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Planning for Contraction

Planning for Contraction

September 29, 2008

Even before the economic news of the last year, I was increasingly convinced that all but perhaps four or five American universities with extraordinary wealth had come to the end of a long period of expansion.

Why? Let me lay out the basics.

1) Tuition is a smaller part of the revenue base for many wealthier institutions than outsiders commonly imagine. Other income, most importantly endowment income, pays for a significant proportion of the per-student cost of selective higher education. Moreover, at many selective institutions, tuition is effectively charged on a sliding scale: basically, universities and colleges ask an entering student how big their parents' wallet is, and set their fee from the answer.

Still, few institutions, wealthy or otherwise, could survive if they minimized or eliminated tuition. Steady increases in tuition above the rate of inflation in the 1970s and 1980s allowed many institutions to dramatically improve what were often shabby facilities, improve what were then poor working conditions for faculty, and to offer a much fuller range of services. Since then, those increases have underwritten further growth along the same lines, though there are also important areas where most higher education has been strongly exposed to cost increases that were also well above inflation, such as libraries and information technology.

This era is over. Tuition cannot keep rising at this rate, at least not at institutions with need-blind admissions. Family incomes are no longer keeping pace with tuition increases. Rising income inequality in the United States means there is a steadily smaller and smaller group of families that can be expected to pay the full cost of higher education. Unless institutions were willing to slide out their fee scale even further, with a premium charge for the richest 1 percent of families that was double or triple the current highest charge, the base charge cannot keep going up above inflation at all. (I suppose you could argue that legacy admissions and capital campaigns and the like are a premium pricing tier of a sort, but the more overt that equivalence becomes, the more corrosive the likely consequences.)

This is leaving aside external political pressure over tuition increases, which I think is likely to increase regardless of who wins the presidency this November. Tuition increases well above or even at the rate of inflation will be increasingly likely to provoke some kind of draconian response from Washington.

2) Endowment income. It’s obvious now that the vast majority of endowments cannot expect anything like the rate of return that many have seen over the last two decades. I worry that many endowments will be hard pressed to hold on to the position they're at right now if the overall investment environment gets any worse. This income pays for a lot at many colleges and universities now. It is not going to pay for another decade of growth comparable in scale and magnitude to the two decades previous.

3) Fund raising. I just don't think there's the money out there for capital campaigns like the ones that most institutions have run in the last two decades. The people who made those campaigns work are tapped out, or they want to move on to other (arguably more deserving or needy) philanthropic targets. The current economic climate is the opposite of the irrationally exuberant eras of money accumulation that occasionally filled fund-raising targets. “Donor fatigue” is clearly a problem for many non-profits at the moment, including higher education. A lot of smaller annual donations are going to get harder for many professional families to make. Colleges and universities will still be able to make up some ground through fund raising, but I don't think it will compare to past efforts, let alone make up the difference in missing revenue from other sources.

4) Public funds, either directly into the budgets of public institutions, or indirectly through grants and awards. Public universities, even the most favored, have not necessarily seen the same kind of growth in the past two decades that elite private universities and colleges have, but the budgetary circumstances of many even a decade ago often seem better than the situation they are facing at present. Many public institutions are facing serious budget cuts coupled with higher tuition charges. Grants and awards from governmental and non-governmental sources, in the meantime, have become gradually harder and harder to get for many faculty, which is especially important in expensive areas of research where public and private donors have played an important role in underwriting expenses in the past. Those funds that are available increasingly pose serious ethical challenges to the independence of academia, often by tying researchers to the promotion of particular products or corporations.

5) A fortunate few institutions may continue to have unusual sources of revenue to tap (IPOs, intellectual property rights, etc.) but that's not most of us.

*****

So, the party's over. However, I'm not hearing a lot of preparation for what higher education will look like if growth is over. Planning for minimal growth or even contraction in some cases might just require budgetary prudence and restraint, but I that’s not enough. There's a different mindset involved.

Here are some of the shifts in thinking needed.

1) Knowledge does not expand automatically like yeast dough. Progress is not perpetually adding disciplines, subjects, new areas of knowledge. Progress is knowing what we know better, making better use of what we know, communicating what we know more effectively, and not treating all forms and types of knowledge as if they were the same or required the same kinds of resources. Progress is discriminating between older disciplines or ways of knowing that need continuing investment and older disciplines or ways of knowing that can be replaced or transformed by new programs and projects. Progress is recognizing where some areas of the average curriculum would benefit from amalgamation and a movement towards generalism.

2) The provision of a full-service infrastructure by most residential universities and colleges needs a hard, skeptical reconsideration on an ongoing basis. Moreover, I do not think the presumption of such a reconsideration is necessarily towards the elimination of frills and creature comforts. It's possible instead that there are some professional and administrative services that many universities carry out through their own staff that could be better and perhaps more minimally provided by external vendors, for example.

3) Where higher education is exposed to cost increases which are potentially within its control, universities and colleges need to band together comprehensively as buyers and dictate terms to their own advantage. There's not much that can be done about energy costs or insurance: any big employer is exposed to those at an equal base, and then to whatever extent they consume those above and beyond that base. On the other hand, libraries and information services are areas of unique exposure. There are reasons for academia to completely rethink its production and consumption of publication and knowledge that have nothing to do with cost. Open access publication is a good idea that enhances the mission of academia, regardless of its financial implications. However, it's also insane to be exposed to escalating costs when we potentially have such massive collective leverage over the sellers. We are not only the main buyers of many forms of publication and information, we are also the main producers, and we typically give away what we produce for free and then buy it back from the people we gave it to.

4) All colleges and universities need to look hard at different areas of their curriculum in terms of the expenses involved, and ask whether some kinds of pedagogy or some subjects are worth the resources that they seemingly demand. At a lot of selective institutions, there is an implicit political covenant that instructs both administration and faculty to act as if all areas of the curriculum are notionally equivalent in their right to resources, and that the reality of resource distribution should be largely ignored. (When you add professional schools at large research universities into the mix, this picture gets more complicated. Nobody acts as if the Wharton School at the University of Pennsylvania is either notionally equivalent in its right to resources, or forgets that Wharton has a very large resource pool of its very own. "Every tub on its own bottom," as the saying goes.) In this resource-usage sense, the hostility that sometimes gets directed at the humanities is a bit crazy: most (though not all) of the humanities are a very cheap date, whatever you might think of them as an area of teaching and inquiry. About the only time they get disproportionately costly is when the faculty-to-student ratio in any given humanistic discipline is consistently lower than the average at a given institution. In an environment where growth is not happening, no institution can afford to say that the relative cost-to-benefit of any given curricular enterprise is off the table.

5) My impression is that many colleges and universities have put some of the bounty of the past two decades into the maintenance of political amity within their own faculty and administration through paying for duplicate or multiple approaches to curricular and institutional decisions. Meaning, rather than choose to commit to one philosophy or approach, we often choose instead to fund competing or contradictory approaches in order to avoid the political turmoil involved in telling one faction or group, "No". Maybe some of that is still worth doing, but in some cases, it simply may not be a sustainable approach.

6) Colleges and universities that have chosen to underwrite growth in some areas by steadily degrading the working conditions of adjunct and non-tenured instructional staff and simultaneously relying on that staff to generate more and more of the teaching are going to have to flatly stop doing things that way. One reason: in a far more difficult economic climate, I really think that prospective students will be far less indulgent of degradation of educational quality that follows on that approach.

Another reason: some institutions have already gone as far as they possibly can go along this track, short of converting their entire faculty to short-term, badly-paid, chronically abused adjuncts. (That's not far off from the picture at a few large universities.) Instructional staff are going to need far better working conditions, and that is going to have to come out of some other area of expenditure, whether it's the salary budget for tenure-track faculty and administration, or from some other institutional budget.

7) I think the most important but subtle thing that has to happen is just that every stakeholder in academia is going to have to develop new mental habits, to stop assuming or believing that growth is the default. At least at selective institutions, I find that in everyday conversation about curricular questions, administrative choices, and so on, the assumption of growth or plenitude is deeply ingrained.

Bio

Timothy Burke is a professor of history at Swarthmore College. This essay was adapted from a posting on his blog, Easily Distracted.

 

 

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