UC Davis has released a white paper outlining a proposal for a "new budget model" (we had discussed something similar back in February). The proposal is in line with, but independent of, the "Funding Streams" model being implemented by UCOP, and similar to the corresponding allocation schemes at Michigan or Minnesota. The leading idea of Funding Streams is that revenue is to remain with the campuses that generate it (hence, for instance, Berkeley's push to enroll more out of state and international students). The Davis proposal brings this idea down to the different units on campus ( a "unit" is defined, for the purposes of the white paper, as anything headed by a Dean, or the equivalent of such). Revenue generated at UC Davis — i.e., student tuition and indirect cost recovery from grants —would be allocated to the units proportionally to the amount of student tuition and grant dollars generated. The central campus would then assess a "tax" on such revenue (including return to aid) supposedly in proportion to resources each unit is using.
This is the main idea. The details are worth a look, too. First of all, "student tuition" means blended tuition, i.e., a campus-wide average of in-state and out-of-state tuition. This way, although the campus has a strong incentive to recruit out-of-state students, no single unit does. Second, part of the moneys recovered through the assessment would go (besides support for shared resources, such as the central library etc.) to fund a "Provost Supplement" allocated centrally to the units in order to further the campus' strategic goals. Finally, it's noteworthy that there is no presupposition that the Deans will, in turn, allocate resources within their own units according to anything resembling the same principle. So although cross-unit subsidies would (presumably) be curtailed, departments within each unit would still be jockeying for increased resources. The proposal also addresses the issue of how a student's tuition is to be shared between the unit teaching the class and the unit hosting the student's major (answer: 65% to 35%).
The proposal is to be praised to the extent that it brings a measure of transparency to an otherwise totally mysterious process. It is also, to an extent, a transfer of power from central administration to the Deans, for better of for worse. But it does nothing, by itself, to address budgetary shortfalls: while units in the sciences are motivated to increase the number and size of their grants (although grants are, as finally acknowledged, a net loss to the university), the number of student credit hours is more or less fixed, certainly in the short term. So the units, especially the ones that rely on teaching vast numbers of undergraduates, would essentially be engaging in a zero-sum game.
It remains to be seen whether the proposal, strongly advocated by Chancellor Katehi, will be favorably received at UCOP (probably yes) and on the other campuses across the system.