The Dean and The Budget:
Not "Just a Bunch of Damn Numbers"
Steven R. Smith*
The process of developing and implementing a budget is among the most
important and least understood responsibilities of deans. When done properly,
the budget will move the school toward its goals and promote its mission. When
done improperly, the budget will waste the limited resources of the school.
Some deans are convinced that budgets are just "a bunch of damn
numbers" and do not take them seriously. They turn the budget over to an
associate dean, establish processes that are so complex that the budget
represents political jostling rather than good planning, or mindlessly
distributed increases or decreases evenly among the law school accounts.
Whether they do not like to make choices among competing demands, think
budgets are only for accountants, or frankly fear figures, too many deans give
too little attention and thought to the budget. It is not necessarily that they do not spend
enough time on the budget, but that the time spent is not effective in producing
a budget that benefits the law school most effectively.
The long-term consequences of this budget carelessness can be significant.
Budget inadequacies almost inevitably lead to problems in law school programs.
Few law schools have financial resources to waste funds through bad budgeting
Budgets may be expressed in numbers, but they are no more about numbers than
literature is about the letters of the alphabet. They are about the future and
direction of the law school. Without knowing any accounting, a good academic
leader can put together an effective budget. In fact, becoming overly fixated on
the numbers can be a pitfall.
Every budget year is a wonderful opportunity for law schools and deans to
think about and plan for the success of their programs. Deans have the chance to lead a school through a successful budgetary process. If the dean
does not show this leadership, then it is unlikely anyone else in the school
will do so successfully.
For deans to take advantage of this opportunity they must focus
on the substance of what the school needs to accomplish and how the budget can
support those goals financially, and on implementing a procedure for developing
such a budget. This article first considers the First Principle of Budgets for
deans, then discusses procedural issues in developing a successful budget, and
finally reviews a number of specific budget issues that law schools face.
The First Principle of Budgets is that the school should fund its highest
priorities, and those priorities should efficiently implement the goals and
long-term plans of the school. But, the universe conspires to prevent
implementation of the First Principle.
Any good budget process should begin with a discussion of the priorities of
the school, not budget numbers. It is the true priorities of the school that are
important, not the immediate "budget priorities" that often appear
only at the time the budget documents are being prepared. The priorities
of a law school have their bases in the schoolís mission. From that
mission, a thoughtful school develops a plan that clearly identifies where it
wants to go and what its priorities are. It is from this set of plans and
priorities that budget decisions can flow naturally. These priorities of the
school, of course, extend for multiple budget cycles.
A law school that has not reached some reasonable consensus on its mission,
direction and strategic plans will find it difficult to make rational budgeting
decisions. Without such a plan, almost any budget process is likely to produce a
series of short-term, inconsistent and directionless expenditures. During a
planning process, the dean should emphasize that the mission, plans and
priorities that are developed will drive budget decisions for several years in
This will emphasize to the law school community that planning is a process to be
taken seriously. It will also be "fair warning" that the budget
process will be driven by the mission and priorities of the school.
Once the school has agreed on its mission and a strategic or long-term plan,
a law school dean is obligated, in good faith, to implement the resulting
priorities. Indeed, there is a fiduciary obligation to honestly implement the
plan through the budget process. The same obligation applies, of course, to
others who undertake responsibility for the budget.
It is startling, but not uncommon, to see law schools state one set of
priorities in their long-term plans and, five to seven years later, find they
have funded entirely different programs. To complete the irony, after seven
years the school may again restate the original priorities and blame external
forces (the university, the state or donors) for budget failure. This despite
the fact that the law school itself has not moved resources from low priorities
to higher ranked priorities. For example, a school that determines that
recruiting scholarships for students and law library research collections are
top priorities, but in fact places its resources in additional clinics and new
faculty positions, unlikely will have achieved its primary priorities and
objectives. The point, is not that any of the items funded is bad or unworthy,
but rather that matters of lower priority receive funding at the inevitable
expense of higher priorities.
There are many things that interfere with turning goals and priorities into
budget realities. Bad process, university policies and unrealistic goals are
examples of the problems that can divert a law school from a sound budget. We
now turn to those issues.
Bad process leads to bad budgets. Good budgeting is impossible where
short-term problems and immediate political considerations drive budget
decisions. Taking a plan seriously can be difficult because the short-term
considerations at the moment a budget is put together often seem more pressing
than the long-term goals established by the school through its planning process.
Yet, avoiding immediate discomfort at the expense of achieving long-term goals
is a recipe for failure. The next section discusses process issues in some
It is generally important that the university, as well as the constituents of
the law school, accept, and share enthusiastically the law schoolís mission, goals and strategic direction. The
university plays an enormously important role in the law school budget, not just
in the level of resources the law school has, but in the schoolís ability to
manage and allocate its own funds most effectively. One of a deanís roles is
to help the university understand the plans developed by the law school. Where
the university officers and the law school have disagreements about the plans
for the school, the dean can serve a critical role in developing a consensus
about the most vital priorities for the law school.
University policies sometimes can interfere with making rational budget
decisions for the law school. A university decision requiring a minimum
percentage increase in the library acquisitions budget during a time when the
law school is determined to move to more electronic-based information is an
example of such a university policy. That is one reason why it is so
important for the law school to work with university officials to ensure that
whatever money the law school has can be placed toward its long-term priorities.
Another serious disconnection involving resources and goals can occur where
the goals of the law school are completely inconsistent with the level of
funding available to it. For example, the law school that has a goal to become
one of the top ten law schools (whatever that means) in the southeastern part of
the country, but has funding in the bottom quartile of the region, is unlikely
to succeed in reaching the goal. Goals and plans that are so inconsistent with
the financial resources of the law school create an inherently unstable
condition that will eventually cause real problems for the school and its dean.
The budget process may be one time to raise issues of the congruence of
resources and goals with the university, the faculty and others.
Few of the deanís tasks are more critical than helping the institution come
to a reasonable consensus on priorities, and then helping it stay committed to
making the priorities a reality. The budget is a central element for achieving
improvements in the institution as outlined in its plan. Even in budget years
with small or no increases, the dean should seek to help the institution find
ways of funding high priority items. This is hard work; it may be more popular
in the short run to fund priorities of a lower rank. The hard work will pay off
in the long run, however, as the budget becomes a way for the school to achieve
Before beginning the process of considering a budget, a dean should gather
information that provides the background for budget decisions. It is helpful to
have many kinds of information in preparing for the budget process, but three
kinds are immediately relevant: an understanding of the schoolís true
priorities, a sense of the universityís financial practices, and detailed
information about the law schoolís finances. It takes some time to develop
this information, so the dean should begin preparing for the budget process well
before the formal process is underway.
It is, of course, critical that the dean clearly understand the priorities
and plans of the school. If those have not been examined and formalized
recently, it is very important to undertake a discussion of priorities before
the formal budget process begins.
The dean should also have as much of an understanding of the universityís
financial status and budget as possible. This information should be sought well
in advance of the formal budget process. The source and usefulness of this
information very much depends on the philosophy and circumstances of the
university, but understanding the financial history and circumstances of the
university will pay enormous dividends during the critical budget discussions
with the university.
The dean must also understand the law schoolís budget and budget history.
Deans who are ignorant of the sources of revenue and the details of expenditures
of their own budgets are living dangerously. Even an experienced dean will find
it profitable to spend time studying and thinking about the budget and actual
expenditures of the law school.
In addition to the formal university budget reports, one convenient source of
information about the law school expenditures and revenues is the Fiscal Section
of the ABAís Annual Questionnaire. Each school completes this questionnaire
annually, and most schools subscribe to the ABA "Take Offs" that give
useful information about other law schools. The software for the ABAís Site
Evaluation Questionnaire (available to all law schools) can be used to display
the prior three yearsí actual expenditure and revenue history.
With the appropriate background information in hand, the dean will also want
to think carefully about the budget process before it actually begins. For most
schools there are really two budget processes, an external (university) process
and an internal (law school allocation) process. The deanís leadership role in
these varies from institution to institution, but requires considerable thought before
The external process for most law schools is critical in determining the
level of funding that will be available to the law school. A new dean is well
advised to meet quietly with deans from other units to try to get a sense of
what really happens in the budget process at the university: who makes
decisions, what the considerations are, what the timing of decisions is, and how
new programs and improvements are funded. For example, in some institutions the
provost or president makes commitments throughout the year that essentially eat
up all the budget flexibility; in others, almost all budgetary decisions are
made at one or two points in the year. Understanding what will happen during the
budget cycle is crucial for the dean. In addition, some public institutions have
two funding cycles, one for the operating budget and the other for the capital
Even where additional funds may not be available through the university,
there are important matters that the dean should pursue with the university
during the budget process. One important example is the issue of flexibility.
That is, whether the law school can be given additional authority to pursue its
highest priorities. In some instances this will require that the law school be
given an exception to broad university policies. Such exceptions require careful
discussion, and it is important to develop a strategy to pursue such policy
questions as well as the level of dollars for the law school. Many law schools
have used this strategy successfully, even during tight budgetary times. Some,
for example, have provided for law school tuition increases above the
university-wide increase; with the "excess" tuition going to law
It is also important to develop a strategy for the external budget process
before that process actually begins. The strategy obviously will depend on
university procedures and priorities, but the dean should have a strategy in
place that can be implemented as the budget process unfolds.
The internal budget process must take account of and respect the culture and
customs of the law school. Nevertheless, most schools have sufficient
flexibility to allow deans to develop processes that are consistent with their
management styles and the external budget strategies with the university.
There is a risk both in too little process and too much process. Too little
process can produce a budget that is a quirk of the moment and too dependent on
the whims of the dean. Too much process can lead to a political document that
does not reflect the long-term priorities and goals of the law school, but is a
series of compromises of the immediate interests of the various constituencies
of the law school. Neither is effective in maximizing the value of the budget.
Most schools grapple repeatedly with defining the appropriate role of the
faculty, department heads, deans and other constituencies in developing the
budget. Here a dean must be especially cognizant of the customs of the law
school. At the same time, deans have the responsibility to ensure that a budget
process is effective in developing and promoting the long-term objectives of the
school. Where there is a dysfunctional process, an effective dean has little
choice but to seek improvements in the way the budget is developed.
A wide range of internal procedures have worked successfully in law schools.
It is clear, however, that neither budget despotism nor democracy is very
effective. A dean who develops a budget without careful consultation with others
in the law school probably ensures that the budget will not have the respect and
support of those who must implement it and are affected by it. By the same
token, throwing the budget open for general vote and amendment by the law school
community would likely produce a budget driven by logrolling rather than
The most successful budget process is likely to involve consultation with the
various constituencies in their areas of expertise, with a budget document
developed by a dean (or a very small committee) who is willing to be held
accountable for demonstrating that the budget has been true to the priorities
and long-term plans of the school.
Most deans will face a variety of issues on a recurring basis. The following
is a brief catalog of those issues.
Revenue: Law schools too seldom focus expressly on sources of revenue.
The budget process is a good time to consider not only private fund raising, but
the degree to which grants and contracts, the sale of law school goods and
services, and innovative or entrepreneurial efforts may benefit the law school.
The efforts that will increase the revenue available for the law school, of
course, will be more appealing than those that develop additional revenue
flowing to the university without the law school receiving much benefit. Revenue
rules within universities are often subject to discussion, and deans should
always consider such issues in developing a budget.
Commitments: The double-edged sword of commitments appears regularly at
budget time. On one hand, the law school may have made commitments with which
the current dean disagrees or finds difficult to implement. It is not uncommon,
for example, for a prior dean to have made firm commitments which the new dean
is asked to honor. By the same token, the dean will have commitments from the
university that the law school will want to have honored.
Deans and universities take differing views of commitments. The university
president who announced, "That was not a commitment, that was just a
promise," is one, unfortunate, approach. The more ethical approach is to
honor commitments and expect them to be honored. Higher education ultimately
depends on its integrity and respect. The dishonesty associated with breaching
commitments tears at the very fabric of this integrity. At the same time, it is
legitimate to ensure the commitments were actually made, and to discern
carefully what the commitments were.
The Difference Between Continuing Annual Requirements and One-Time
Expenditures: Among the most dangerous confusions in budgeting is the
difference between a budget item that will recur in future years and one that
can be covered one time from current funds. For example, hiring a new permanent
faculty member (a continuing annual requirement) from non-recurring funds (a
one-time gift from a donor) will create real problems in future years. Many
institutions have tried to develop accounting mechanisms to prevent such errors,
but they still occur too frequently.
Overhead: Overhead or indirect expenses are the charges imposed by a
university (or paid directly by the law school in a few instances) for debt
service, contributions to general university services and offices,
"goodwill" charges by the university, facilities maintenance and
operation charges, and the like. The Fiscal Section of the ABA Annual
Questionnaire, if completed properly, provides a handy mechanism for determining
what the indirect or overhead charges are for a law school.
In fairness, the law schoolís contribution to overhead should be offset in
part by a reasonable share of undesignated general university revenue. For
example, the investment return on pre-paid tuition and gifts given without
restriction or designation to the university as a whole are the kind of revenue
in which the law school fairly should participate.
Many deans have struggled with the question of what the fair overhead rate
should be for a law school. In truth, it depends on the individual circumstances
of the school. It remains an important budget issue, because, by definition,
overhead diverts funds from the programmatic efforts of the law school. In
extreme cases, it amounts to little more than an unjustified charge to law
students (who are borrowing the money) to fund other university offices or
Because the effect and legitimacy of overhead charges is so uniquely tied to
each law school and its parent institution, it is impossible to state a single
overhead percentage that is appropriate. My sense, however, is that as a general
principle, where total overhead and indirect expenses exceed 15 to 20 percent of
total revenue (net of the law schoolís fair share of undesignated revenue),
problems develop in the budget of the law school that affect the academic
Another matter of great importance is the overhead charges against law school
gifts and endowments. This involves not only the usual overhead issues,
but maintaining the utmost good faith with donors. Institutions that
divert any significant part of a donor's gift from its intended purpose to
another purpose through various forms of overhead or assessments fail as
stewards of the money entrusted to them. Only if donors clearly understand
and agree to this diversion before the gift is finalized are such charges fair
to the trust and faith that is essential between donors and institutions of
Salaries: It is common for universities to set a salary and staff
increase pool that is a given in the law school budget. Even here, in special
circumstances the dean may be able to negotiate some exceptions for the law
school. Where there is not an institution-wide policy on the percentage of
salary increases, a major issue in budget discussions will be the degree to
which other budget priorities are offset against the salary pool. This is a
particularly difficult problem because almost everyone involved in the decision
has a direct, immediate interest in its outcome.
The absence of reliable data on law faculty salaries that resulted from the
Justice Departmentís intervention in the ABA process has made it especially
difficult to approach salary questions in an informed, rational way. As is
usually the case when market information is unavailable, the absence of reliable
data has resulted in inefficiencies, with deans left to rely on fragmented,
partial and inadequate information.
The Problem of Squeaky Wheels: In too many institutions the squeaky wheel
does, in fact, get the grease. In a university where this is the process, of
course, the law school will want to be a squeaky wheel: ideally, a nice squeaky
wheel. Within the law school, it is a mistake to use squeaky-wheel budgeting. It
results in misallocation of resources and too often rewards bad behavior. The
difficulty is, it is human nature to respond to those who press a little
aggressively for their needs. One appropriate response by the dean is to urge
the squeaker to make a formal budget request that can be considered with other
priorities during the budget process.
Reallocation: Every budget process should include some mechanism for
considering internal reallocation of funds. The fact that the current budget has
an allocation to certain services does not mean that the allocation is correct.
It may be an accident of history, or an allocation based on priorities that are
no longer relevant. There should be periodic consideration given to
discontinuing activities that are no longer a high priority and reallocating
their resources to other projects. Such reallocation considerations and
discussions must be done with enormous care. It can scare the daylights out of
some faculty and staff, result in disruption of ongoing programs, and create
unproductive havoc. At the same time, it is unnecessary to continue all of the
budget lines at their historic levels.
Expectations: Satisfaction often depends on expectations. It is a
careless dean who raises high expectations for the next budget cycle. In some
institutions, raising unreasonable expectations has been developed nearly to an
art. The streets will be paved with gold and every member of the staff decked
out in the latest technology, if only we can hang on until the next budget. It
is much more sensible to create reasonable expectations. There seldom is as much
money when a budget is implemented as people expected nine months before.
A dean need not be pessimistic to caution against expecting too much in any
Accreditation: Accreditation interests do not generally play a major role
in law school budgeting. Occasionally, the law school or university has made
commitments to accrediting agencies. In other instances, the funding for some
programmatic areas of the law school may have fallen so dangerously low that
they threaten to violate accreditation standards. In these special circumstances
the dean must pay special attention to those areas of the budget. At a minimum,
the failure to meet the accreditation commitments that have been made or to
correct the funding deficiencies threatens the integrity of the institution.
Think Ahead: A budget is made for a single year, but it is part of a
continuing process of allocating resources. A dean should always be considering
future budget years when going through a budget process. The very nature of
focusing on priorities, of course, has the effect of providing a long-term
perspective. It is generally useful to have a long-term strategy for the budget
Implementing the Budget
A budget is, in one sense, "just a bunch of damn numbers." Only if
it is actually implemented is it an effective instrument of resource allocation.
In some schools there are routinely huge differences between the budget
that is adopted and actual expenditures. In some cases this is because the
university has an arcane method of budgeting in which a dean is left to prepare
a budget as a fiction that will never be implemented, and then to make
substantial reallocations to operate the law school in a reasonable way. In
reality this is an institution operating without a true budget.
Absent such strange institutional policies, the art of being a dean is to
know how to be reasonably flexible so that the budget is not a silly constraint,
but sufficiently rigid to ensure that priorities are actually implemented. If
the budget decisions do not constrain the day-to-day operating decisions to
funnel money to priorities rather than to immediate, if temporary, diversions,
then it has not served its primary purpose.
A good budget is not a bunch of numbers. It is the future of the law school
and the place where dreams meet reality. The budget process provides the
opportunity to ensure that the most important things are done, search for
additional funds to do the important work of the law school, efficiently use
every dollar students and donors entrust to the law school, and ensure that the
shared vision of the direction and future of the law school can become a
reality. Deans should welcome the opportunity, which is renewed almost every
year, to undertake such important, challenging and, yes, creative activity.
*Dean and Professor of Law, California Western School of Law. The author
wishes to thank Steven Ciceron, Barbara Cox, Lenore Fraga, E. Donald Shapiro, Lera Smith and
Peter Winograd for their helpful comments and assistance.