Stoevener, Herbert H.

English

Research Papers in Economics

SOUTHERN  JOURNAL  OF  AGRICULTURAL  ECONOMICS  JULY,  1983
DISCUSSION:  FINANCING  AGRICULTURAL  RESEARCH  AND  EDUCATION
IN  A  PERIOD  OF  TIGHT  BUDGETS
Herbert H.  Stoevener
Most of us  will react to a topic such as the one  as-  ence of agricultural groups at state and federal levels.
signed to Dr. Flatt on the basis of our personal expe-  The opportunities,  referred  to by  Dr.  Flatt,  to be  re-
rience  rather than  from the  vantage  point  of a well-  sponsive to the short-run needs of state citizens may be
reasoned  conceptual  framework.  As  Dr. Flatt points  another explanation.
out, there  is a multitude  of means through  which  in-  To disentangle  all of these influences  may only be
stitutions finance  agricultural research  and education.  an academic exercise. But then again it may not be.  If
Hence, there is the danger that the biases of a view from  we decide that we can enhance our future by falling in
personal experiences will cause our observations to be  step behind the drummer for a  national research agenda
off the  mark. However,  I found myself generally  and this does in fact, not lead to improved resource ac-
agreeing  with  Dr.  Flatt's comments.  Encouraged  by  quisition, we will suffer on two accounts.  First, we will
this, I shall add a few more specific observations of my  not have achieved the objective  for expanding our re-
own after picking up briefly on one point made by Dr.  source base,  and secondly,  we will have given up some
Flatt.  of the allocative efficiencies  of which Ruttan  speaks. I
am most concerned about this latter aspect. Continued
high productivity of our operation is the best, if not the
FUNDING  HISTORY  only defensible argument for our support.
I am not certain that I am in full agreement with the
implications drawn  by Dr. Flatt from the argument at-  IMPACT  OF  TIGHT  BUDGETS  ON
tributed  to  Ruttan.  You  will  recall  that  it  was  sug-  INDIVIDUAL  RESEARCHER
gested  that  the  decentralized  nature  of the  U.S.  PRODUCTIVITY
Agricultural  research  and  education  system  leads  to
high efficiency  in resource  allocation  but relative in-  The subject of productivity brings me to the second
effectiveness  in resource  acquisition.  I find the statis-  part of my remarks.  Here I want to add to some of Dr.
tical  evidence  which  Dr.  Flatt cites  on this point  Flatt's  comments on  how  financing  affects  the  envi-
somewhat  confusing.  In  the  aggregate,  agricultural  ronment  of the  individual  teacher,  researcher,  or ex-
experiment  stations  have  done  well.  Appropriations  tension specialist,  the person who is entirely responsible
from their respective  states increased in constant dol-  for the  output of our enterprise.  My  focus will  be on
lars  by  57%  between  1966  and  1979  (Table  2).  In  the financing of these activities as it may be handled by
comparison,  USDA research expenditures  during this  our individual  institutions,  once  funds have  been al-
period remained virtually level in constant dollars (Ta-  located to them by federal and especially state govern-
ble  1).  Dr.  Flatt says that we may  have  "the best of  ments.  In this area the prerogatives are largely ours.
both  worlds"  in the  state agricultural experiment  sta-  Let us turn first to the allocation of personal  finan-
tions:  decentralized  decision-making  yet  centraliza-  cial rewards for faculty. As budgets tighten, there may
tion for fund raising through the state government. With  only be sufficient  funds to make  on the average  very
the latter aspect,  I wonder why the role of the experi-  small increments  to salaries.  Under these circumstan-
ment station in the individual states should be so greatly  ces there is  a tendency to substitute "across the board"
different from that of the USDA in relation to the fed-  for merit increases.  A common occurrence  at the pres-
eral government.  ent time is salary freezes,  which totally rule out any at-
There may be other hypotheses  to explain the diver-  tempt  to  reward  productivity  financially.  Our
gent history of appropriations for agricultural research  universities  must resist this  tendency  or the  long-run
and education  at  the federal  and  state levels.  Differ-  consequences will be serious.  Faculty morale may de-
ences  in entitlements  and  inflation-driven  commit-  dine, recruitment of high-quality  people  into the fac-
ments to other programs at federal and state levels may  ulty ranks  will be hampered,  and  many  of our most
be one source of such hypotheses.  Political scientists  capable  faculty  will increasingly  look  to outside  op-
might  also  look for differences  in  the political  influ-  portunities to  supplement  their incomes. All of this will
Herbert H.  Stoevener is  a Professor and  Head of the Department of Agricultural Economics,  Virginia  Polytechnic  Institute and State University.
Invited discussion presented  at the annual  meeting of the Southern Agricultural Economics  Association,  Feb. 6-9,  1983 Atlanta.  Invited discussions  are routinely published in the July SJAE
without editorial  council review  but with  review by the copy editor  (as per Executive  Committee action June  25,  1982).
19have serious long-run consequences  for our collective  ductions? We may want to use any or a combination of
output.  the above  tools to deal  with a short-term fiscal  emer-
Tight budgets can also have devastating impacts  on  gency.  But for long-run  adjustments  to tightened
operating budgets.  Different institutions have different  budgets,  there must be another solution.  I would like
practices  concerning  what  are  classified  as  operating  to come back to Dr.  Flatt's advocacy of decentralized
funds. Some include monies for teaching and research  decision-making.  I believe  we need much more  of it
assistants,  secretaries,  and technical  support staffs. In  inside our universities and colleges of agriculture than
others, these are allocated to departments as positions.  we currently enjoy.
In this case, operating funds cover merely travel, pub-  Ideally,  I would like us to approach  a system where
lications,  supplies,  repairs  and  maintenance,  tele-  administrative  units,  down to the departmental  level,
phone service,  and whatever is left over is for general  would have the  flexibility to work  within one  budget
teaching,  research,  and extension support,  and equip-  from which they would finance their entire operations.
ment  purchases.  Generally,  the  more  narrowly  oper-  This would include everything from faculty salaries to
ating funds  are defined,  the more  serious  the impacts  the  purchase  of typewriter  ribbons.  Of  course  there
of budgetary  cut-backs.  Operating  funds  are  consid-  would need to be appropriate guidelines  and  supervi-
ered to be the uncommitted  portion of the budget and  sion from higher administrative  units.  When overall
therefore  subject to recall.  The smaller the portion of  budgets tighten or expand,  adjustments  (hopefully on
operating funds relative to the total budget,  the greater  a reasoned,  non-across-the-board  basis) could  be made
the portion of these funds that will have to be given up  in  these unit budgets  by  higher-level  administrators.
to make  a given percentage of the total budget.  At the  Decisions  concerning  resource  allocation would gen-
same  time,  opportunities for making adjustments  and  erally be made at that level where information on their
reallocations within the operating budget are also more  effects is most readily  available. The system would also
limited when this budget covers fewer expenditure cat-  accommodate  adding,  eliminating,  or combining  any
egories. Under these circumstances,  we can encounter  number of program areas as administrative  units.
situations where  it is no longer possible to make  sub-  Time does not permit us to speculate about many of
stitutions for operating funds,  and we have to fall to a  the  likely  effects  associated  with  such  a scenario.  I
lower isoquant.  would hypothesize,  however, that under this proposal
What accompanies  or precedes  the  operating  fund  we  would generally  find fewer tenured  and tenure  track
call-back is usually the hiring freeze.  This presents  an  faculty  than  we  now  have.  Administrators  and  their
opportunity for universities to make savings in the per-  faculties would no longer be forced to act as if the bud-
sonnel budget.  Obviously  the  hiring  freeze  is  neces-  getary pool from which faculty salary funds are drawn
sary  for  any  substantial  budget  reduction  since  were a free good.  The same would be true for all kinds
universities have more than 80% of their budgets com-  of other  expenditure  categories  in  which  the  current
mited to wages and  salaries. Everyone knows that the  system protects  the advocate for their consumption from
consequences  of a hiring freeze are almost totally ran-  an incentive to economize in their use.
domly  distributed.  Such  consequences  can hardly  be  What I am suggesting would obviously help our ag-
supportive of an objective  of allocative efficiency.  If  ricultural research and education system not only dur-
not  modified  (and  modifications  are  administratively  ing this tight budget period, but at other times as well.
difficult),  hiring  freezes  can  seriously  affect  faculty  Currently we should be more open-minded and willing
morale  and the  outputs  from  those programs  and  ad-  to put forth the necessary effort to be innovative in fi-
ministrative  units that happen to have a large number  nancing our operations.  We may  be  able to make  an
of staff retirements  or resignations.  opportunity out of the current hardship and assure that
You may wonder where I am leading,  having ruled  the  productivity  of our  system  can  continue  to  be a
out salary and hiring freezes  and substantial reductions  source of great pride to us.
in operating funds.  How are we to deal with budget re-
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DISCUSSION: FINANCING AGRICULTURAL RESEARCH AND EDUCATION IN A PERIOD OF TIGHT BUDGETS

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Research Papers in Economics