I'll Scratch Your Back, You Scratch Mine

The Wall Street Journal reported that “(a) panel of business and academic leaders warned funding cuts to higher education are hurting the global competitiveness of U.S. research universities….”

The panel consisted of 22 “academics, business and non-profit leaders”. The report was 250 pages long---and it was commissioned by Congress! That means you paid for a report that concludes that you should give more money to research universities.

Congress paid academics and their friends in the non-profit and big-business sector to write a big report ---the conclusion of which they already knew. That they need more money—much of it from taxpayers. Fortunately the report also includes advice to tighten the belt and do things differently (like add more on-line learning).

I love this quote from Bank of America’s Chairman—and the head of this committee, “The pressures on these institutions are just massive.” Uh-huh.

We often read that increasing enrollments mean universities have less to spend on each student, but what are universities doing with the increased tuition they charge (that is burdening students with debt)?

According to the article, these institutions have a spending problem. While state funding as a percentage of the total budgets has declined, the total budgets are ballooning. One cause? Employee fringe benefits and retirement plans. “Employee fringe benefits, including retirement plans, accounted for 13.6% of total spending at 124 four-year public research universities in 2009, according to federal data compiled by the Delta Cost Project, a nonprofit group that examines higher-education funding.” (Emphasis added)

Like government, research universities and most of the academy, has been living in its own universe. While the folks who pay the taxes that support these institutions have learned new ways to do things with less—and shifted to a different benefit structure---the academy is still living in the good old days.

I think we got a glimpse of that when the University of Minnesota made the news last winter with big pay and benefit packages for retired administrators or officials on leave.

Maybe too many people are going to college. Diane Ravitch and others have written about this of late. I am not sure what the relationship is between increased enrollments and the financial woes of research institutions (because if you went to the Uof M like me, you know there is a disconnect between the college and the research arms). I doubt if research budgets are dependent on tuition for lowly undergrads.

What is clear is that this report is self-serving. Here is our friend, Dr. Richard Vedder, a retired economist from Ohio University and director of the Center for College Affordability and Productivity, on the report: “It read to me like a lobbying effort for the National Research Council.”

What he said.