Administrative Bloat in the WSJ

December 30, 2012

This weekend the Wall Street Journal had a front page piece detailing how administrative bloat in higher education is causing costs to spiral higher.  The piece carefully dissects hiring patterns at the University of Minnesota to illustrate their general conclusion that:

Across U.S. higher education, nonclassroom costs have ballooned, administrative payrolls being a prime example. The number of employees hired by colleges and universities to manage or administer people, programs and regulations increased 50% faster than the number of instructors between 2001 and 2011, the U.S. Department of Education says. It’s part of the reason that tuition, according to the Bureau of Labor Statistics, has risen even faster than health-care costs.

This conclusion is not new, but it is great to see it getting the attention it deserves.  As regular readers of JPGB will remember, Brian Kisida, Jonathan Mills, and I released a report on administrative bloat at the nation’s 200 leading research universities.  That report elicited a tizzy fit from Arizona State University President Michael Crow, including a letter to the chancellor of my university accusing me of academic fraud.  University leaders who should be the guardians of academic freedom are too often its greatest oppressors.

But the obvious facts about administrative bloat cannot be suppressed.  Johns Hopkins professor Benjamin Ginsberg recently published an excellent book on the topic.  And despite a lousy attempt by the professional association of State Higher Education Officers to spin the data, a subsequent analysis by the Pope Center successfully replicated our results and confirmed out conclusions.

And now we have a front page article in the Wall Street Journal reporting the same thing.  Michael Crow might try writing an angry letter to the editor but university leaders won’t be able to shut this story down.  The good university leaders are already taking steps to reign in runaway non-instructional, non-research costs.  See for example Erskine Bowles efforts at the University of North Carolina or the new leadership at the University of Minnesota.  The bad university leaders will bluster, brow beat, and continue to expand the mission of universities beyond their core missions of teaching and research.

Administrative Bloat Study Successfully Replicated

March 26, 2012

Replication is the engine of scientific progress.  That progress feels especially good when it confirms one’s work.

A little more than a year ago I wrote an analysis for the Goldwater Institute along with Brian Kisida and Jonathan Mills on the growth in non-instructional professional staff at major universities — or administrative bloat.  Then last year the State Higher Education Executive Officers (SHEEO) issued what appeared to be a rebuttal analysis in which they claimed that “public colleges and universities are operating more efficiently than before, and with appropriate numbers of staff.”

Recently the Pope Center examined both of these studies and then conducted their own new analysis.  They concluded:

the Pope Center analyzed the two studies and also roughly replicated both of them for the 16 campuses of the University of North Carolina system. While we do not claim to be the definitive voice on the matter, we discovered that one of the two studies—the one that said excessive staffing is a serious problem—seemed to be on the mark. The other contained some truth but also raised a few questions about its objectivity….

Our findings, which focused entirely on the UNC system, corroborated the Goldwater study for the most part. Between 1993 and 2010, total UNC system staffing indeed grew faster than enrollment: 51 percent against 42 percent; the number of total staff members per 100 students grew 5.9 percent….

The failure to mention the more recent upward trend in staffing [in the SHEEO report] was puzzling—certainly anybody who has looked at statistics professionally would be able to pick up the trend reversal and realize its significance. Such an important omission raises the possibility that the SHEEO researchers also “cherry-picked” 2001 as a starting point in order to show an overall decline in staffing, rather than the real long-term trend that staffing is rising. (There are no such concerns about the Goldwater study—the researchers chose 1993 because that was the first year for which this type IPEDS was available.)

Ahh.  Vindication is sweet.

The Miseducation of a University President

November 16, 2011

(Guest post by Jonathan Butcher)

Aesop tells us that every man carries two bags, one in front and one behind, both full of faults. The bag in front contains the faults of others, while we carry ours in the one behind. As a result, we always see someone else’s mistakes and rarely look at our own.

Writing in the Washington Post earlier this month, ASU President Michael Crow chastises universities for not being more innovative during the current financial crisis. “Their lack of creativity in adjusting to the reduction of resources has shocked governors and business leaders alike who want to see universities innovate in order to educate more students better, faster and cheaper,” said Crow.

But ASU hasn’t exactly been a model of efficiency. Across the country, colleges are hiring massive numbers of administrators and ASU is no exception — in fact, the Sun Devils are an example of this “administrative bloat.” Between 1993 and 2007, ASU increased the number of full-time administrators per 100 students more than 167 other comparable universities while the number of instructional staff and researchers actually decreased. Goldwater research finds “[n]early half of all full-time employees at Arizona State University are administrators.”

Considering these hiring practices, Crow’s warning that proposals to turn universities into businesses are “ill-conceived” is remarkable. Also “ill-conceived” are programs that would “send our kids to college in the basement with the local online university.” Yet the University of Phoenix reports that some 75 percent of higher education students today “are older…work full or part time and have family responsibilities, including financial obligations,” which means online access to college classes may be the only access they have.

ASU and other state universities should focus on core academic programs and direct spending not to administration but on practices directly tied to student instruction. In addition, Arizona colleges and universities should align tuition more closely with the actual costs of providing an education, pursue more private funding, and make themselves more financially self-sufficient.

Jonathan Butcher is education director for the Goldwater Institute.

Bloat? I Don’t See No Stinkin’ Bloat

June 27, 2011

An organization representing State Higher Education Executive Officers (SHEEO) released a report a little while ago on staffing trends in higher education.  The report never names the report Brian Kisida, Jonathan Mills, and I released last year showing how administrative staff grew much more rapidly at research universities between 1993 and 2007 than did instructional and research staff.  But it is clear that this new report is meant to be a refutation of sorts to what it describes as “similar analyses of staffing patterns,” meaning our report.

Using the same federal data source, the new report comes to what appears to be a very different conclusion:

While total staff levels grew 18 percent from 2001 to 2009, the total number of FTE students grew by 29 percent, resulting in a decrease in the overall number of staff per 100 FTE students by 8 percent. “Most institutions improved their educational efficiency by educating more students with fewer staffing resources,” the SHEEO report stated.

What explains the seemingly different conclusions?  The SHEEO report does not group staff into the same categories that we do, it looks at a different and shorter time period, and it expands its scope to include non-research Associates degree and BA granting institutions, which comprise 91% of all of the sample they observe.  We focus on the other 9% of high research universities.

The most important of these differences is the way in which staff are grouped.  The point of our report was to compare growth in administrative staffing relative to instructional and research staffing.  We defined administrative staffing as a combination of the “Executive/Administrative and Managerial” and the “Other Professionals” categories, since these represent the higher-paid professionals who provide non-instructional and non-research services to students, from Deans to student counselors.  When we compare the growth of these folks to the growth in faculty we see that universities have been devoting much more of their newly obtained resources to these non-instructional and non-research services.  That is, our leading research universities are using new resources to stray further from their core missions of teaching and research and to expand into a host of peripheral services.

The SHEEO report concludes that institutions have “improved their educational efficiency” only by combining all staff into one big category.  If you dig deeper into their report where they break the results out by category, you can see that they also find that faculty staffing ratios have declined while senior executive and professional staffing ratios have grown.  In Table 4 the total ratio of Executive and Other Professional staff to students went from 5.04 per 100 students in 2001 to 5.07 in 2009, while faculty declined from 8.41 to 8.09 during the same time period.

That is, the SHEEO report confirms our basic finding.  It only concludes that higher ed has improved its efficiency by adopting the strange idea that greater efficiency means cutting faculty while growing executive and professional staff.

It is also worth noting that the SHEEO report does not go back to 1993 as we did.  We covered the years 1993 to 2007 because they were the earliest and most recent years for which data were available at the time we wrote the report.  If SHEEO had gone further back they would not have found the improved efficiency they claim to find since 2001.  In our report we found overall staffing levels increased from 31.4 full and part time staff per 100 students to 35.5 in 2007, an increase of 13.1% in overall staffing levels.  We also observed an increase if we look only at full time staff.  SHEEO is only able to find greater overall efficiency (defined strangely by them as cutting faculty even more than growing non-faculty professionals) by starting their analysis in 2001 rather than 1993.

This spin-job by SHEEO hasn’t gained much traction, so I hadn’t even noticed it for more than a month after its release.  But I’m sure that it is being waived around in meetings of boards of trustees if they begin to ask about administrative bloat as a result of our report last year.  Trustees shouldn’t be fooled.


Universities as Non-Profit Conglomerates

March 8, 2011

Mission creep is the bane of the modern university.  Once upon a time universities believed that their mission was the discovery and dissemination of knowledge.  Accordingly, they focused on teaching and research.

Universities are now straying far from this core mission and launching an array of new enterprises.  They run health-care systems, engage in property re-development, serve as venture capitalists for start-up businesses, etc…

To reflect their new status as non-profit conglomerates, universities espouse missions that are only tangentially related to their previous core function of education.  No longer do universities emphasize their founding mottos, such as “veritas” or “disciplina in civitatem.”  Instead, we see Ohio State University calling itself the “economic engine” of Ohio and declaring “We’re in the progress business.”

No they aren’t.  At least, they shouldn’t be.  They are in the knowledge business.  Universities forget this at their and everyone else’s peril.

The more that universities see their mission as progress or being an “economic engine,” the more they are straying into business at which they are less competent, on which they lose more money, and which distract them from their core responsibilities.

We have had experience with profit-seeking industrial conglomerates in the 1970s and it didn’t go very well.  Businesses grew large, unfocused, and overly bureaucratic.  But in the business-world, there is a remedy for this type of gross inefficiency.  Corporate raiders took-over these conglomerates and made a fortune breaking them up and selling off the pieces.  They realized that these businesses would be much more effective if they weren’t combined in a conglomerate.

The non-profit sector lacks a similar remedy.  Universities are expanding into a variety of businesses and there is no one to stop them other than a board of trustees which has been fully-co-opted by administrations (just as the boards of industrial conglomerates were co-opted by their management teams).  Raiders can’t purchase the grossly inefficient non-profit conglomerates masquerading as universities and make a fortune by breaking them up and selling off the pieces.  Instead, we increasingly suffer from administrative bloat and inferior quality education.

The only prospect for these non-profit conglomerates to be broken-up is that they tend to lose more money with each new venture.  We shouldn’t expect universities to be efficient at operating health-care systems, property re-development, or venture capitalist operations.  They claim to be attracted to each new enterprise as a way of making money to subsidize their core functions, but the reality is that their losses pile-up and their administrative over-head swells as they experience mission creep.  They all fantasize that their venture capitalist efforts will spawn the next Google, but I am willing to bet that the average return on start-up businesses for universities is negative.

Returning to our Ohio State University example, their total annual revenue has grown to $4.7 billion.  It becomes very difficult to run a $4.7 billion business that also teaches individual students well and conducts quality research.  As OSU’s president, Gordon Gee, describes his institution: “Universities are large and complex — ours more so than any other. Trying to describe all that we do in one sentence seems a daunting task.”  Gee, President Gee, maybe that should be a sign that OSU is trying to do too many things.

Of the $4.7 billion in annual revenue, OSU gets $2.3 billion from its Medical Center.  Why should universities also operate gigantic health care systems?  I understand that universities may want a relationship with hospitals to help train their students and provide opportunities for research, but frankly that can be done without having to own them.  And even if it were efficient to own a hospital for teaching and research opportunities, there is no reason to own an entire network of medical  facilities and services.

I’ll bet that OSU requires large government subsidies for both its medical and traditional educational operations.  And I’ll further bet that those loses could be reduced, on both ends, if they spun off their Medical Center.  The reasons to combine them and to add a host of other “economic engine” activities is not financial or educational efficiency.  The reason is to satisfy the desire for empire building among senior university officials and their compliant boards.

We may not have corporate raiders to break-up these non-profit conglomerates, but we will eventually have angry taxpayers who grow tired of subsidizing their losses.  When the subsidies get cut, universities will be forced to shed these extraneous and money losing ventures and focus once again on teaching and research.

Higher Education Probably Won’t Help Our Economy

February 7, 2011

Bloated, wasteful and ineffective is no way to grow an economy
(Guest Post by Patrick Gibbons)

As the rest of the Nation recovers Nevada’s economy still seems to slide further and further into the abyss. Nevada has the nation’s highest unemployment rate (over 14 percent). We also face a significant budget shortfall. The general fund revenue for the state budget is projected to be $5.3 billion for the next biennium – current spending is $6.4 billion.

Governor Sandoval has proposed cutting the budget and implementing reforms – most notably for education. Higher education in particular is slated for a 7 percent cut in state appropriations (17.5 percent if you include the lost ARRA federal subsidy).

To discuss the magnitude of the cuts the Board of Regents called a meeting on February 3, 2011. After three hours of testimony the only solutions presented were 1) close class sections, 2) reduce enrollment and 3) terminate faculty.

Oh no, budget cuts… Again.

The colleges and universities of Nevada have also been rolling out a new PR campaign. They’ve argued “invest more in us and we’ll help grow and diversify the economy.”

The relationship between higher education and positive economic growth is “indisputable” claims the state’s higher education chancellor Dan Klaich.

Its not at all clear that higher education can help grow Nevada’s economy. Naturally, a more educated work force can be more productive and earn higher incomes. But that assumes we’re actually educating people in the first place. It also assumes that jobs are created just because of education quality rather than a host of other factors.

First of all, states with top tier universities like California, New York and Michigan are bleeding residents and jobs. Its not just these three, a host of other states with top universities are also struggling to create jobs and keep residents. Between 2000 and 2008 the combined net migration rate for states with an Ivy League school was -2.5 million. Nevada, with its 3rd and 4th tier universities, had a net migration rate that was higher than the combined rate of all 32 states with a top 100 university. In fact, having a Top 100 University as ranked by U.S. News and World Report means a state also averages a statistically higher unemployment rate (nearly 3 points higher than not having a top 100 university).

University officials in Nevada are making a very basic logical fallacy. They are seeing Nevada’s economic struggles (fact) and assuming that Nevada’s low percentage of college graduates (fact) must be a reason why the economy hasn’t diversified and recovered. This fallacy leaves them believing they’re the saviors of Nevada, thus, we can’t cut their budget.

Conveniently, they forget the fact that prior to this economic crash Nevada sustained high economic growth, population growth, high income-per capita, and below average poverty rates for DECADES, despite having a “poorly educated” populace.

There is probably a more robust positive relationship between higher education spending
and keg stands than with economic growth.

It is especially unlikely that further investments in higher ed will boost Nevada’s economy when the Universities spend so much already and produce very little in return.

UNLV spends $19,000 per FTE student and only graduates 48 percent of the full-time students within 8 years. Meanwhile, UNR spends over $34,000 per FTE student and graduates merely 54 percent after 8 years.

At the Regents meeting I pointed out that UNLV and UNR spend more money per-pupil and employ more adults per-pupil to do the same job. According to Dr. Jay Greene’s report “Administrative Bloat at American Universities” both UNLV and UNR grew their employees faster than the student body between 1993 and 2007. UNLV saw inflation-adjusted spending per-pupil rise 59 percent while UNR saw spending rise 21 percent.

According to the U.S. Department of Education, UNLV’s inflation adjusted credit-hour costs have risen 90 percent while fees increased a whopping 771 percent over the last decade. At UNR the increase was 80 percent and 290 percent respectively.

How can anyone consider UNLV or UNR to be a wise investment? Spending more and more money to employ more adults to do the same shoddy job will not grow our states economy. At best it will do nothing at all. At worst, it may actually retard or reverse economic growth.

My two minutes of comment were up at that point, but the damning facts keep piling up. The Lied Institute at UNLV released a rather shoddy report calling for more “investment” in higher education, pointing two Arizona and Utah as states to emulate. I’ve blasted the report to pieces here and here.

Failing to conduct even the most basic literature review or even analysis on state spending, the Lied Institute researchers failed to notice that Nevada already spends more on education and research per-pupil than Utah and Arizona (see figure 11 on page 29).

In particular the Lied Institute researchers and Brookings Institution Mountain West have called on lawmakers to emulate Arizona State and the University of Utah.

ASU spends $28,000 per-pupil on “Education and General Expenditures per FTE” according to the Education Trust. That is $6,000 less than UNR, Nevada’s flagship university. As much as Arizona State is made fun of for their low-quality, they spend less and graduate more of their own students than UNR.

The University of Utah does in fact get the lion’s share of resources in Utah – spending over $50,000 per FTE. Embarrassingly, their 6 year graduation rate is 51 percent. They make Arizona State – a university lampooned by everyone including SNL and the Daily Show – look like Harvard AND a bargain.

Worse still may be the quality of, at least some, of the faculty in Nevada. One professor employed at the University of Nevada – Reno wrote me via Facebook to accuse me of believing what I do because I’m paid to believe it. Of course he “believes with all [his] heart in the mission of the university” and is “proud of [the university’s] progress” and success.

After pointing out the irony – he has called for higher taxes to fund his own employer where he makes $143,000 a year – I asked him exactly what the university’s mission was and what does he mean by success.

Just 12 percent of UNR’s students are considered low-income (Pell Grant recipients) and just 11.6 percent are underrepresented minorities (white non-Hispanics make up just 56 percent of the population in Nevada and less than half of the K-12 student population).

I wondered if the mission was to spend $34,000 a year to graduate half the students within 8 years – the vast majority of whom were middle/upper class and white.

If that his definition of success and progress, then I think the Klan might agree with him. Or at least the Joker…

Nevada needs to rethink the higher education paradigm because being bloated, wasteful and ineffective is no way to grow an economy.

Higher Ed is in for a World of Hurt

October 4, 2010

Last Friday the Department of Education Reform’s lecture series featured a great talk by Richard Arum, a sociologist from New York University.

He presented research from the forthcoming book, Academically Adrift, which he co-authored with Josipa Roksa.  I don’t want to scoop their findings, which will be released in the book and an accompanying report in January, so let me simply quote from the promotional material:

Almost everyone strives to go, but almost no one asks the fundamental question posed by Academically Adrift: are undergraduates really learning anything once they get there?

For a large proportion of students, Richard Arum and Josipa Roksa’s answer to that question is a definitive no. Their extensive research draws on survey responses, transcript data, and, for the first time, the state-of-the-art Collegiate Learning Assessment, a standardized test administered to students in their first semester and then again at the end of their second year. According to their analysis of more than 2,300 undergraduates at twenty-four institutions, 45 percent of these students demonstrate no significant improvement in a range of skills—including critical thinking, complex reasoning, and writing—during their first two years of college. As troubling as their findings are, Arum and Roksa argue that for many faculty and administrators they will come as no surprise—instead, they are the expected result of a student body distracted by socializing or working and an institutional culture that puts undergraduate learning close to the bottom of the priority list.

Be sure to read this book and the supplemental report when it comes out because he presented some amazing and disturbing information on how students spend their time, what their courses require of them, how much they learn, and what happens after they graduate.  Let’s just say that the results don’t paint a pretty picture.

And we may want to ask again why universities are hiring all of those non-instructional professional staff and administrators.