Business issues

Lafayette conference shows concern about liberal arts colleges' economic future

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At a conference this week, it is clear that elite liberal arts colleges are concerned about the future, and silver bullets are hard to find.

Public universities will take on more debt as states decrease spending on capital projects

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With state lawmakers unwilling to fund capital projects at colleges and universities, public institutions increasingly turn to debt to finance construction and maintenance.

Big tuition hikes at private colleges complicate affordability picture

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Big tuition hikes at elite private institutions contradict the notion that colleges are focusing on reining in sticker price to make education affordable.

Mount Holyoke and a handul of other private colleges freeze tuition for next year

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Mount Holyoke joins a short -- but longer than usual -- list of colleges to freeze tuition. Moves could signal awareness of a limit to families' willingness to pay high sticker prices.

Brown dispute questions what's a fair payment in lieu of taxes

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Rocky negotiations in Providence about how much Brown pays the city in lieu of taxes highlights the difficulty of determining an appropriate contribution.

UC system weighs shift in tuition payments to after graduation

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Proposal being weighed by University of California to shift student payments to after graduation and tie them to income would be a dramatic change in how education is financed.

Campus administrators weigh a more practical argument for higher education

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Facing skeptical public and politicians, campus business officers discuss strategies for making a more practical case for higher education.

Key questions to ask about free college plans (essay)

We have recently witnessed the introduction of a growing number of diverse plans for free public college. But what we’ve not seen -- and what must be done -- is to determine a set of criteria to judge the effectiveness and the viability of these various financial aid models.

A major concern is that some of the new programs do not appear to have a sustainable funding source, and many do not look closely at the relation between state support for financial aid and state support for campus funding. Moreover, if we enter another recession, and state revenues fall again, free college programs will be in significant jeopardy.

Another problem is that most of the proposed and enacted plans focus on making tuition free and do not take into account the total cost of attendance. The issue with this approach is that nontuition expenses -- room, meals, books, transportation and the like -- often make up the majority of the cost and are a leading reason for student debt. The best plans, then, should pay for the total cost of attendance and seek to focus on the students who need the most help. Unfortunately, however, most politicians and pundits only talk about tuition costs, and that creates a distorted view for the public.

Many plans also rely on an increase in state support for financial aid, but this approach could function to crowd out the already decreased state support for general funding -- or the money that goes to pay for the salaries of faculty and staff members and other vital infrastructure costs. For instance, if a state currently spends $500 million on financial aid and $1 billion for direct funding, what happens if the financial aid costs go up to support free tuition? And if more students are induced to attend, but institutions have less money to pay faculty members, what will happen to the quality of instruction?

It is important to ask such funding questions now. In the past, whenever states suffered from a lack of tax revenue, they have reduced their appropriations for higher education because they know the institutions can make up the difference by increasing tuition. In this system, state budget cuts to support higher education are partially made up for by increases in financial aid. But during a financial downturn, pressure is placed on all support for higher education, since many other government programs are mandated by law or popular initiative, and states cannot run a deficit or print more money.

Although many local and state free college programs have not identified a new revenue stream to support their programs, they will have to consider developing other revenue sources or passing new taxes to remain sustainable. Moreover, these free college plans must not only have enough financial support but also act to contain and control rising costs. While many people think that the solution to this problem is to reduce the number of faculty members or to move instruction online, colleges and universities have already decreased instructional costs by turning to large lecture classes and non-tenure-track faculty. Further, as I stated above, much of the reason for student debt involves nontuition costs, and so policy makers, institutions and concerned citizens have to take a serious look at the rising amount of money spent on housing, dining, parking, health care and amenities.

As I argued in my book Why Public Higher Education Should be Free, we not only have to control noneducational costs, but we also have to focus on improving the quality of instruction and basic research. So far, most of the free college plans have focused on financial aid and mentoring, but they have not been centered on a more holistic approach to controlling costs and improving instructional quality.

A rare exception to this problem is Senator Bernie Sanders’s 2015 plan proposed in Congress, which called for providing “an assurance that not later than five years after the date of enactment of this act, not less than 75 percent of instruction at public institutions of higher education in the state is provided by tenured or tenure-track faculty.” That push to have more tenure-track faculty reveals a desire to protect the quality of instruction and research. But a more realistic and effective goal would be to have at least 75 percent of all courses taught by full-time faculty, whether on the tenure track or not, with academic freedom, shared governance rights and job security.

Sanders also proposed making sure that more money ends up in the classroom. His plans would require a state that receives a grant to use any remaining funds and any matching funds “to increase the quality of instruction and student support services by:

  • Expanding academic course offerings to students.
  • Increasing the number and percentage of full-time instructional faculty.
  • Providing all faculty with professional supports to help students succeed, such as professional development opportunities, office space and shared governance in the institution.
  • Compensating part-time faculty for work done outside of the classroom relating to instruction, such as holding office hours.
  • Strengthening and ensuring all students have access to student support services such as academic advising, counseling and tutoring.
  • Any other additional activities that improve instructional quality and academic outcomes for students as approved by the secretary through a peer-review process.”

Sanders's plan was thus not simply a model of eliminating tuition costs for students. Rather, he sought to guarantee that not only would students be able to afford higher education but their education would also not be cheapened or short-changed.

It is commendable that so many states and local institutions are trying to make higher education more accessible. But we do not simply want more students to attend: we want them to learn and earn degrees. Since it does not look like the federal government will be much help here, state policy makers will have to come up with comprehensive plans that raise new sustainable revenues as they motivate institutions to spend money on the right things.

Bob Samuels is a lecturer at the University of California, Santa Barbara.

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Senator Bernie Sanders
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Proposal on indirect costs would put research universities in an impossible situation (essay)

Over the past 20 years, technologies based on university research have launched entire new industries, cured fatal diseases and even put new foods on your grocery store shelves. Since 1996, these technologies have contributed an estimated $1.3 trillion and 4.2 million jobs to the American economy. In 2015, Florida’s state universities spun out 48 start-ups and achieved a multitude of scientific breakthroughs in health, engineering, agriculture and basic sciences.

The partnership between America’s research universities, industry and the federal government is the envy of the world. But a proposal by the federal Office of Management and Budget to severely cut the reimbursement government agencies make to universities for shared research costs threatens to destroy it.

University research expenses are typically divided into two buckets of money. Money in the first bucket pays for the direct costs of the project: salaries for researchers and stipends for graduate assistants, lab equipment and supplies, and travel.

The money in the second bucket funds all the other things researchers need to do their work, like the building itself; electricity; heating, air-conditioning and other utilities; janitorial services; building security; laboratory safety equipment; and information technology. It also pays the salaries of the support staff members who help scientists develop and submit highly technical research proposals, manage millions of dollars in public funds, and comply with a myriad of federal rules and regulations. These highly trained professionals enable the scientists to focus on what they do best, whether it’s finding a cure for diabetes or protecting computer systems from ransomware.

In the business world, these are called overhead costs.

For most universities, such overhead costs amount to about $1 for every $2 spent directly on the research. They are determined not by the universities but by the federal government through a rigorous review process.

But the federal Office of Management and Budget proposes to pay as little as 20 cents for every $2 of research, grossly shortchanging universities and leaving them with the option to either pick up the tab or simply not do the research. You don’t need an M.B.A. to understand that any business forced to sell its services for less than its costs is doomed. For the universities within Florida’s State University System, this “tab” would be more than $100 million per year, a cost that would have to be covered with other university revenues. As such, it would place the universities in the state of Florida, and every other state, in an impossible situation -- either subsidize federally funded research with other university money or quit doing research on next-generation technologies and medical treatments.

As the chief research officers for Florida’s 12 state universities, we are committed to recovering the costs for services provided to the federal government at no loss to the institution. We urge our representatives in Washington to make every effort to stave off this action by OMB and the agencies. Otherwise, the research efforts at our universities, a shining beacon of American know-how that has been decades in the making, will be crippled. Faculty members at each of our 12 institutions are working each day to generate new discoveries for the benefit of current and future generations in our state and nation. We hope to continue these efforts for many years to come.

Daniel Flynn, Vice President for Research, Florida Atlantic University

Andrés Gil, Vice President for Research and Economic Development, Florida International University

John Kantner, assistant vice President for research, University of North Florida

Elizabeth Klonoff, vice president for research, University of Central Florida

Timothy Moore, vice president for research, Florida Agricultural & Mechanical University

Pam Northrup, vice president for research and strategic innovation, University of West Florida

David Norton, vice president for research, University of Florida

Gary Ostrander, vice president for research, Florida State University

Lee Ann Rodríguez, director of the office of research, New College of Florida

Paul Sanberg, senior vice president for research, University of South Florida

Jeanne Viviani, director of sponsored programs, Florida Polytechnic University

Tachung Yih, associate vice president for research, Florida Gulf Coast University

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A recommendation to Jeff Bezos to award transformative philanthropic gifts to colleges (essay)

On June 15, The New York Times published an interview with Jeff Bezos, the founder of Amazon, in which he was asked about his philanthropic interests, now that his net worth exceeds an estimated $80 billion. His philanthropic giving to date has been modest by the standards of many other multibillionaires.

Bezos responded, “If you have any ideas, just reply to this tweet …”

Within a day, Bezos had received more than 18,000 replies. No doubt the flood of tweets will continue unabated for days to come. Yet it’s very difficult to compress a good idea into the 140-character limit of a tweet.

With that in mind, I offer my own suggestion.

Dear Mr. Bezos,

You indicated to The New York Times that, when it comes to philanthropy, you are interested in making investments that are “at the intersection of urgent need and lasting impact.” I have a suggestion that I think would do just that. But first, let me set the table for you.

In 1992, Henry M. Rowan Jr., an industrialist living in southern New Jersey, did something literally unprecedented: he gave $100 million, virtually all of which was unrestricted, to a local public institution, Glassboro State College. He had no particular history with that institution, but it was the only four-year college near his business offices. It was, at the time, the largest gift ever given to a public institution -- and Glassboro State College then had an endowment of less than $1 million. In recognition of this gift (and not, as some people have speculated, because it was a condition of the gift), Glassboro State College changed its name to Rowan University.

Rowan was rolling the dice with an enormous bet. He was betting that a gift of this size could be transformational for Glassboro State. He was a graduate of the Massachusetts Institute of Technology, and that institution was soliciting a major gift from him. But he decided that MIT was already so rich that even $100 million would do little to effect a transformation there, and he wanted his gift to have an impact.

Rowan’s gift was paid in installments over 10 years, and I had the good fortune to be hired as president of Rowan University in 1998 to move the university “to the next level” -- a concept that was not specifically defined but was assumed to mean making the university better, stronger and more recognized.

The gift was intended to be an endowment, with some of the investment earnings available for spending every year. But the sheer size of the gift allowed us to leverage it in the market for purposes of borrowing funds to improve the campus. We built engineering, science and education buildings. We renovated many of the existing buildings and improved landscaping. We constructed a town house complex to increase student housing. We acquired 600 acres of land near the campus for future expansion and the construction of a technology park.

Over a 10-year period, working with the town of Glassboro, we constructed campus-related buildings (residence halls, a hotel, a bookstore and a parking garage) on city-owned land adjacent to the campus, and to benefit the town, we orchestrated a public-private partnership to ensure the new buildings would be taxable at normal rates. Most of them included shops and restaurants on the ground floors, as a way of attracting the local populace to the area.

The campus grew in size and reputation, and shortly before I left in 2011, we built the first new medical school in New Jersey in 40 years. The work continues under my successor, with an intention of growing the student body from 8,000 in 1998 to 25,000 by 2025. (It’s more than 17,000 today.)

Rowan died two years ago, but he lived long enough to see his legacy in full bloom. His gift was every bit as transformational as he had hoped. He was a tough businessman, but when he spoke of the university that bore his name, his eyes filled with tears, and on more than one occasion he told me, “That was the best money I ever spent.”

Some cynics speculated at the outset that the university would never receive another gift, since any gift would pale in comparison to Rowan’s gift. To the contrary, philanthropists reasoned that a university that could attract a gift of $100 million must certainly be worth their much smaller investments, and over the subsequent decade, we received more than a dozen gifts of $1 million or more, with one gift of $10 million. Success breeds success -- and large philanthropic investments attract other philanthropic investments.

The Rowan story is gradually becoming better known. For instance, it was featured in a Malcolm Gladwell podcast last year as an example of how philanthropists should be investing in colleges where their gifts will have meaning and impact, as opposed merely to swelling the bank vaults of well-known institutions that are already fabulously wealthy.

So, Mr. Bezos, here is my suggestion for a philanthropic investment.

  • Transform 10 colleges or universities each year for 10 years by awarding them an unrestricted endowment gift of $100 million. That’s $1 billion annually for 10 years.
  • Any public or private four-year, nonprofit institution with an endowment of less than $100 million would be eligible to apply.
  • An anonymous panel of experts whom you select would review the applications each year and select the 10 that promise to be the most transformational, affect the largest number of students and have the greatest societal impact. The specific criteria for evaluation would be yours to state, and those criteria may well change over the 10-year history of the plan.
  • As a condition of the gift, each recipient institution would be obliged to prepare an annual report, for 10 years, documenting their success (or failure) in achieving the goals they stated in their initial proposal. Those reports would be public, so that everyone could see the ways in which the colleges and universities were being transformed by virtue of winning a Bezos grant.

Mr. Bezos, this proposal, if funded, will positively impact the lives of hundreds of thousands of students every year -- forever. But more important, if something like this does not happen, our country will continue to see a major shortfall of college graduates relative to our economic needs, and that shortfall will occur largely among would-be first-generation students, many of whom are members of ethnic and racial minorities.

There are many worthy philanthropic investments that you might make. But the economic future of our country depends on doubling the percentage of American adults with a four-year degree. A study last year by the Georgetown Center on Education and the Workforce showed than 73 percent of all jobs created since the Great Recession required at least a baccalaureate, and only 36 percent of adult Americans currently have that level of education. The current system of higher education will never get us to where we need to be, but philanthropists such as you can show us the way.


Donald J. Farish, president
Roger Williams University

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Image Caption: 
Jeff Bezos
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