Sept. 29

Planning for Contraction

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.

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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.

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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Comments

Taking the long view

History offers numerous examples of fluctuations and long-term trends in higher education, changes we would do well to take into account (see link).

Over the long run, higher education has gone through boom or bust cycles, especially those institutions grooming students for professional positions.

England’s Court of Inns, for the legal profession, went into a major period of decline, and was itself the beneficiary of earlier declines at Oxbridge. Chinese and Japanese history is full of tales of credential inflation, and credential collapse, all highly dependent upon economic conditions.

It would be helpful, I think, if folks realized that the education portion of the federal budget is a discretionary item, not mandated by law, as is medicaid, medicare, social security, and veterans’ benefits.

So, it’s not just the history of financial markets and institutions that we need to better understand, it’s the mechanics of boom cycles and overschooling bubbles in higher education.

Glen S. McGhee, Dir., at Florida Higher Education Accountability Project, at 8:45 am EDT on September 29, 2008

Professor Burke lists 5 harbingers of the coming contraction in higher ed: 1) Declining rates of tuition increases, 2) Poorly performing endowments, 3) Donor fatigue, 4) Declining public and commercial investments in higher ed,5) Uneven returns from tech transfer.

To those we might add 3 others: 6) Demographic trends -> fewer students, 7) Growing public awareness of the declining economic returns of a college degree,8) Increased acceptance of and value of alternative programs such as U. Phoenix.

So given that a contraction appears likely, how will higher ed respond?

Isn’t it the normal practice within most institutions, when presented with an inevitable need to cut costs, to convene some sort of committee or hire a consultant to decide upon how best to make the cuts, and from there simply to begin to lay people off?

One suspects that we are on the cusp of decades of this sort of contraction and retrenchment at all but the most privileged institutions.

Ken D., at 12:30 pm EDT on September 29, 2008

Adjunctification

I really wished I could believe your Point 6 that colleges relying on adjuncts and non-tenured faculty “are going to have to flatly stop doing things that way.” I think that given the economic pressures and assuming that prospective students do not rebel (and I don’t think they will) I’m afraid we’ll see more, not less, of this.

Faculty Person, at 12:40 pm EDT on September 29, 2008

The Coming Crunch

Professor Burke’s warning is timely and accurate. I am struck, first, by how few academics have posted comments in reply. On some relatively trivial issues, IHE articles grow comment tails longer than Halley’s Comet. But here, confronted with a cogent analysis of what lies ahead in just the next few years, the commentariat tail resembles that of a hippopotamus. I’ve had a similar experience the last two years in speaking to academic groups around the country on the looming financial aid crisis and the vulnerability of American higher education due to its over-reliance on borrowed funds. In general, faculty members do not like being reminded that the seemingly robust enterprise of college and university education rests on a wobbly set of assumptions about endless growth, unlimited expansion, bottomless demand, and perpetually increasing credit. The only item missing from Burke’s list of “basics” is the credit crunch, though perhaps it is implied his treatment of why tuition cannot continue to rise at the rate it has been rising in the last several decades. But to be explicit: about 35 percent of students borrow money to attend college. The figure has been steadily rising and the amounts that students borrow have been rising too. In the last year, the credit market for student loans has begun the contract. It is a complicated market which includes both government-guaranteed loans and private loans, and various forms of federal and state intervention, but the overall picture is that capital markets have begun to look at college loans as riskier and less remunerative. This means some students won’t get loans. It also means that the idea of increasing a college’s net revenue by raising tuition may be nearing the point of negative returns, as more and more students find that they cannot borrow the funds to meet the increases. On the matter of the increasing use of adjuncts and colleges that underwrite growth by “steadily degrading” their working conditions, Burke thinks this will have to stop because students will object. I fear this is wishful thinking. As all but the richest colleges enter into a period of financial decline, it seems likely colleges will become more parsimonious towards faculty and even readier to hire adjuncts.

Peter Wood, Executive Director at National Association of Scholars, at 4:25 pm EDT on September 29, 2008

I fear I’m wrong too about the impact of the current crisis on the adjunctification of academia. But even if students don’t become more discriminating consumers of education in a time where they really need to get back meaningful educational bang for their buck, it’s also possible that some of the ability of adjuncts to juggle multiple positions and stay barely above water economically will come to an end as whatever remaining safety nets they have will snap. Universities may drive even harder towards pauperization of instructional staff only to find that there’s no one left to hire once the few remaining secure tenure-track positions are eliminated.

Timothy Burke, Swarthmore College, at 7:10 pm EDT on September 29, 2008

Think

Engaging. Consider this: why did the USSR collapse? A popular theory is that President Reagan’s arms race drove them to near-bankruptcy.

Too many colleges play the “me-too” game, complacent in the belief that the public will keep funding their game. Inconvenient truth: as with Freddie/Fannie — there are limits to dreamy-eyed thinking.

The late Peter Drucker made a small fortune, asking college presidents a simple question: why do you do? “Me-too” is not a winning strategy, frankly.

L.L., at 6:55 am EDT on September 30, 2008

Correx

The late Peter Drucker made a small fortune, asking college presidents a simple question: what do you do? “Me-too” is not a winning strategy, frankly.

L.L., at 8:50 am EDT on September 30, 2008

Tim, I agree with what you write here about the need for new thinking about nearly all of our common assumptions, but it seems to me that your argument re. growth per se applies only to selective institutions concentrated in the NE. At state institutions, especially in the Sun Belt, the growth is coming no matter what; only a legitimate economic depression could stall it. Georgia State University and the University of North Texas and the University of Central Florida and their ilk (a stratum that includes most of us in the academy) ARE going to see enrollments continue to increase. That doesn’t mean that those of us in these sorts of institutions shouldn’t be asking ourselves hard questions—particularly about how we’re going to teach all these students with flatlining faculty sizes. But I don’t think your concept accounts for the rest of us.

A. Sock, at 2:00 pm EDT on September 30, 2008

Resources also an issue

Some contributing factors:

NIH Budget doubles...but only five new schools are added to the list of supported institutions.

Federal earmarks support construction on campuses already bursting with new research and educational spaces, while small and mid tier colleges and universities see research support vanish, facilities decay, and don’t benefit from support doubling or congressional largesse.

Elias Zerhouni in the last five years reminds researchers at scientific meeting after scientific meeting that “good deans are three crane deans” encouraging massive overbuilding at elite institutions from the top of the NIH hierarchy.

Yah, there are lots of problems out there, but frankly I can’t even get research funding to provide meaningful undergraduate research experiences to some of my 1300 undergrad biology majors because I am at a university that is too big for NSF RUIs and too small to attract the NIH money hose. Maybe some of our “struggling", but historically lavishly supported major universities should become the contract research organizations they already are, spend down their massive endowments a bit supporting internal research, and let research expand to the schools were students can actually work side by side with a faculty member on a meaningful project. My students hardly ever think about a research career because “Dr. X..we see how hard it is for you to even get $10,000 of support". We’ve constructed a winner take all system that I argue does not build stronger faculties, better research culture or better science...it just concentrates resources in the hands of the few (who then do such a poor job developing junior faculty that they enjoy huge and increasing rates of tenure failure). I think a winner take all system of federal support is rotting the core out of the American academy, take a gander sometime at how few NIH grants or NSF grants find their way to the mid tier “out in the corn fields” schools in your state. Not to mention strong Catholic/Religious universities and colleges which are almost completely ignored. Research is just going away at many American colleges...what will they become if they have no meaningful role in knowledge creation? How will their students view the importance of science as taxpayers and voters if they just keep hearing “sorry, primarily because of where you chose to go to school..no science for you".

Yah, we could all have more start up money, write better grants etc..but frankly I have been on too many grant panels as a reviewer to think that the science and scientists at elite universities are really that much better than the rest of us. I’ve seen folks at major universities whose applications have key conceptual flaws in their hypotheses and inconclusive data win funding too many times at this point to think that this system is anything but fundamentally corrupt. I certainly think elite universities should be rewarded for their investments in science, but I don’t think it makes any sense to me as a U.S. citizen that they should be the only places research thrives.

Thanks.

Professor X, Associate Prof GPD, at 1:15 pm EDT on October 9, 2008

Costs, tuition, access to higher ed

Interesting article. To get costs down, though, payroll costs have to go down. Public information on Big Ten schools say that each has an employee for every three students. Pitt has an employee for every 2.5 students. That can’t possibly work. Any business CEO will tell you that it’s always the headcount. Higher Ed needs productivity just like the rest of the economy does. Best regards,Bob Barry

Robert Barry, Adjunct professor at University of Pittsburgh, at 6:25 pm EDT on October 17, 2008

Higher Ed

The fact of the matter is that the whole post-secondary system is grossly bloated. From a societal point of view, it’s a waste of resources. Big chunks of it are doing what high schools used to do; others are simply providing employers with a credential whose only merit is that it proves a certain ability to endure tedium.

Public investment (including tax exemptions for donations and endowment income) in post-secondary education should be limited to those fields with a demonstrable society-wide material benefit.

Scientific and technical education, useful specialities like languages (needed for the military and other government service), and so forth.

The humanities in general, and specialties like law, should have to finance themselves through tuition and donations. And they should be drastically scaled back. No more than 25% of the total student-age population should be in universities. That’s about the maximum percentage that get any real benefit out of it anyway.

The university degree as we know it could usefully be abolished, and replaced by some sort of public examination for certification, modeled on the CPA system.

Certificates should be pass/fail and then graded. The grades could indicate proficiency without reference to where the student studied, be it the Ivies or an on-line, part-time system.

S.M. Stirling, at 7:20 am EDT on October 18, 2008

Headcount

Yes, headcount is probably part of the problem, but I don’t believe the bulk is coming from the instructional faculty. Blame instead the proliferation of administrative positions that keep appearing like mushrooms. How many assistant and associate vice-presidents does a university need, anyway?

Prof. X, at 7:20 am EDT on October 18, 2008

Professor Burke is undoubtedly accurate in his assertion that the party is pretty much over for higher education in America. He’s correct that there will be resistance to substantial increases in tuition, lower income from endowments (which may even shrink in the medium term under current economic conditions), decreased giving, and decreased public support. And, I think he’s correct that most colleges and universities seem to be whistling past the graveyard instead of taking a fundamental look at what they do and how they are perceived.

My perspective differs from most of the commentators here. Although I hold multiple academic and professional degrees from major universities, I don’t work in the university. My main recent contact has been as the parent of two students, one at a top midwestern liberal arts college and one at a top midwestern university.

If faculty members are intellectually honest, most would admit that (outside of the hard sciences and engineering) the standards of work and grading at most universities today are not even close to as high as they were 40-50 years ago, and that it’s perfectly possible to get through a top college or university (once on has gotten in) without working very hard or learning very much. You serve the market you have developed.

Most of you, I suspect, don’t admit (even to yourselves) that only a tiny faction of your students are at the university for the purpose, or with the expectation, of obtaining the kind of liberal education (whether in the sciences or the humanities) that was mandatory only a couple of generations ago (whether the kiddies were looking for it or not).

The reason the vast majority of student go to college today is to validate or obtain their membership in the social and economic upper middle class. Without a college degree, even middle class status is probably not possible today. Elite status increasing requires a degree from an elite institution.

The elite institutions obtained their reputations through providing rigorous and thorough educations over many generations. Now, however, the trick is to get into a top school, not to graduate from one.

You are diluting your brand so to speak.

Then, of course, there’s the political backlash. Liberalism in faculties is nothing new, but what that liberalism means has changed dramatically in the past two generations. Whatever one thinks of that, the loss of public support for public spending on higher education is more a product of a change in the public’s perception of the universities than anything else.

An example. There was a time, when I was a lad, the the people of California were happy to support the creation of the greatest public university system in the country (if not in the world). Whatever UC could make a reasonable case for, UC got. That changed when the public came to the conclusion that the values of the UC system were no longer substantially in sync with the values of the people of California.

That’s happening today with the entire university and college world, but it is masked by the necessity for a top college degree for social and economic status and the fact that the money has been available to pay for it.

If — as I suspect will happen — access to elite colleges and universities, and to private colleges and universities at any level, becomes increasing impossible for middle and even upper middle class families to afford, you will begin to lose significant numbers of students, who will over time make their way in the world and demonstrate that an elite college or university imprimatur is not necessary. It may take a generation or two, but I suspect that in 50 years, we may be back to a world where smaller numbers of students attend traditional colleges and universities, far more attend technical institutions and community colleges. And, the colleges and universities that survive will be offering more traditional, structured programs in the sciences and humanities at a lower relative cost than today.

Cato, at 9:20 am EDT on October 18, 2008

When I was born, my mom was the age I am right now, and owed about $5,000 on her student loans (she went to private schools.) I owe $34,000 (I went to state schools.) In thirty years will my kids/neices/nephews owe $238,000 each for their community college educations? Come on. College was overpriced when I started as a freshman in 1997 — I now actively tell every high schooler I meet that they should explore every other option before even thinking of going to college, that they should work during school, that they should get as many credit hours as possible at community colleges or regional campuses, and that under no circumstances should they start college unless they know exactly what career they’re gunning for, and are committed to spending four to six years doing nothing but working for that career.

Meanwhile, the faculty have decided they don’t get paid enough.

Sarah, at 10:20 am EDT on October 19, 2008