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.


Administrative Bloat Report — Release Tomorrow

August 16, 2010

With Brian Kisida and Jonathan Mills, I have a report on administrative bloat at American universities being released by the Goldwater Institute tomorrow.  You should be able to find it at the Goldwater web site.

If you thought K-12 education was suffering under a large and growing bureaucracy, just wait until you see the results in tomorrow’s report.  In your heart you know it’s right.


The Way of the Future in Higher Education

November 27, 2008

 

aviator-leonardo-dicaprio-11(Guest Post by Matthew Ladner)

Ed Sector’s Kevin Carey’s article on the technological transformation of American higher education is a must read. Carey’s article leaves much to discuss, but a bottom line conclusion is that computer based learning at traditional universities is improving instruction, lowering costs and moving us in the direction of outcome based assessment- all very positive developments.

The other story however is that many universities are pocketing the efficiency savings and jacking up tuition, making undergraduates even bigger cash cows than they used to be. Higher education is on an unsustainable path, and yet Carey writes:

Long-prosperous colleges risk finding themselves in the perilous state of the newspaper, with competitors using the Internet to drive down prices in businesses that were once profit leaders. That would be a mixed blessing, at best. The Web is a boon for those who need to access higher education at a distance. For colleges that have grown complacent and inefficient—and there are many—a dose of fiscal reality would do them good. But the financial cross-subsidization at the heart of the modern university also sustains much of what makes it a uniquely valuable institution, more than a mere conveyer of credits and degrees. Much as newspapers use classified advertising to support money-losing foreign bureaus, subsidized scholarship makes huge contributions to the scientific, cultural, and civic lives of the nation. The University of Phoenix does not.

Carey is of course correct about the huge contributions of university academic departments which cannot financially sustain themselves. I suspect however that the costs of many such departments are far greater than their benefits. It’s not a stretch, for example, to view, say, a Sociology department with a large number of faculty and few students as a group of self-indulgent rent seekers whose dead-weight cost helps drive up tuition and wastes taxpayer money. Mind you, there has been some great work done by sociologists, but there seems to be much more taxing of plumbers to subsidize coffee house revolutionaries going on.

Not just to pick on the Sociologists, when I was a Political Science graduate student in Texas, my fellow graduate students and I once counted up the number of Ph.D. programs in political science in the state. We wondered “do we really need so many?” The answer was obvious: no, hell no.

I think Carey’s use of the newspaper analogy is an apt one- it just hasn’t happened yet. A little Schumpeterian creative destruction in higher education seems long overdue.


On Immigration and the Catwalk

June 27, 2008

(Guest post by Jonathan Butcher)

George Will had an incisive oped yesterday on immigration issues in the U.S.  Not the issue of whether or not to build a giant wall from L.A. to Houston, but an actual immigration policy that is being enforced and routinely wedges our collective finger up our collective nose: kicking well-educated international students out of the country once they have their advanced degrees.

Our elected officials have thought it prudent to restrict the residency of international students who study in the States so that the students can only reside long enough to earn a diploma.  To stay longer and get a visa they would have to get a job, but to get a job they have to have a visa first.  And if they ask not to fly more missions they can’t be crazy and so will have to fly more missions but if they don’t ask they will still have to fly more missions and…ad infinitum.

After being trained at American colleges and universities, often subsidized by taxpayers, we make them leave.  Clearly residency is a touchy concept to policymakers.  If you sneak into America, you can get a job and stay until Congress decides on a way to a) find you and make you leave, b) give up and let you stay or c) move everybody north and take over Canada.  

Will makes the following observation about what this policy accomplishes: “Suppose a foreign government had a policy of sending workers to America to be trained in a sophisticated and highly remunerative skill at American taxpayers’ expense, and then forced these workers to go home and compete against American companies. That is what we are doing…”  This sounds to me like we are committing an act of corporate warfare upon ourselves.  Wouldn’t be the first time we’ve done something like this: 25 years ago in A Nation at Risk the authors wrote, “If an unfriendly foreign power had attempted to impose on America the mediocre educational performance that exists today, we might well have viewed it as an act of war.”

So to review: 25 years ago America was committing an act of war on itself by imposing mediocre performance on our students, and since national math and reading scores have held pretty much the same since, we decided to up the ante on future generations and engage in corporate warfare with ourselves by sending well-educated international students who came to the U.S. to study—whose educations taxpayers subsidize—somewhere else to be snatched up by companies competing with American businesses.  This residency issue is case-in-point why we shouldn’t trust the government with anything important, like running the country.  

I’ll admit there is actually an ingenious plan being proposed by Rep. Anthony Weiner (D-NY) to remedy the situation.  Earlier this month he introduced a bill that would allow more runway models (1,000, to be exact) into the country.  I am not making this up.  While this may spell trouble for congressmen who vote for the bill and their wives (yet spell opportunity for Weiner, a bachelor), it will actually free up 1,000 spots for technical workers to get visas.  A bill that would bring more beautiful women and international computer geniuses into the country all at once?  I take back my statement about not trusting the government to run the country.

 

 


Grab a Brew- Don’t Cost Nuthin’

May 7, 2008

(Guest Post by Matthew Ladner)

On May 1st, the Arizona Senate Higher Education committee held a hearing on the university “stimulus plan.” The idea is to have the state borrow $1.4 billion to build new buildings on the state’s three public universities. Governor Napolitano, Phoenix Mayor Phil Gordon and Arizona State University President Michael Crow all spoke in favor. One thematic message: this borrowing can more than pay for itself by increasing the percentage of Arizona workers with a college degree.

Tempe Mayor Hugh Hallman stole the show, noting that ASU students have a high per capita beer consumption rate, providing an economic stimulus to Tempe.

Hallman’s observation however might help to explain graduation rates. Don’t get me wrong- I drank my share of beer as an undergraduate. Someone else’s too. Nevertheless, I managed to graduate in 4 years, something 73 percent of ASU students fail to do. Education Trust rated Arizona State University against 7 similar peer institutions and found Arizona State had the lowest 6-year graduation rate of the bunch.

If we did need additional graduates, more focus on absurdly low graduation rates could do the trick. A fraction of the eighty million dollars a year in debt service would pay for a tremendous amount of financial aid, tutoring, and even the additional course offerings that some students might need to graduate on time. I’ve yet to hear the sad story of the student who dropped out for lack of fancy new facilities.

However, it is far from obvious that the state “needs” additional college graduates, given that many graduates currently work in jobs which do not require degrees.

This begs the question: do Arizona universities need new buildings, or new priorities?


Arabian Gulf Money and US Universities (Continued)

May 7, 2008

As I established in my last post, gifts and contracts from Arabian Gulf countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) are a large portion of all foreign funds given to US universities.  And those countries give much more relative to the size of their economies than do almost all other countries.

Before discussing where that money is going and what it means, I should state my preferences upfront.  To the extent that Arabian Gulf money in US universities is reducing criticism of those regimes and increasing criticism of the US and Israel, I think that is a negative development.  Gulf countries, principally Saudi Arabia, are currently governed by fundamentally illiberal regimes that are relatively oppressive toward political, religious, and cultural dissent within their countries.  They also promote a foreign policy agenda that is antithetical to desirable US values and interests.  And while the US and Israel are certainly worthy of criticism, they are generally forces for good in that they offer relative freedom within their countries and generally promote positive values outside.  To dwell on the errors of the US and Israel while neglecting the abuses of Arab states is an inversion of moral priorities. 

I understand a full defense of these views would require a longer argument and am prepared to offer one at a later time.  For our purposes, I assume (and think most readers would agree) that promoting more criticism of the US and Israel while suppressing criticism of Arab states is a bad thing.

 So where does Arabian Gulf money go in US higher education?  Most of what is reported is categorized as “contracts,” not gifts.  Of the almost $322 million from Gulf states, nearly $234 million is labeled as contracts.  The contracts appear mostly to be for the purchase of support and research related to Arabian Gulf oil production.  For example, $111 million of the $234 million in contracts went to Carnegie Mellon University from the Supreme Council for Information and Technology in Qatar.  Another $19 million went to the Colorado School of Mines from the  Adu Dhabi National Oil Company.  There may be political effects of these contracts, but they appear to be largely related to economic activities.

That leaves a little more than $88 million in total gifts (not contracts) from Arabian Gulf donors since 1995 that have gone to 14 US universities.

Recipients of Arabian Gulf Gifts Since 1995
   
American University (The) $500,000
Boston University $1,500,237
Columbia University $500,000
Cornell University $10,900,000
George Washington University $11,953,519
Georgetown University $16,232,667
Harvard University $11,871,563
Howard University $250,000
MIT $10,000,000
Michigan State University $926,740
Rice University $2,750,000
Texas A&M University $1,498,671
Tufts University $1,000,000
University of Arkansas $18,312,524
   
Total $88,195,921

 While $88 million feels like a lot of money, it is an extremely small portion of university endowments.  According to the National Association of College and University Business Officers, the 785 higher education institutions they surveyed had a total of $524 billion in endowments as of fiscal 2007.  That makes the Arabian Gulf contributions .02% of the total.  Even at the 14 receiving universities listed above, the Arabian Gulf money is a small portion of their individual endowments.  For example, at Georgetown the reported gift constitutes 1.5% of their endowment.  At the University of Arkansas, where I am a professor but not a beneficiary, the Saudi gift is little more than 2% of the endowment.  Nowhere else is the gift amount in excess of 2% of endowment.

The income generated from these gifts is an even smaller portion of the annual operating budgets of these institutions.  Normally less than 5% of endowment gifts can be spent annually, meaning that $88 million dollars would generate less than $4.4 million in money that could be spent each year.  At George Washington University the FY 2008 budget calls for $553 million in revenue, while the almost $12 million Arabian Gulf in gifts should produce roughly $600K, or .1% of annual revenue.  At Columbia University the FY 2006 budget reports almost $2.7 billion in revenue, while Arabian Gulf gifts would produce roughly $25,000 of that, which is basically rounding error.

While the Arabian Gulf countries are dispropotionately large foreign donors to US universities, the size of their gifts pales in comparison to the total endowments or annual budgets of these institutions.  American universities may be cheap dates, willing to do quite a lot for that marginal dollar, but they aren’t that cheap.  It’s unlikely that Arabian Gulf money is buying a significant change in the priorities of the universities to which they are donating. 

It’s true that the 14 recipient universities include a disproportionate number of academics who are willing to offer apologies for Arab atrocities while inflating US and Israeli misdeeds.  For those who would rely on David Horowitz’s list of the 101 most dangerous professors as a guide (and I am in no position to endorse or refute his list), 16 are housed in these 14 universities.  Given that there are almost 1,000 colleges and universities in the US, having almost one-sixth of the “dangerous professors” at these 14 universities is a fairly high concentration. 

Arabian Gulf money tends to go where there are professors friendly to their world view.  The money may give those professors a larger megaphone, but for the most part they were already at these institutions and their views were unchanged by receiving the gift.  So, Arabian Gulf money is unlikely to be buying much of the priorities of universities or the views of the recipient professors.

But before we breath a sigh of relief, we need to consider the scale of these gifts relative to pre-existing funding in Middle Eastern Studies.  Having $4.4 million to spend each year may not be a large amount of money to US universities, but it is quite a lot of money within the relatively limited world of Middle Eastern Studies.  People wishing to have productive careers in that field may alter the emphasis of their work in the hopes of attracting another $18 million gift.  And the power of recipients of these gifts to reward like-minded friends and punish critics is enhanced.  This all helps populate Middle Eastern Studies programs and the State Department and CIA, which hire their graduates, with people inclined toward a Gulf Arab view.

Martin Kramer articulated the problem: “Of course, this is why we can’t ever expect to get the straight story on Saudi Arabia, Wahhabism and oil from people who operate within Middle Eastern studies. If you want a fabulously wealthy Saudi royal to drop out of the sky in his private jet and leave a few million, you had better watch what you say — which means you had better say nothing.” 

But if the problem is that prospective (not established) Middle East experts can be bought on the cheap, an obvious solution presents itself.  People who think there should be more criticism of Saudi Arabia and less of the US and Israel should make their own gifts to universities.  Countering $88 million over a dozen years from the Gulf Arabs shouldn’t be beyond the collective financial reach of supporters of US and Israeli world views.

Of course, working out the details with universities can be a tricky business for people wishing to promote greater emphasis on certain issues, but there are organizations that can help facilitate that process.  For example, the Veritas Fund for Higher Education Reform, run by my friend David DesRosiers, works with donors to ensure that their intent is followed.

And people can only effectively counter Arabian Gulf influence if they are aware of how much money is being given and to where it is going.  Toward that end, Stanley Kurtz has called for legislation that would enhance the transparency of foreign donations while worrying that the existing information, on which I base my analysis, may be incomplete.

In sum, the problem of Arabian Gulf influence in US higher education is real, but can effectively be countered and contained by those with opposing views.


Arabian Gulf Money and US Universities

May 6, 2008

A number of observers have noted some large gifts originating from Saudi Arabia and other Arabian Gulf countries to US universities.  The purpose of this post is to put in perspective how large those gifts are.  In subsequent posts I’ll discuss where the money is going and what it may mean.

The motivation for this post comes from Stanley Kurtz, who has a piece over at National Review Online with a list of gifts and contracts from foreign sources to U.S. universities.  Kurtz rightly emphasizes: “To treat all or even most foreign gifts to American colleges or universities as somehow nefarious would be a serious mistake. America’s institutions of higher education — with their superb programs in science, medicine, and engineering — rightly benefit from the largesse of America’s foreign friends and allies, many of whom have benefited directly from the technical expertise developed in these institutions.”

But he continues: “On the other hand, there are reasonable grounds to fear that some foreign donations may purchase undue influence over the way in which highly controversial subjects are treated in American lecture halls.”

I would add a further caveat that gifts to universities rarely, if ever, lead professors to alter the views they hold.  The slogan, “follow the money,” is a gross oversimplification of how academia works.  While one can’t simply buy ideas in academia, it is important to examine donations as an indicator of priorities in those institutions.  The money doesn’t buy ideas, but it can buy emphasis on some issues and some types of academics over others.

That being said, Arabian Gulf money is clearly a significant issue in higher education.  According to the federal filings Kurtz reproduces, Arabian Gulf gifts and contracts to US universities have exceeded $321 million since 1995.  That’s more than 16% of all reported gifts and contracts from foreign sources. 

To put the magnitude of those gifts in perspective, the Arabian Gulf states from which the money came have economies that represent less than 2% of global GDP (excluding the US).  So, their share of foreign gifts to US universities is eight times as large as their foreign share of global wealth production.  The Arabian Gulf states are exceptionally interested in US higher education.  The breakdown by country can be seen in the table below: 

Gifts and Contracts from Arabian Gulf States to U.S. Universities Since 1995
       
  Gifts and Contracts % of Total Foreign Gifts Share of Global GDP (ex US)
BAHRAIN $8,199,058 0.42% 0.05%
KUWAIT $7,639,854 0.39% 0.27%
OMAN $9,046,801 0.46% 0.12%
QATAR $151,702,156 7.75% 0.13%
SAUDI ARABIA $92,972,720 4.75% 1.10%
UAE $52,058,098 2.66% 0.28%
       
Total Gulf States $321,618,687 16.44% 1.95%

How do these figures compare with gifts and contracts from other foreign sources to US universities?  If we look at donations from the 10 largest trading partners with the US (excluding Saudi Arabia, which ranks 9th), we see that they are roughly proportionate to their share of global GDP.

Gifts and Contracts from Top Trading Partners (ex Saudis) to U.S. Universities Since 1995
       
  Gifts and Contracts % of Total Foreign Gifts Share of Global GDP (ex US)
 Canada  $73,418,414 3.75% 2.45%
 Mexico  $21,272,215 1.09% 2.60%
 China  $53,266,855 2.72% 13.55%
Japan $257,196,140 13.15% 8.36%
Germany $207,624,660 10.61% 5.45%
 United Kingdom  $163,232,433 8.34% 4.13%
 Korea, South  $42,893,079 2.19% 2.32%
 France  $62,638,953 3.20% 3.98%
 Netherlands  $34,800,500 1.78% 1.23%
       
Total $916,343,249 46.84% 44.09%

The highest ratio of share of foreign gifts to share of GDP is 2 to 1 among these major trading partners.  Certainly none of these countries gives at a rate that is 8 times out of proportion with its wealth. (Although as South Park would say, we have to watch those Canadians, with their floppy heads and pointy eyes.)

Tune in here for a discussion of why the Arabian Gulf states may have such a strong interest in US universities and what it may all mean.

This Piece Continues Here.