College Costs and Spending Hinder Student Success: :Guest blogger Pat Callan

Looking Under the Hood of Public Higher Ed
By Patrick M. Callan


Last week, the College Board released its annual Trends in College
Pricing report, finding that tuition at the nation's public four-year
colleges and universities had risen 6.6 percent, which is roughly
equivalent to previous years but continues to far outstrip inflation and
increases in family income.


Media coverage of college affordability almost invariably takes its cues
from this report, focusing on the "sticker price" that colleges and
universities charge students. But tuition alone is a relatively
superficial measure that hides as much as it reveals, since it responds
to changes in state allocations, political factors and fund raising
success.


What has gone mostly undiscussed is escalating spending on college
campuses across the country. A public discussion focused on tuition -
the price of the education - gives institutions a free pass on how they
spend the money they raise. Furthermore, this discussion reinforces the
assumption that spending increases follow some sort of natural
progression. But this is not the case. Spending can and must be
contained if the price of college is to be brought under control.


This message is falling on deaf ears today in part because last year was
a good state appropriations year for colleges and universities. But even
in bad years, public institutions are raising spending. Today, higher
education is a "seller's market." Demand for college has never been
higher, and families are willing to take on dangerous amounts of debt to
get their children through.


However, the willingness of families to reach deeper into their pockets
is reaching a breaking point. Recent polling by my organization, the
National Center for Public Policy and Higher Education, and Public
Agenda shows that the public is concerned about how colleges and
universities spend their money. Most Americans (83 percent) believe that
today's colleges should be doing a much better job of keeping their
costs down. More than two out of three (68 percent) believe that
colleges and universities could reduce their costs without hurting the
quality of the institutions.


The American public is onto something. But many institutional leaders
have not been willing to look under the hood of higher education
expenditures. Typically, leaders have used a range of excuses to deflect
questions about spending. Some common excuses, and my responses to them,
follow:


Increases in tuition reflect the high demand for postsecondary education
and financial aid keeps the net cost to families under control. Public
college and university leaders think there is no crisis in higher
education so long as there are students and families willing to pay. But
tuitions at four-year public institutions have risen 22 percent in the
past five years, after adjusting for inflation, while family incomes
have increased only 8 percent. What's more, need-based financial aid is
not keeping up with increases in tuition, pricing many poor families out
of higher education. Continual price hikes may respond to market forces,
but do not honor the public mission of state colleges and universities.


Higher education is a labor-intensive industry and faculty salaries and
health care costs are behind most of the recent run-up in spending.
Because institutions use humans to pass on knowledge, historically a
greater proportion of their budgets have gone to salaries and benefits
than in other industries. But this is not where most of the spending
growth is occurring. Faculty salaries have barely kept up with inflation
for the past 10 years. Last year, faculty salaries rose on average 1.3
percent after adjusting for inflation - the first inflation-adjusted
increase since 2003-2004. In addition, the use of cheaper part-time
faculty is growing fast, now making up 48 percent of all faculty,
according to the American Association of University Professors. On the
other hand, universities are spending huge amounts of money on
construction - for new dorms, new athletic facilities, and new student
centers- as part of an "amenities arms race." And administrative
overhead at many universities has ballooned, due to an explosion in
niche student services and fund raising apparatuses. It is doubtful that
these developments have improved student learning.


There is great competition for applicants nowadays, and we have to spend
to compete for the best students. This is probably the most common
excuse offered by leaders at state flagship universities, but they are
not referring to competition with other state institutions. Rather,
leaders at public research universities are increasingly viewing
themselves as competitors with private research universities such as
Duke and Stanford, or even Ivy League institutions. These leaders feel
that they can only "compete" if they offer the same amenities and
practice the same aggressive recruitment tactics, including lavish merit
aid for high performing students, which takes resources away from
low-income students. Instead, they should refocus on their educational
mission, and the advantage that public institutions have always had: the
availability of need-based financial aid and the opportunity for a great
education. Prospective students seeking high quality education at low
cost will be smart enough to know the difference between style and
substance.


There's no political incentive to take on cost containment. Most
institutional leaders don't want to touch this issue because it almost
inevitably leads to faculty concerns that they will be expected to do
more for less. Faculty will revolt, if "cost containment" means
across-the-board budget cuts. In cases where institutional leaders have
contained spending and reinvested savings in teaching and learning,
faculty have been very supportive. The University System of Maryland is
a case in point. Chancellor William E. (Brit) Kirwan got faculty support
for the Effectiveness and Efficiency Initiative, which identified areas
for cost savings and redirected those savings toward priorities such as
increasing enrollment capacity, containing tuition increases, and
improving academic programs and services for students. Even though
faculty teaching loads increased 10 percent, faculty largely supported
the measure, because it was focused on improving student learning.


At the state level, lawmakers and system heads don't want to engage cost
because it requires a restructuring of higher education finance. States
base appropriations on students enrolled, which encourages spending on
amenities and recruitment - not students graduating.


Where there have been incentives, universities have proven capable of
cost management. In the 1990s, the Illinois Board of Higher Education
established the Priorities, Quality, and Productivity initiative, which
re-evaluated all academic programs with an eye to institutional
priorities. Elimination of duplicative programs, technology
enhancements, and administrative streamlining resulted in savings
averaging $36 million annually. As at Maryland, faculty came to support
PQP because the savings generated were reinvested in instruction. These
funds were most often used to reduce class size and reliance on graduate
teaching assistants; support minority student achievement; improve
technology; and expand need-based financial aid.


My hands are tied, because the biggest decisions are made at the state
level. Big decisions about allocations are made at the state level, but
institutional leaders have a lot of discretion about how that money is
spent. While there aren't many incentives for cost containment now,
there also isn't much oversight of spending requests. Institutional
leaders have lots of room to maneuver on this issue.


Cutting spending hits disadvantaged students hardest. Cutting spending
only hits disadvantaged students hardest if need-based financial aid is
the first target. In fact, cost containment, if it focuses (as it
should) on increasing instructional spending, boosting degree
completion, and streamlining administrative processes, can make public
higher education work much better for disadvantaged students. That is
because these are the students most likely to have trouble completing
degrees and to have the most interaction with administrative offices.


There is another major reason why colleges are not acting on this
agenda. There is too little data about how spending impacts learning. In
contrast to business or the military, how inputs affect outputs is
poorly understood in higher education. New research being conducted by
the Delta Project for Postsecondary Costs to be released next year will
set the basis for looking at the relationship between spending and
student success.


But the lack of data is no barrier for action. We don't need to wait for
longitudinal studies to know that more spending on full-time faculty and
need-based financial aid will impact student learning more than a glitzy
new dorm.


Taking a hard look at the evidence shows that it is time to focus on
college spending patterns and that there is a lot college leaders can do
right now to contain the spending that drives up college prices. Many of
the problems originate at the state level, but bold leaders will take
action regardless of incentive structures and political rewards. It is
time to expect more of college and university leaders than we do now.


Patrick M. Callan is president of the National Center for Public Policy
and Higher Education.

Labels: college costs, college sucess