Money, Money, Money

February 11, 2011

Whether the title of this article brings to mind Cabaret’s emcee and Sally singing "Money makes the world go round," or the Abba lyrics "All the things I could do if I had a little money; It’s a rich man’s world," or the O’Jays' "Money, money, money, money, MONEY," or Pink Floyd’s "Money," the word money probably enters your thoughts frequently. How is it that most of us work for nonprofit organizations, such as public universities, and yet, increasingly, money considerations seem to pervade everything? As Jim Collins put it in his 2005 monograph Good to Great and the Social Sectors, in nonprofits "the critical question is … 'How can we develop a sustainable resource engine to deliver superior performance relative to our mission?'" There is no guarantee that access to resources will result in excellence, but excellence is impossible without access to resources. Therefore we all spend a great deal of time focusing on money: how to get it, how to keep it, and how to use it.

Money is particularly on the minds of those of us at the City University of New York this year because it is not a good year for New York State financially and next year is predicted to be worse. CUNY students need money to stay in and be successful at college — approximately one-third come from families whose income is below the official poverty level of $22,050 per year for a family of four. CUNY campuses need money to provide a quality education for students. It is no wonder that we focus so much on money. But that same focus, so important if we are to have sufficient resources to attain excellence, can have very unfortunate consequences. A focus on money can entice you to take actions that seem useful in the short term but can be harmful in the long term.

All species, including humans, are likely to choose short-term gains (impulsiveness) over larger, but more delayed, gains. There are many possible reasons for this behavior, but in general they have to do with the low probability of ever receiving the larger, more delayed gain. In the case of higher education administrators, this devaluing of delayed events can occur because the administrator has learned that promised large gains often never appear and/or because the administrator does not expect to be in his/her current position by the time the delayed event would occur. The American Council on Education's recent survey of chief academic officers showed that there is, for example, a lot of turnover among the members of this group; the mean number of years the respondents had been in their current positions was only 4.7. Some administrators, thinking only about the next job up the ladder, are quite shortsighted. Long-term chief executive officers, such as CUNY’s chancellor, Matthew Goldstein, who has served in his position since 1999, are not common.

Enrollment management provides an example of how in hard times a focus on immediate money can trip up shortsighted university administrators. First consider tuition discounting. When times are financially tough, prospective students are more likely to choose a college or university that is less expensive. This means that non-elite private colleges and universities (ones with relatively high listed tuition but without long waiting lists) need to discount their tuition more steeply in order to continue to compete successfully with public colleges and universities. In some cases, these private colleges and universities may enroll sufficient students for a given year, but enroll them at such a low tuition that the institution cannot be sustained over the long term.

An additional enrollment management example concerns public universities that are funded by their states on a per-student basis. In such a situation, enrolling more students means receiving more money, and therefore many presidents under those conditions will continuously seek out more students. However, too often the additional money proves insufficient to provide more than a barely adequate education. In other words, the more students the university enrolls, the lower the quality of the education. In such a situation, as enrollment grows, the ratio of full-time to part-time faculty deteriorates along with student support services, while class size grows. Yet some presidents will keep seeking more students so that their budgets will grow. Even if a university does have enough money to grow without harming quality, that does not necessarily mean that the university will actually maintain its quality as it grows. Hiring high-quality faculty and expanding high-quality student support services can be extremely time consuming and difficult, in addition to being expensive. Additional revenue arrives virtually immediately, but the negative consequences of the quick growth are delayed and are therefore discounted.

Still other ways in which short-term money considerations can trip up higher education relate to estimating costs. Colleges and universities, to be successful and make good choices, in addition to obtaining resources, must obtain good information about costs. Toward this end, many universities will calculate how much they spend per enrolled student, and these calculations are often made for different disciplines as well as for the university as a whole. However, ultimately, this is not the best way of estimating the university’s costs, because ultimately the output of the university is not an enrolled student but a graduate. What needs to be calculated is the cost per graduated student, perhaps even the cost per successful graduated student, though that would be much more difficult to measure. The university needs to consider many years of data to do any of these calculations appropriately, which may be difficult if administrators are changing relatively rapidly.

As another example, when times are tough, colleges and universities often start looking for additional sources of revenue. Facilities can be rented, programs can be offered for high school students, and sites can be established in distant countries. Often such ventures turn out just fine, yielding immediate, as well as long-term, much-needed additional funds. But, sometimes, unexpected costs reveal themselves only over the long term, including the cost of time and attention taken away from the central mission of the institution. The auditorium cannot be used by a theater course because an outside group has rented it, full-time faculty are devising curricula for courses for the high school students while the university’s 20-year-old core curriculum goes unreviewed, and the university’s legal office is tied up in discussions about labor laws at the university’s international site. Such considerations must be carefully balanced against any revenue received.

There are many other examples of how higher education administrators may focus on short-term costs to the long-term detriment of the institution. Some new facilities, such as a science building, will not have many initial maintenance costs, but by the 20th year will require significant amounts of funds in order to keep the building in good shape. New program costs can also accelerate greatly in the long term. Consider a special baccalaureate program that provides students with free tuition and a stipend for four years, starts with 50 freshmen in its first cohort, and builds to 200 freshmen in the fourth year. That means that the full costs of the program will not be revealed until the eighth year of the program, when fully 800 students will be enrolled in it in the freshman through senior years.

Short-term and long-term considerations may be at the root of some of public higher education’s basic funding problems. State legislators must deal with many short-term concerns when deciding how funds are to be allocated. Such concerns may at times be not conducive to the best long-term health of public universities. Tuition increases may be too large, too small, or sporadic. Further, over time, state and city funding has constituted a lower percentage of public universities’ budgets, while a higher percentage has consisted of tuition. It is for reasons such as these that CUNY’s Chancellor Matthew Goldstein convened a fall 2010 summit on the funding of public universities.

Legislators and administrators are not the only actors in the higher education drama that can sometimes appear to have short time horizons, focusing on immediate concerns. Students, by and large, also have a relatively short time horizon because they will remain at the institution for only a relatively brief period of time. Only faculty, some nonteaching staff, and members of the Board of Trustees are consistently likely to have long-term time horizons regarding the university. In that fact lies a very real justification for the concept of shared governance at universities, a concept that is unfortunately resisted by so many administrators.

Students are not immune to a short-term focus on money that can cause later harm to the quality of a university’s education. In the special baccalaureate program described above, suppose that high school seniors are asked to commit to that program in order to receive the four years of tuition and stipends. High school students may make a choice to enroll in that program based on the resulting short-term benefits, but it is a choice that constrains their ability to explore other areas of higher education. In some cases, in the long-term they might have been better off leaving their options open. More generally, the tendency of students to purchase unessential goods using credit cards, and of working for immediate cash while enrolling in fewer credits rather than taking out student loans and enrolling in more credits and graduating faster, are well-known additional examples of students focusing too much on immediate money. As still another example, students at public universities may oppose tuition increases, even though those increases are designed to meliorate state budget cuts, and keeping tuition flat will cause sections or even programs to be canceled, resulting in students taking more time to graduate and thus gaining access to a well-paying job.

Finally, despite their long-term presence at the university, and although they may often have the long-term interests of the university at heart, even faculty can sometimes succumb to short-term interests when it comes to money. Faculty are generally expected to perform their duties in the nine months ranging from about the beginning of September to the end of May, and as such are frequently considered nine-, and not twelve-, month employees. Yet some colleges and universities give faculty the option, and some faculty take the option, of receiving their pay over twelve months so as not to be tempted to spend all of their annual pay in the first three-quarters of the year. As another example involving faculty, due to time or other short-term considerations, some faculty may resist learning new ways of delivering their course material, such as how to combine face-to-face and online approaches (resulting in what are called hybrid courses). A faculty member might, say, teach an overload course for extra money rather than spend time reconfiguring his or her current courses as hybrids. However, such an approach could end up losing a faculty member some student enrollment, in addition to his or her students possibly learning less, with neither of these long-term outcomes reflecting well on the faculty member. Therefore choosing to spend time in this way could, ultimately, negatively affect the faculty member’s promotion, tenure, and/or salary.

These situations of impulsiveness and self-control involve people choosing between something less good that is available sooner, and something better that is available later. When times are tough, as they are now, impulsiveness can increase. Choosing sooner, smaller amounts of money can be adaptive when, if you do not get some money quickly, your college or university will not survive more than a couple of years. Choosing sooner, smaller amounts of money can also be adaptive for administrators — though not their universities — in other short-term horizon situations, such as administrators looking for higher positions who need additional infusions of funds for their favorite legacy projects. Whatever the exact reasons, a scarcity of money can end up having negative effects far beyond a lack of funding for some particular activities. Our focus on money will never, can never, go away, and neither will our tendency to be tempted by short-term gains. But particularly during these lean times, we must educate ourselves and others about the need to focus on money for the long-, and not just the short-, term. Then, perhaps, we will be able to make our world go around a little faster and a little further.

Bio

Alexandra W. Logue is executive vice chancellor and provost of the City University of New York. She is also a professor of psychology at Queens College.

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