Most universities will face only minimal effects from the automatic budget cuts that went into effect at the beginning of the month, according to a report released Thursday by Moody's Investors Service. The report looked at the projected financial effect of the 5 percent cuts to domestic discretionary spending, known as sequestration, and found that only 1 percent of colleges and not-for-profits stood to lose more than 3 percent of their annual revenue as the result of the cuts.
Research universities were most likely to be hit hard by the cuts because federal funding for scientific research is one of the areas affected. While some financial aid programs -- particularly federal work-study and the Supplemental Educational Opportunity Grant -- will also be cut, the Pell Grant, bedrock of need-based financial aid programs, is safe for the 2013-14 academic year.
I commend the 5,000 higher education workers of the Massachusetts Service Employees International Union (SEIU), Local 615. These men and women, led by Massachusetts SEIU Higher Education Director Wayne Langley, commissioned four of the most trenchant, clear reports on the foibles of higher education finance since The Jungle muckracker Upton Sinclair self-published The Goose-Step: A Study of American Higher Education in 1922.
These articulate, footnote-laden documents investigate questions that must, but may never, top the public agenda of any discussions of college access for years to come.
While the reports ask familiar questions, my thrill is that these powerful questions come from a new voice, an influential union, outside the higher education policy circles -– the 2.1 million voter, I mean, member, SEIU. The former SEIU president Andy Stern sat beside the Obamas for the 2009 inauguration parade. If current SEIU president Mary Kay Henry would take a call from one of the nation’s leading obscure columnists, once this column runs, I’ll buy lunch for her and Langley at Kramerbooks, just a couple of blocks from SEIU’s Massachusetts Avenue headquarters.
The new Dan Brown novel? Skip it. This winter, I pulled up in front of a roaring fire with "Errors of Omission – Transparency and Conflicts of Interest at Leading Private Colleges and Universities in Massachusetts." (To download this and the other SEIU studies, see box at right.)
In this 2012 report, Boston College and Williams led the way with five or more trustees reported as “working with firms providing investment services to the college.” As the report notes, this is legal. As the report wonders, whose best interests do trustees in such a position represent? (See The Goose Step, Chapter V, “Interlocking Directorates” and Chapter XLVII, “Introducing a Board of Regents.”) All this made me miss my friend, the late John Strassburger, president of Ursinus College, who often wondered how so many colleges had become investment-management companies with a few classrooms attached.
Next, I devoured "Public Investment in Private Higher Education: Estimating the Value of Nonprofit College and University Tax Exemptions." This estimated the value of federal, state, and city tax exemptions to Northeastern University at $94.4 million. The report notes “the lack of transparency in existing, publicly available data sources about numerous issues related to specific areas of exemption.”
The SEIU report asks only for an open, public debate on the public good deriving from such tax exemptions, because “without a clear sense of the scale of public taxpayer support that colleges receive, it remains difficult to have a well informed debate about our policy priorities.”
On to the conclusion of "Academic Excess – Executive Compensation at Leading Private Colleges and Universities in Massachusetts." I’ll get a copy to U.S. Senator Charles Grassley (R-Iowa), one of the few on Capitol Hill willing to ask in public why nonprofit colleges and universities use their tax-exempt status to pay high salaries.
“There always seems to be more money for the executive suite even as colleges raise tuition year after year,” Grassley lamented this winter. The SEIU report, using 2009 data, covers 339 positions at 21 Massachusetts private colleges and universities. The high is $6.4 million for a Harvard Management Corp. staffer. Pity the chief of staff at Worcester Polytechnic Institute, in the cellar at just $101,941. Recent news reports show that the situation is the same with more recent data.
“A more robust public debate about the costs and benefits of colleges’ nonprofit fiscal privileges, which subsidize the excessive pay schemes documented here, is badly needed…. We have highlighted the numerous ways in which schools continue to avoid providing a full public accounting of the compensation of their highest-paid employees, regardless of whether they are defined as ‘key employees’ or whether the source of their compensation comes from the school itself or outside corporate activities.”
Janitors? Why would a union of janitors speak out on higher education?
“During the endowment debacle, several of the schools either approached us for wage, hour or benefit concessions or instituted layoffs of our members,” Wayne Langley said the other day in Boston. “Essentially, schools were asking us to do things like waive a 4 percent contractual raise based solely on their word that times were tough.”
Meetings with the colleges to clarify that “times were tough” failed to answer the SEIU’s questions. “It was all very frustrating because it was impossible to determine the truth from the spin, making reasonable debate and discussion impossible and confrontation inevitable,” Langley said. “Our sponsored research is an attempt to find out what is really going on, so we could decide what positions both at the policy level and at the bargaining table.”
Finding credible help was the next hurdle. “It took me six months to find a researcher that had the professional chops to do this and who was not terrified of offending the school lobby and being blackballed,” Langley told me.
I’m late in my discovery of the four crisp studies Langley commissioned from the think tank The Tellus Institute, published in 2010, 2011 and two in 2012. With President Obama just unveiling an online tool to untangle the actual cost of college for students, these four reports affirm both the fog of higher education finances and the cost of that fog to the nation.
Why would the janitors ask these questions? Listen. Langley’s clear argument would earn an A in any most highly selective private college class I’ve attended: “We believe the current (higher education) leadership is pursuing a bad model that will decrease affordability for students and parents, eliminate good jobs, increase inequality and reintroduce a class-based system where the rich will receive a good, four-year liberal arts education, and everyone else will get trained for jobs that will last 10 years and then disappear.” Wouldn’t this be a fine question for, well, colleges and universities?
On to my favorite of the four, the first the SEIU sponsored in 2010 to search for the answer to a simple query: “If you want our members to take pay cuts due to the weak economy, would you please open your books and let’s see how much money you have?” This is "Educational Endowments and the Financial Crisis: Social Costs and Systemic Risks in the Shadow Banking System, a Study of Six New England Schools." (See The Goose Step, Chapter VI, “The University of the House of Morgan.”)
The SEIU study of endowments is the only report I’ve read evaluating whether 2008-9 multibillion-dollar college endowment losses followed unavoidable fate or reckless trustees taking excessive risks. The report, the executive summary states, “looks at what happens – and who suffers – when universities embrace high-risk investing.”
What happens? Janitors, not trustees or college presidents, lose jobs. And, oh, at my own Williams College, the trustees revoked the short-lived no-loans financial-aid policy. At last, thank you, janitors, someone else is wondering what gives the trustees to chase endowment returns three, four, five times higher (i.e., riskier) than the risk-free rate of U.S. Treasuries.
Our janitors asking such questions? Hopeless? I’ll take the long view, with Thomas Paine in the introduction to the third edition of Common Sense:
Perhaps the sentiments contained in the following pages, are not YET sufficiently fashionable to procure them general favour; a long habit of not thinking a thing WRONG, gives it a superficial appearance of being RIGHT, and raises at first a formidable outcry in defense of custom. But the tumult soon subsides. Time makes more converts than reason.
“Until we organized janitors in commercial office buildings, many thought it could never be done,” Langley told me. “We are predisposed to issues that will benefit the general public as well as our members. That is what unions used to do when they fought for public education, the eight-hour day, child labor laws and the like.”
Examining and improving “issues that will benefit the general public”?
Thank you, janitors. Crazy me, I know. That’s what a college education is for, too.
Wick Sloane writes the Devil's Workshop column for Inside Higher Ed.
A key state legislator told reporters Thursday that one way North Carolina lawmakers may deal with budget cuts would be to consolidate campuses of the University of North Carolina System. "I think our members definitely envision that there could be some consolidation between campuses, and we might need to go from 16 down to 15, 14, something like that," said Senator Pete Brunstetter, co-chair of the Senate Appropriations Committee, WRAL News reported. On Wednesday, Governor Pat McCrory, a Republican, called for a $135 million cut in funding for the UNC system, a reduction that would follow several large cuts in recent years.
A prominent professor at Columbia University's journalism school has sued the institution, charging it with misusing an endowment fund, The New York Times reported. Sylvia Nasar, co-director of the business journalism program and author of A Beautiful Mind, charges that Columbia was supposed to match a $1.5 million gift for an endowed chair Nasar holds, so that Nasar or others holding the chair would have funds both for salary and research. Instead, the suit charges, Columbia didn't match the funds and Nasar had to pay for many of her research expenses. Columbia has declined to comment on the suit, saying it does not discuss litigation.
A Washington think tank that focuses on the impact of government policy decisions on low-income students issued a report Tuesday aimed at documenting the extent of state budget cuts for higher education and arguing that they are hurting students and state economies. The report from the Center for Budget and Policy Priorities largely mirrored the findings of recent studies by the State Higher Education Executive Officers and others.
In order to make good on an earlier pledge to freeze tuition for at least two years, Purdue University President Mitch Daniels, formerly Indiana's Republican governor, announced in a letter Monday that the university would be looking for at least $40 million in savings over the biennium. "It has been too easy in higher education for institutions to decide first what they would like to spend, and then raise student bills to produce the desired funds," Daniels wrote. "That approach has run its course. At Purdue, we will make our first goal affordability, accommodating our spending to students’ budgets and not the other way around."
As a first step toward accomplishing those savings, Daniels announced that he would eliminate merit pay raises for all senior administrators, deans and administrative and professional staff with salaries of more than $50,000 for the next two years, a move projected to save $5 million. The freeze would not apply to faculty members. He also said in a Faculty Senate meeting Monday to expect additional announcements later this month.
The College of the Atlantic announced this week that its board voted to sell all fossil-fuel-related investments. The move follows a student push -- at that college and elsewhere -- to sell investments in companies whose businesses they believe are harmful to the environment. A spokeswoman for the college said that the total endowment is about $30 million and that the value of investments sold to comply with the policy was just under $1 million.
Pennsylvania State University on Monday revealed details on the cost of the outside investigation it commissioned into the Jerry Sandusky scandal, including the cost ($8.1 million) paid to the law firm that produced what is known as the Freeh Report,The Centre Daily Times reported. Those expenses bring the total expenses to date for the scandal to $41 million.
Towson University announced Friday that it would eliminate its men's soccer and baseball teams, while reinstating men's tennis. The shifts are designed to help the university reduce its athletic deficit and comply with Title IX of the Education Amendments of 1972.The Baltimore Business Journal reported that although 61 percent of Towson undergraduates are women, only about 52 percent of athletic slots go to women (some estimates of the women's share are higher, although still below the 61 percent figure). In 2012, the athletics department had a deficit of $1.36 million.