Sloan, B. (2000), "Slicing the membership pie", The Bottom Line, Vol. 13 No. 1. https://doi.org/10.1108/bl.2000.17013aaf.001
Emerald Group Publishing Limited
Copyright © 2000, MCB UP Limited
Slicing the membership pie
Keywords Finance, Cost allocation, Academic libraries
(Columnist's note: This is the first in a series of columns dealing with the financial aspects of consortial management. This column discusses methods of apportioning consortial costs back to the membership, using the Illinois Library Computer Systems Organization as an example. Future columns will deal with topics such as outlining how other consortia allocate costs, negotiating with electronic resources vendors, fiscal reporting to consortial membership, etc.)
At the recent 6th Conference of the International Coalition of Library Consortia (ICOLC), I participated in a panel discussion dealing with slicing the consortial pie. Panelists, and audience members, participated in a lively discussion of how various consortia allocate costs among the consortium membership.
I began my presentation by illustrating how the membership composition of a consortium can complicate the development of cost sharing models, using the Illinois Library Computer Systems Organization (ILCSO) as an example. While largely a consortium of academic libraries, there is still a tremendous amount of diversity among the membership. ILCSO has 45 members: 13 state universities (three of which are ARL members), 25 private colleges and universities, five community colleges, one high school, and one state library agency. Of these members, 11 offer the doctorate as the highest degree, 21 offer the master's as the highest degree, six offer the bachelor's, five offer associates degrees, one offers a high school diploma, and one (the state library agency) offers no degrees at all. The smallest library in the consortium has an operating budget of $230,000, while the largest library has an operating budget of $24 million. Eleven libraries have budgets in excess of $2 million, while eight libraries operate on less than $500,000 each. One library has a student FTE count of only 233, while the largest library has nearly 40,000 FTE students. Eight institutions have more than 10,000 FTE each, while seven have fewer than 1,000 FTE. One library holds only 45,000 volumes, while the largest holds 7.7 million volumes. Five libraries hold more than 1,000,000 items each, while 13 hold fewer than 100,000 items.
ILCSO began charging membership assessment fees in FY 1988 (since FY 1988, these membership fees have contributed $11.1 million to the development of various ILCSO programs). Prior to FY 1988, ILCSO costs were subsidized entirely by the state, or were charged to libraries strictly on a pass-through basis (e.g. the costs of the telecommunications circuit that connected the library to ILCSO's central site computer). The calculation of each institution's membership fees began simply enough. ILCSO had a multi-year plan that outlined the bottom line that would be needed each year to support certain programmatic requirements. All that remained was to develop a method to apportion those costs back to the individual institutional members. For the first year (FY 1988) the method used was very simple: calculate the relative percentage of online circulation system usage (by counting transactions) for each institution, and apply that percentage toward the total number of dollars needed for FY 1988 ($382,500). If a library accounted for 5 percent of relative system usage, that library's membership assessment would be 5 percent of the bottom line, or $19,125. This same method was used in FY 1989 to allocate $569,400 in membership fees, and again in FY 1990 to divide $646,500. Relative system usage was used again to divide up FY 1991 and FY 1992 assessments, except that for those years relative usage of a new online catalog component was also factored into the equation.
While calculating ILCSO membership assessments was fairly straightforward for the first five years, changes to the software complicated matters beginning with the FY 1993 assessments. When ILCSO assessments were calculated, the baseline year for usage data had been the fiscal year two years prior to the fiscal year of the membership assessment. For example, membership assessments for FY 1993 were calculated based on FY 1991 usage data. During FY 1991 a new user interface called MILO began to be implemented at various ILCSO libraries. One unforeseen side effect of MILO implementation was the impact on online public access catalog usage data, resulting in an "apples-to-oranges" comparison of online catalog usage data between libraries using the MILO interface, and libraries that had not yet implemented the MILO interface. The ILCSO Policy Council discussed the issues and determined that the best course of action was to freeze ILCSO membership assessments for FY 1993 at the FY 1992 level. The MILO vs. non-MILO institutional data problems had not been entirely resolved during FY 1992, so the ILCSO Policy Council once again elected to freeze institutional membership assessments at the FY 1992 assessment level for FY 1994. Recognizing that it was not desirable to extend the assessment freeze into FY 1995 (i.e. assessments would have been based on "old" data collected from FY 1990), the ILCSO Policy Council appointed the Assessment Methodology Task Force, and charged that group with developing a new method for calculating membership assessments for FY 1995. This Task Force recommended that each ILCSO member library be assessed a $2500 base membership fee, with the remainder of the assessment to be calculated using a method based on the following factors: holdings, circulation activity, ports allocated, and a measure of inter-institutional borrowing and lending.
ILCSO again used the FY 1995 method (partially) to calculate membership assessments for FY 1996. The method for FY 1996 included the relative percentage of total membership assessment paid in FY 1995, as well as factoring in updated information on the number of ports allocated and circulation system usage. For the following five fiscal years (FY 1997 through FY 2001) the membership assessment calculations were made by applying a more or less fixed percentage increase to each institution's assessments. For example, the assessment bottom line increased by 4 percent in FY 1997, so each member library's assessment was increased by 4 percent over the FY 1996 institutional assessment, with the minimum fee increasing by $500 increments each year. One basic shortcoming to the continued use of this method is that assessments continue to be based, to some degree, on data gathered in FY 1993. Recognizing this shortcoming, a new ILCSO Assessment Task Force has been constituted to review methods for calculating membership assessments in FY 2002 and beyond, and to establish a new formula, based on readily available data and statistics. The new Assessment Task Force is expected to complete its report by the spring of 2000.
What are the lessons to be learned from the ILCSO experience to date?
The allocation of consortial costs is complicated, or made simpler, by the diversity, or lack of diversity, among consortial members. In a consortium made up of one type of library, where all institutions are more or less peers, the task would be simple: divide all costs evenly among members. But even in a consortium such as ILCSO, which is largely one type (academic libraries), the diversity among members presents a real challenge to developing a method that apportions membership fees fairly. One can only imagine how the process is further complicated in multi-type library organizations.
The allocation of consortial costs is also largely driven by the reporting capabilities and mix of the technologies the consortium uses. For example, if these technologies do not produce good usage data, cost calculations might be skewed. Or, if some member libraries use some technologies, and others do not, how does the consortium weight the use of these different technologies in allocating costs?
Perhaps the most important lesson to be learned is that there does not appear to be any one-size-fits-all solution to allocating costs among consortial members. So much of how a consortium conducts business reflects the history and politics of the consortium. For example, using student FTE counts to allocate consortial costs might seem an ideal solution in one setting, but may be hotly contested in another. The political, social, and historical aspects of the individual consortium must be considered when developing methods to slice up the consortial cost pie. What works well for another consortium may not work out in your consortium.
In this column, I focused on how the Illinois Library Computer Systems Organization allocates consortial membership fees among its 45 member institutions. In my next column, I will consider models used by other consortia. Are there some common themes that seem to work generally for differing consortia?
Bernie Sloan is Senior Library Information Systems Consultant, University of Illinois Office for Planning and Budgeting, Urbana, IL