The Federal Regulatory Compliance Fee

Administrative costs on college campuses have soared in recent years, contributing in no small measure to the striking rise in student tuition and fees. Higher education leaders themselves are at least partly to blame for this, as their institutions’ focus on rankings and reputation has led them to spend increasing amounts of time and money on non-academic matters. But true to college officials’ complaints, the growing demands of government regulation also contribute significantly to the administrative bloat.

I propose that institutions be much more explicit about the money they spend to meet federal (and, for public colleges, state) demands. They should add a line to their tuition bills called the Federal Regulatory Compliance Fee, so that parents and students (and, yes, politicians) know just how much regulation costs them. Here’s why.

The explosion in administration costs has been striking. With the number of campus administrators, on average, now equaling the number of faculty members (and, perhaps even exceeding it given the increased reliance on adjunct faculty as resources are shifted to from instructional to full-time administrative positions), it appears that the university administration has become the tail that now wags the educational dog.

Some of this administrative burden is clearly self-imposed. When college students became customers, and institutional rankings became focused on reputation, fund raising and selectivity rather than educational opportunity or academic quality, the education of students became almost incidental to the institutional priority of getting onto somebody’s – anybody’s – top 10 list.

Who has time to worry about what happens in the classroom when there are glossy brochures to design and publish, colleagues to woo (it is they who will assess your institutional reputation when ranking season rolls around), earmarks to seek, research infrastructures to build, grants to win, press to avoid, coaches to hire, merchandising opportunities to pursue and donors to cultivate? I sometimes wonder how cheaply we could run colleges and universities if we got rid of capital campaigns, selectivity ratings, federal grant programs, commercial athletic enterprises, and architectural showcasing and went back to the traditional focus on … silly me … teaching and learning.

Oh that’s right, we do know how affordable it is to educate students without all of the extras -- community colleges are the perpetual reminder of how inexpensive it can be to provide a quality education at an affordable price (although these institutions are currently under-resourced given the role they play not only as institutions of higher education, but also as the new high schools).

Rules Require Cost Shifts

Nonetheless, a great deal of administrative burden does flow from the growing list of federal regulations that may ultimately be the greatest barrier to innovation, efficiency and quality in higher education. Many of these regulations force institutions to shift valuable resources away from classroom instruction and into administrative functions and salaries, not to mention electronic data systems, non-instructional facilities, external advisory groups, and teams of consultants and lawyers who help institutions complete the annual ritual of checking boxes and submitting reports to bureaucrats who are unlikely to read them and who will never confirm their accuracy.

In fact, even when regulators know that they are asking institutions to use outdated and faulty methods to collect inaccurate data on a non-representative population of students, they still hold institutions accountable for producing the coveted report. Can you say … IPEDS?

That does not mean that all regulations are bad or wasteful. Truth be told, there are many regulations that are productive, necessary and critical to maintaining our national edge in the area of higher education. The federal regulatory framework does, in many ways, level the playing field among institutions and set minimal standards for financial and instructional integrity among a group of institutions that are increasingly focused on the wrong priorities. And for those institutions engaged in scientific research, some regulations are critical to ensuring student and worker safety and to protecting our national security when sensitive work or materials are involved (although the current regulations are outdated and far too expansive in this regard).

It is true that colleges and universities can opt out of a great number of federal regulations simply by declining to participate in certain federal programs, such as federal student aid programs and federal grant programs. But during this time of shrinking state support and significant endowment losses, can institutions afford to turn away ANY potential source of funding? I sometimes wonder if institutions ever do the math to determine if the benefits of participating in various federal programs -- and especially federal grant programs -- actually exceed the costs.

While some degree of regulation is a good and necessary thing, how do elected officials, and perhaps even more importantly, the voters, know when the regulatory burden is too great? As we see with each reauthorization of the Higher Education Act of 1965, when Congress can’t do anything to address the legitimate challenges that students or institutions face, they show the love by authorizing grant programs that will never be funded, expanding existing programs that have never shown positive results, and adding layer upon layer of additional regulations so that they can tell their constituents just how serious they are about solving all of higher education’s problems.

Congress can’t actually guarantee that undergraduates will have access to the Nobel-winning faculty featured on the glossy college brochures, and they can’t force an institution to offer enough sections of required courses so that all students can graduate in four years, but they sure can force institutions to tabulate more data and report on more things. Whether or not the data are meaningful or the reports are useful is not terribly important. One wonders, however, if for the cost of writing yet another report, the institution could have hired another professor to teach freshman composition.

Sure, it sounds good for an elected official to say that he or she is going to hold an institution “accountable” for instructional quality, or campus safety, or cost containment, but what if the regulatory framework intended to improve a legitimate problem only makes it worse? For example, what if regulations aimed at increasing retention rates serve only to provide the sort of perverse incentives that further erode institutional quality? After all, the unintended consequence of our past efforts to increase high school completion rates is that we essentially made the high school diploma meaningless, and yet we still can’t give the thing away to 20% of the population.

Or what if regulations intended to control escalating college costs serve only to make it more expensive to operate – and, therefore, attend – an institution of higher education? What if regulations intended to increase the quality of classroom instruction do nothing more than shift precious resources away from the classroom and over to the administration building?

The problem with our current regulatory system is that voters do not have access to the sort of information that would allow them to evaluate the true efficacy or the actual cost of the regulations created or imposed by the officials they elect (no, elected officials don’t write the regulations, but it is they who write the laws that require, and set the specifications by which agencies promulgate and enforce regulations). I’ll bet that the average student or parent has no idea just how many federal regulations apply to institutions of higher education, or how the compliance burden contributes to soaring costs.

Elected officials of both parties have realized the polling benefits associated with castigating higher education leaders about rising tuition costs, but do the voters understand that each time Congress passes a law, they contribute significantly to those rising college costs? In the absence of good information, voters seem to think that doing something is better than doing nothing, especially when they are misled into believing that someone other than them will pay the cost (as if regulatory costs are ever absorbed by producers and not passed along to consumers).

Calculating, Not Complaining

In order to provide students and voters with the information they need to make informed decisions, it is imperative that colleges and universities provide clear information about the true costs of these regulations to the people who ultimately foot the bill -- the students, their parents, and the taxpayers.

Instead of just complaining about regulatory burden, colleges and universities should take the time to calculate actual cost of compliance -- including the cost of personnel, information systems, specialized facilities, and programmatic changes that are required to meet regulatory standards -- and then disclose this information to students and the public on the institution’s homepage as well as on each student’s bill.

Moreover, instead of burying compliance costs in the overall tuition rate, I urge institutions to start billing students separately for their portion of the compliance costs through a line-item Federal Regulatory Compliance Fee. Utilities have used this sort of billing practice for years, and perhaps it is time that colleges and universities follow the lead to inform students of just how much the federal government shares in creating, rather than solving, the problem of rising college costs.

Then, when new regulations require the institution to hire more staff or purchase new technology, the students will understand the direct connection between the cost of attendance and increased regulatory burden. Not only will this allow academic leaders to place the cost-increase blame squarely on the shoulders of the responsible parties, but it will also provide students and the public with the information they need to engage more effectively in the democratic process.

Conversely, the data may reveal that regulatory burden contributes only minimally to rising college costs, in which case we know to start looking harder for the real problem.

Regulations clearly have associated benefits as well as costs, but there is generally scant information about the cost side of the equation and an overabundance of promises on the benefits side. It is my guess that once students and the public have access to accurate information, they may be willing to forfeit a few of those “government assurances” in order to be able to afford the opportunity to attend college in the first place.

And with a paring down of regulations to those that are truly important, institutions may be better positioned to comply more fully while at the same time allowing the dog to, once again, wag its tail.