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Archive for the ‘Budget’ Category

U. of Delaware's state-of-the-art Visitors' Center

I belong to a Yale class of ’75 listserv, and recently, in addition to planning for our 35th reunion (starts the day after tomorrow!), there has been a lively discussion about the seemingly shocking rise in the cost of college: a year at Yale cost about $5,000 in our day, and $50,000 now. Since I have papers to grade and there is no better motivation than procrastination, I offer some comments on the subject—with the understanding that they are purely based on personal experience and observation, not on any knowledge of the economics of higher ed, the economics of pricing, or the economics of anything. So here they randomly are.

1.  My personal inflationary landmarks (aka the things whose prices I remember and are basically the same product over time) are the newsstand price of the New York Times (ten cents in 1971; $2 now) and the price of a ride on the N.Y. subway (thirty cents in ’71; $2 now). So the change in the cost of a year at Yale ($5,000-$50,000) is roughly in keeping  with those commodities.

2. At Yale (which Maria attends), Swarthmore (where Gigi works), the U. of Delaware (where I work), and Vassar (from which Lizy just graduated), and presumably most other major colleges and universities, if you divide the annual cost of running the school and educating the students by the number of students, you come up with a figure that is more, and in some cases far more, than the sticker price of tuition (much less the amount that the average student actually pays, once financial aid is factored in). At Yale and Swarthmore, my sense is that tuition accounts for something in the area of half the cost, with the rest coming from endowment income. At Delaware, which gets funding from the state (though it isn’t technically a state school), tuition accounts for roughly 40 percent of the budget. The relevance of this is that even if costs were substantially reduced (athletic programs cut, professors made to teach five classes year-round, tenure eliminated, thermostats set at 65 in the winter, etc.), tuition still wouldn’t cover them, so tuition would not go down.

3. When I chat with my Delaware students, I often ask them why they chose to come here. The most common answer (often eerily expressed in exactly the same words) is, “I fell in love with the campus.” That makes sense. It was a nice setting to begin with, but in the eighteen years I’ve been teaching there the place has been transformed, with a lot of new buildings, extensive renovations to all the old buildings, and every cement sidewalk torn up and replaced with a brick path. From looking at dozens of colleges with my two children, I know that UD is not alone in spending so much on physical plant. The centerpiece of virtually every tour we took was the “state of the art” gym (a state-of-the-art library was rarely on display). My sense is that all colleges, even the Yales and Swarthmores, realize they are in a battle for students with their peer institutions, and amenities and the appearance of luxury is one of the most important things they can sell, if not the most important. This has nothing to do with education, obviously, and it costs a lot of money, also obviously.

4. When we went to my daughter Lizy’s graduation over the weekend, we were very gratified to bring with us my 95-year-old mother-in-law, Marge Simeone. She is in fine fettle, but isn’t quite as nimble as she used to be, so we rented a wheelchair for her. On graduation day, the second—and I mean the second—we got to the outdoor amphitheatre where commencement was to take place, we were greeted by a friendly, extremely competent woman wearing a nametag stating her name and “Office of Disability Affairs” (or words to that effect). She very clearly explained all the options for seating, and access to and exit from same, and made it clear that she and her colleagues would do everything they could to make sure we comfortably enjoyed the ceremonies.

My reason for sharing this touching anecdote? The friendly woman was part of the administrative superstructure some of you have alluded to and which, indeed, has relatively recently sprung up and multiplied at U.S. colleges. So, in fact, is Gigi. She and her half-time assistant spend their time helping Swarthmore students (and alumni) get into medical school and law school. None of these jobs existed thirty-five years ago, and they cost a lot of money to staff and run. Should they be gotten rid of?

One of my Yale classmates, Chris Edwards, talked about the sort of nanny-state RA system he experienced when he fairly recently went to BU to get an advanced degree. Again, this whole structure (often called “Residence Life”) postdates our college experience and is a presence to some extent on all campuses. Gigi  in fact used to work in this field (at the Universities of New Hampshire and Pennsylvania), so I have some familiarity in how it works, essentially, to address and develop the non-academic side of students. This quest can sometimes seem a little foolish, as Chris observed. But its has a sort of noble bottom line, which is, as I see it, to support who more than likely wouldn’t have made it through (or been damaged by) the Darwinian sink-or-swim college ethos of past decades: people in wheelchairs, the non-wealthy, those on some kind of emotional precipice, those that society seems to think are marginal or different, and so forth. People with a handicap, or at least without a head start.

The sink-or-swim mentality had a kind of attractive intellectual purity to it, and was a whole lot cheaper. But there is no going back. And even if there were, I’m not sure I would want to.

And now I really have to grade those papers.

—Ben

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USA Today continues its great reporting on the business of college sports. A couple of days ago, its website offered readers a really eyeopening database showing a detailed look at the athletic revenues of some 200 Division I colleges and universities. The most eye-catching finding: only 14 of these schools brought in as much money (from ticket sales, donations, radio/TV, and marketing/merchandising payments)  as they spent on sports.

Coach K, the $4 million man

The biggest expense used to be scholarships, but now it’s coaches’ salaries. Nine men’s basketball coaches–including Mike Krzyzewksi, whose Duke team is playing for the national championship tonight–make more than $4 million.

The schools make up the deficit through direct institutional support and, increasingly, student fees. To take a couple of examples close to (my) home, at Rutgers, in 2008-09 (the most recent year available) student fees paid $7.8 million and institutional support $17.9 million—a combined 44 percent—of the $58.5 million athletic budget. At my employer, the University of Delaware, no student fees went to athletics (thankfully), but direct or indirect institutional support paid for a whopping 78 percent of the $30.30 million budget.

By my calculations, that amounts to well over $1,000 for every UD student, going to pay the sports team’s bills. That just seems wrong.

A VP at the University of Houston, Carl Carlucci, was nice enough to talk to USA Today for a related article. At Houston, over the last five years, the university and student fees have, respectively, covered $43 million and $21 million in athletic expenses.  Carlucci defended the spending, including the men’s basketball coach, Kevin Sumlin, getting a 60 percent raise, to $1.2 million. “We’re paying for talent,” he said. “We’re in a competition for fans. When Sumlin wins, we can count on more ticket sales.

“It’s like any other entertainment business.”

He said it, not me.

—Ben

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A new study of 842 colleges and universities shows that their endowments lost about $58 billion last year.

That represents a 19 percent drop in the collective endowments, which total $306 billion. Interestingly, endowment spending by the average school actually increased last year, from 4.3 percent to 4.4 percent. To make matters worse, 60 percent of the schools reported a decrease in gifts and donations. Plus probably all of them received less money from the federal and (especially) state governments.

My employer, the U. of Delaware, saw a 25 percent endowment drop, to a neat $1 billion. We are also being squeezed by Delaware legislators, and, needless to say, rising costs.

Even as we speak, the faculty union, the American Association of University Professors (AAUP), is commencing negotiations on our next contract. Somehow I don’t thing we will be looking at double-digit raises.

—Ben

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Deductible quarterbacks

Does this man run a charitable organization?

Writing in today’s New York Times, Gilbert Gaul points out another extremely sketchy aspect of big-time college athletics: the money it generates is untaxed. He notes:

Decades ago — before the lucrative television contracts, Internet marketing, Nike sponsorships and luxury boxes — Congress essentially exempted colleges from paying taxes on their sports income. The legislators’ reasoning now appears shockingly quaint: that participation in college sports builds character and is an important component of the larger college experience.

Many booster clubs are recognized as charities under the federal tax code. At Florida and Georgia, to name just two universities, the athletic departments are set up as charities. Universities also have access to tax-exempt financing when building ever-larger stadiums and arenas. Boosters and donors benefit from generous tax deductions when they buy the best seats or endow an athletic scholarship. That’s right: colleges now endow their quarterbacks and linebackers the same way they do a distinguished chair of American literature.

So these programs aren’t just sucking up resources at their universities; they are aggravating the country’s deficit.

Maybe we could get the congresspeople from non-BCS states to band together to end this nonsense. The Montana-Massachusetts coalition: I like the way that sounds.

—Ben

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A gentleman identified as “chancellorial chairman for teaching across disciplines at the University of California at Riverside” (there’s a title for you) writes a letter to the New York Times on college presidents’ salaries, a topic frequently discussed here at BloggEd. He notes:

If higher salaries for administrators could be shown to enhance the fundamental purposes of a university — teaching and research — then the raises might be justified. But there is an important sense in which the higher pay actually does the opposite: it undermines those basic functions. It puts out the message that to succeed in academic life is to climb the administrative ladder: department chair, dean, provost, president. Generally speaking, the further one goes on this ladder, the less teaching and research one does. In the end, a campus can have a Nobel Prize winner who is paid only a third of what the president gets, and the most brilliant teacher on campus will be paid even less. The pattern sets up perverse incentives: Want to maximize your pay? Don’t work too hard on teaching or research. “Success” lies elsewhere.

Now, don’t get me wrong, I resent the top brass as much as the next bloke, but this seems seriously wrongheaded. For one thing, the writer, Perry Link, sets up a false choice: pursue academics/research and get peanuts, or pursue the administrative track and get big bucks. It would probably only occur to a tiny percentage of my fellow professors to go after administrative jobs, and only a tiny percentage of us do so. Such  jobs are all about sitting through meetings, raising money, going to boring cocktail parties, and telling people things they don’t want to hear. We don’t like that. We like teaching, research, and writing. And you know what? We are paid pretty well for doing them.

Chancellorial Chairman Link also doesn’t seem to understand proportions. The median salary for presidents of private colleges and universities (which were revealed in the survey he is responding to) is $358,000. Maybe three dozen college presidents in the whole country, public and private, make over a million dollars a year. And why wouldn’t they? They are responsible for the operation, success, and survival of multimillion-dollar organizations in a very difficult time. Amy Gutmann of the University of Pennsylvania runs an institution with 31,000 employees and a $5.5 billion budget, and has to sustain a $6 billion endowment. Her $1.2 million in compensation doesn’t seem so terribly out of whack.

I would be interested in what some of my economically literate readers, like John Caskey or Andy Cassel, would have to say about the matter of presidential compensation.

In the meantime, I am saving my ire for coaches at big-time athletic schools, like my old buddy Urban Meyer of the University of Florida. He gets $4 million. And all he has to do is win football games.

—Ben

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Is this guy worth $4 mil a year?

The $6 million man

The $4 million man

The Chronicle of Higher Education recently ran a section on athletics and academics in the Southeastern Conference (SEC), revealing, among other things, that “of the league’s 12 head football coaches, eight make $2-million a year or more, twice as many as in any other league.” The biggest earner is the guy at left, Florida coach Urban (“Legend”) Meyer, who was given a $750,000 raise last month, making his salary $4 million a year—this just after the university’s overall budget was cut by $42 million.

To paraphrase Congressman Barney Frank: What planet are these people on?

Maybe the most shocking thing in the section was a chart showing changes in spending on athletics vs. academics by the twelve colleges in the conference. With two exceptions (Vanderbilt and–barely–Ole Miss) sports far outstripped studies. The most egregious offenders were Georgia (12% increase for academics, 57% for sports) and Auburn (5%/38%). The University of Arkansas spent nearly $63 million on sports in the most recent year for which figures were available, and barely more than that on academics–$108 million. Its football coach, Bobby Petrino, gets paid $2.9 million a year.

The proof of the pudding is in the NCAA figures: Arkansas shows a 45% graduation rate for its football players.

I’m not a dummy. I understand that economically, these decisions are rational. That is, Meyer will probably be responsible for bringing in more than his salary a year, in dollars, good feelings, and glory to the U. of Florida name.

But with priorities like this, do these outfits still have a right to be called institutions of higher learning? I don’t think so.

—Ben

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