The budget revolution

Well concealed on the next-to-last page of the University of Copenhagen’s (UCPH) new strategy paper Talent and Collaboration is a sentence that could lead to a revolution in the old university.

“We want to develop the university’s budgeting model and make financial management more flexible so that it best supports our strategic goals, including interdisciplinary collaboration,” it states.

If we continue with the current budget model, we simply run into a wall and run out of basic funding

University Director Jesper Olesen

At first glance, the item may not seem controversial. But according to associate professor Thomas Vils Pedersen, academic staff representative at UCPH, “it may become one of the most important budgetary changes in UCPH modern history”.

“It can either be a reasonable adjustment, or something that has serious consequences for the distribution of funds internally at the university. The devil is in the detail,” he says.

In order to understand why the sentence is so explosive, it is necessary to know how the current university budget model works, and to keep in mind how small the portion of the budget is that is held in common at UCPH today.

Put simply, UCPH gets its revenues from three sources at present: government grants to education programmes (the taximeter system), government basic and research grants, and external funding.

The largest part of revenues at UCPH go directly to the faculties, and on to the departments, before ending up with researchers. Only a small portion ends up on the common UCPH account, so it is a very small part of the university’s finances that is held in common.

This has prompted University Director Jesper Olesen to call UCPH a group of owner-managed businesses, meaning that it is the researchers themselves that control their own funding for their own projects.

One of the many former UCPH rectors Ove Nathan, who stepped down in 1994, called himself “a janitor without a budget.”

No more in-the-box thinking

According to a memo from the rector on the new budget model, presented to the UCPH General Collaboration Committee and the Board of Directors, the present system has a number of negative consequences. And the new model will help create “a greater strategic room for management manoeuvre.” The rector and the prorectors, in other words, will have more say in it.

The fixed allocations will be replaced by what the Rector’s Office calls “a strategic dialogue based on broad and uniformly-defined targets/keypoints for ‘production’ and quality,” it states in the memo.

In education, it will supplant the principle that 80 per cent of the ‘STÅ’ taximeter grant goes to the department, as two study programmes with the same taximeter grant can have different costs, since the methods of instruction and examination are different.

One education programme can give a surplus, another a loss, but “with the current budget model it is not possible to redistribute even though there may be a strategic need for it,” management writes.

This means that some subjects are not offered based on where the quality is the highest. Instead they are offered in several departments at the same time. This is because the departments speculate in doing the programmes themselves to keep their STÅ income in house.

There are cases, where it has been said that it would be better to hire an external lecturer to teach a subject, than leave the subject to an other department which has the strongest research in the area.

External funding must contribute to the community

When it comes to external income, the current budget model also leads to problems.

As it is today, external funding goes directly to individual faculties and, ultimately, the individual researcher. But half of the overhead for things like rent and buildings operation is paid via the central fund at UCPH.

Even if an external foundation has paid overhead, that is, an amount for the administrative costs of a research project, then all the proceeds go to the faculty. Yet the costs are partly financed through the central UCPH fund, so each faculty has an inappropriate economic advantage, it states in the memo.

The rector and projectors propose therefore that the overhead income be channelled to where the expenses are incurred.

“This means that external projects to a greater extent than today contribute to the central community,” the management writes in the memo.

Cannot go on

Out in the different university campuses, the rumours about the new budget model have set off fear and trembling. But University Director Jesper Olesen does not understand why people are apparently more afraid of changing the current budget model than keeping it.

He points out that there has been a dramatic change in the composition of the UCPH revenues over the past ten years, and that it should have consequences for the way the university distributes its funding.

The grants to education programmes used to amount to a greater share of revenues, but now they only make up a quarter of them. The external funding accounts for one third, and this portion is still growing.

An increasing part of the funding that UCPH can dispose of is tied up to expenses for things like rent, chemicals and electricity, which the foundations do not pay in full. And management’s strategic options, in terms of setting off new research projects, have been shrinking with the increase in administrative costs.

“It is a success story, that the researchers have been able to bring in so much external funding. But we can also win ourselves to death. If we continue with the current budget model, we simply run into a wall and run out of basic funding,” says Jesper Olesen.

Then we will really see an army of number-crunchers moving in to UCPH

Thomas Vils Pedersen, joint union representative

He adds that he does not take part in all the moaning about how the foundations are ‘butchering’ the universities.

“We find that the foundations would like to cover our costs, if they can only have the costs documented. So we must get better at helping researchers write up all the expenses on their applications for funding,” he says.

Jesper Olesen rejects at the same time that this is about centralisation, and that the Rector’s Office wants to be able to dispose of a greater portion of the UCPH funding.

“Not everything has to be from our common UCPH treasury. But it must be made visible how much is jointly financed, and why it is an advantage to hold things in common at university,” the University Director says and continues:

“The budget model is not interesting in itself. The question is what we want to do with UCPH. If we think it is a good idea that students should be able to put their study programme together out of courses in different faculties, then the model must reflect it. The budget model is a tool, and if we find it is difficult to work together with it, then we have to look at whether the structure is the right one,” says Jesper Olesen.

Union representative warns against civil war

Tina Wandall, union representative for biomedical laboratory scientists at UCPH, warned at the General Collaboration Committee meeting on the 30th May that the new budget model sounds like a recipe for a university civil war.

“It looks as if management wants a model that covers everything. This sounds like a recipe for civil war, if you set off uncertainty about the external funding You have the ‘right’ to receive the external funding that you have applied for. It might be a little too square to go for one model. Maybe we should have two models – one for those who are used to getting a lot of external funding, and one for those who find it more difficult,” she said at the meeting.

Tina Wandall adds that as staff representative it is her task to safeguard staff conditions.

“Grant security is a significant stabilising factor, and it has a positive effect on employee well-being and job security. If the budget model needs to be changed, then it is important to focus on the grant security,” she says.

Thomas Vils Pedersen, associate professor and union representative for academic staff at UCPH, emphasises that budget stability is crucial, and that the new budget model should under no circumstances lead to dismissals.

But he believes that management has a point that the financial conditions have changed, and that a service check-up may be necessary.

It is not fair that the funds held in common by UCPH should pay a large part of the overheads while the departments receive all the external funding, he reckons. He sees a need to change the model so that the university’s central fund can cover some of the costs.

“You could call it a kind of UCPH tax, which a department needs to pay UCPH in order to cover some of the costs associated with an external research project, irrespective of whether the overhead comes with the grant or not,” says Thomas Vils Pedersen. He emphasises, however, that the tax must not be put so high that the researchers’ incentive to apply for external funding disappears.

As it is now, a large part of the UCPH basic funding covers rent and other central costs, some of which are costs associated with external grants. A UCPH tax will free up some of these basic funds, making it possible to distribute more funding for free research to departments .

When it comes to the distribution of the government grants to education programmes, Vils Pedersen prefers to keep today’s simple model. He is afraid that a complicated model, where you try to calculate the costs of each study programme in order to create a system that is as fair as possible, will be heavy and costly in terms of administration.

“Then we will really see an army of number-crunchers moving in to UCPH

He prefers a subjective assessment of which subjects are being under-funded and giving them a special grant.

As for the problem of departments not cooperating on the teaching in order to keep their own ‘STÅ’ taximeter funding in house: This needs to be solved in terms of management, and not by changing the budget model, he reckons.

At the Faculty of Science the departments keep the money

At the Faculty of Science, director Henrik Zobbe is following the debate closely.

At this faculty, they changed the budget model in connection with the 2012 merger, and the model was evaluated in 2016.

The objective of their model is that the departments keep all the money they earn, and that it is crystal clear to everyone how the money is distributed.

“It may well be that we disagree on the distribution, but we do agree on what the basis is upon which we disagree,” says Henrik Zobbe.

At the moment, the strategy just follows wherever the money comes from. But it would be more appropriate if it were the other way round.

Head of Department, Stuard James Ward, Saxo

“The strategy is to put the money to work in research and teaching, so that the funding accrues to those who are doing something. This goes for reducing the dropout rate on a study programme or getting external funding,” he says and continues:

“It also means that our administrative expenses have not increased at the faculty, even though there has been a huge increase in revenue. We do not use a penny more in administration than we did with the establishment of the Faculty of Science, and we’re proud of it.”

According to Henrik Zobbe, the evaluation showed that there was satisfaction with the model among heads of departments and employees. But the responses also showed that in terms of the education grants there was a tendency towards a silo mentality, with each department preferring to teach in all the subjects in order to keep their own ‘STÅ’ taximeter income. In response, the faculty has introduced a principle which decides where the teaching is to be placed.

“The underlying idea is that the course needs to be research-based so the teaching takes place where the best research environment in a subject area is,” says Henrik Zobbe.

This means that the philosophy of science is now only taught in two places at the faculty, and the same applies to mathematics.

“We’ve fixed the model in the places where some unfortunate incentives were at work. A strategy needs to change the course a little bit, but not change everything, and you could introduce the same principle throughout UCPH,” he says. He adds that he does not understand why Science is used as the nightmare case that shows how fragmented UCPH is.

“We are the faculty with the largest number of education agreements with other faculties and universities,” the faculty director says.

Budget model prevents collaboration

Stuart James Ward, department head at the Saxo Institute at the Faculty of Humanities, emphasises that he is not speaking on behalf of the faculty. But he says that, for him, it is obvious that the current budget model is not consistent with ambitions for a more cohesive UCPH.

“Even at the faculty level, initiatives that go across departments run into difficulties due to the zero-sum approach to strategic planning. The model does not necessarily have to encourage collaboration across departments and faculties. But it would be desirable if it could at least minimise the obstacles. There is a large, untapped, interdisciplinary potential, especially among education programmes, which is hard to bring to fruition when we are penalised financially for working together,” he says.

He adds that it says a lot about the existing model’s weakness that the mere mention of change immediately triggers a debate on rich versus poor, humanities versus natural sciences, us against them. Just the oppositions, in other words, that a more unified University should work against.

“At the moment, the strategy just follows wherever the money comes from. But it would be more appropriate if it were the other way round. Now it is a relatively random budget model which determines which subjects are offered at UCPH. But this is not what a budget model can, and should, do,” says Stuart James Ward.

No big bang

According to the University Director Jesper Olesen, it has been discussed in the Board of Directors which principles should apply to a new budget model. But a timetable for further work will be set at the next Board meeting, 9th October.

According to the memo, the new principles can already be introduced in 2019, but this will not lead to significant priority changes across faculties. Quite the opposite, they will continue with the financial framework that individual departments were promised for the 2018 budget and for subsequent years.

“I don’t foresee some kind of big bang. You cannot change much at UCPH in less than five years,” says Jesper Olesen.