83.0
(G) 30.2 3.1 1.3 34.6
(H) 38.5 11.4 2.0 51.9
(I) 14.8 7.1 0.9 22.8
Total 318.4 36 7 14.2 369 3
Group II
(J) 20.1 0.5 0.8 21.4
(K) 15.6 1.8 0.7 18.1
(L) 93.8 2.0 3.8 99.6
(M) 10.3 2.3 0.5 13.1
(N) 26.5 2.6 1.2 30.3
(0) 14.1 1.3 0.6 16.0
Total 180.4 10.5 7.6 198.5
Combined -
Total 498.8 47.2 21.8 567.8

 

1Fixed Credit FTEF based on 7. 25 teaching units per FTE

2IND/VAR Credit FTEF based on 36:1 and 25:1 ratios at undergraduate
and graduate levels, respectively.

3Administration based on a 25:1 ratio of Fixed Credit and IND/VAR
credit FTEF to Administrative FTEF

143

TABLE lO-C. -- Projected academic staff requirements of selected
departments for 1965-66, based on course-classification and credits-
of—teaching

 

Fixed Credit IND IVAR Credit Administration Total

 

 

 

 

 

 

Dep" FTEF1 FTEF2 FTEF3 FTEF
GroupI
(A) 78.3 1.7 3.2 83.2
(B) 39.2 1.9 1.6 42.7
(C) 16.4 3.2 0.8 20.4
(D) 26.2 2.5 1.1 29.8
(E) 11.0 4.1 0.6 15.7
(F) 89.9 1.7 3.7 95.3
(G) 34.8 3.1 1.5 39.4
(H) 43.0 11.4 2.2 56.6
(I) 17.0 7.1 1.0 25.1
Total 355.8 36.7 15.7 408.2
Group II
(J) 23.1 0.5 0.9 24.5
(K) 11.6 1.8 0.5 13.9
(L) 62.6 2.0 2.6 67.2
(M) 8.7 2.3 0.4 11.4
(N) 25.6 2.6 1.1 29.3
(O) 11.4 1.3 0.5 13.2
Total 143.0 10.5 6.0 159.5
Combined
Total 498.8 47.2 21.7 567. 7

 

lFixed credit FTEF based on 6. 29 credits of teaching per FTE.

2IND/VAR Credit FTEF based on 36:1 and 25:1 ratios at undergraduate
and graduate levels respectively.

3
Administration based on.a 25:1 ratio of Fixed Credit and IND/VAR
Credit FTEF to Administrative FTEF.

144

TABLE ll-a. —- Projected 1965-66 salary budgets for selected departments
of Michigan State University, based on the course Classification approach
with alternate staffing and salary norms (units-of—teaching)

 

Salary Budgets 1

 

 

 

 

Dept.
lelz1 lezz1 X1Y3Zl xlylz2 xlrlz3
Group I
(A) $852,514 $832,195 $800,517 $820,001 $860,030
(B) 358,308 387,638 373,228 346,810 361,619
(C) 187,296 187,311 180,161 181,614 189.974
(1)) 340,937 323,001 309,561 312,660 290,210
(E3) 178,993 174,374 167,480 180,351 167,528
(F‘) 810,047 859,256 826,659 836,211 820,644
((3) 370,436 365,893 352,333 396,039 367,424
(11) 607,324 572,464 549,063 623,642 577,544
(1) 261,772 258,953 248,061 260,969 243,622
Trual 3,967,627 ,961,085 3,807,063 3,958,297 3,878,595
Group II
(J ) 229,116 214,690 229,670 219,852 215,202
(1<) 206,602 179,014 192,442 201,260 196,788
(1.) 882,384 978,141 1,046,973 867,481 852,276
(50 143,780 129,536 139,143 139,505 136,475
(N) 313,275 306,658 329,075 297,256 291,215
((1) 158,191 160,756 172,036 151,957 148,974
Trual 1,933,348 1,968,795 2,109,339 1,877,311 1,840,930
Combined
Trual $5,900,975 $5,929,880 $5,916,402 $5,835,608 $5,719,525

 

1'Based on the following normative data:

Departmental Norms

Group Norms/College Salaries
= Combined Group Norms/
University Salaries

X Course Classification 1
Y Staffing Ratios 2
Z = Average Salaries 3

145

TABLE ll—b. -- Projected 1965-66 salary budgets for selected departments
of Michigan State University, based on the course classification approach
with alternate staffing and salary norms (credits-of-teaching)

 

Salary Budgets1

 

 

 

Department L
Xllel Xle 22 X1Y3 Z3
Group I
(A) $890,362 $841,106 $839,510
(B) 409,540 431,510 431,057
(C) 211, 350 206,124 205, 847
(D) 385,855 339,033 301,137
(E) 180,719 178,514 158,534
(F) 929,832 1,026,210 961,796
(G) 421, 987 448, 549 398, 051
(H) 662, 969 644, 578 570, 898
(I) 288, 342 285, 526 253,160
Total 4, 380, 956 4, 401,150 4,119, 990
Group II

(J) 262, 526 236, 611 247,150
(K) 170,016 134,774 139,842
(L) 565, 491 649, 372 678, 208
(M) 160,422 110,342 115,133
(N) 303,064 283,489 295,608
(O) 130, 941 128,133 133,162
Total 1,592,460 1,542, 721 1,609,103
Combined Total $5, 973, 416 $5, 943, 871 $5, 729, 093

 

l

X
Y
Z

Course Classification
Staffing Ratios
Average Salaries

1

Based on the following normative data:

Departmental Norms
Group Norms/College Salaries
Combined Group Norms/

University Salaries

BIB LIO GR APHY

BIBLIOGRAPHY

A. BooKS

American Association of Collegiate Registrars and Admissions Officers.
Handbook of Data and Definitions in Higher Education.
American Association of Collegiate Registrars and Admissions
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Briggs, John F. A Refined Program Budget for State Governments.
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Budget Director's Office. Analysis of Lpgislative Buggets: University
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California and Western Conference Cost and Statistical Study. Berkeley:
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Dodds, Harold W. The Academic President. New York: McGraw-Hill
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Evans, John M. and Hicks, John W. An Approach to Higher Educational
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Glaze, Thomas E. Business Administration for Colleges and Universities.
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Glenny, Lyman A. Autonomy of Public Colleges: The Challenge of
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147

148

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Millett, John D. The Academic Community. New York: McGraw-Hill
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149

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Buechner, John C. "Performance Budgeting, " Michigan Municipal
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Ikenberry, Stanley. "Instructional Cost and Quality, !' Collgge and
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Kelley, Fred J. "Adequate Cost Analysis as a Basis for Budget Making,"
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Milwaukee Journal, June 24, 1965.

 

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C . UNPUBLISHED MA TERIALS

Cammack, Elwin F. "A Projection of Student Credit Hours by Department,
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Manual for the Preparation of Uniform Cost Reports: Michigan State
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150

Michigan Council of State College Presidents. Unit Cost Stugr: Instruction
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Office of Institutional Research. Section Size Analysis, Fall Term(s) 1962-64.
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. Teaching Load and Time Distribution Analysis, Fall Term(s),
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. Volume of Instruction Analysis, Fall Term(s), 1962-64. East
Lansing: Office of Institutional Research, Michigan State University,
March, 1963, 1964, 1965. ,

Office of the Chancellor. 1964-65 Status Rgort of the California State
Colleges -- Part G: Fall Instructional Faculty. Inglewood: Office
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Peters, (John S. "Genesis: The Faculty Staffing Formula, " Sacramento:
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Education, California State Department of Education, June, 1961,
(Mimeographed).

Saupe, Joseph L. "A Technique for Projecting College‘or University
Instructional Loads, " East Lansing:qufice of Institutional Research,
Michigan State University, June, 1966, (Mimeographed).

. "Relationships Among Various Measures of Teaching Load --
from Fall 1962 Faculty Load Data, " East Lansing: Office of
Institutional Research, Michigan State University, 11. d. ,
(Typescript).

HICHIGQN STQTE UNIV. LIBRRRIES

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