The U's failing grade for fiscal management

  • Article by: CHARLES LANE , Washington Post
  • Updated: January 6, 2013 - 6:30 AM

Exhibit A on administrative bloat: The U.

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Eric Kaler, who was named the new University of Minnesota President in June 2011, inherited many of the management woes.

Photo: Richard Sennott, Star Tribune

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At the University of Minnesota, the number of employees with "human resources" or "personnel" in their job titles has grown from 180 to 272 since the 2004-05 academic year.

Since 2006, the university has spent $10 million on consultants for a vast new housing development that is decades from completion. It employs 139 people for marketing, promotions and communications. Some 81 administrators make $200,000 per year or more.

In the past decade, Minnesota's administrative payroll has gone up three times as fast as the teaching payroll, and twice as fast as student enrollment.

Oh, and tuition more than doubled in that same period, to more than $13,000 per year.

These facts and figures, gleaned from a fascinating article in last weekend's Wall Street Journal, are depressingly typical of American higher education, where administrative payrolls and other nonteaching costs have been growing rapidly -- without any obvious commensurate benefit for students.

To the contrary, the bloat on many U.S. campuses is now a significant cause, along with cutbacks in state spending, of the surge in tuition, which, in turn, is an obstacle to upward mobility for an entire generation of young Americans.

There should be a lot more outrage about this than exists -- though we can hope that outrage will grow as more and more such facts come to light.

Solving the problem, however, won't be easy. Americans and their elected leaders have grown used to discussing college "affordability" as a matter of distributing ever more government aid -- in the form of tax breaks, direct assistance or subsidized loans.

Actually, this is self-defeating: By making it possible for students to pay higher tuition, federal and state aid reduces institutions' incentive to make the hard budgetary choices that might hold tuition down in the first place.

Management got so loosey-goosey at Minnesota, the Journal reports, that the school had no idea of such basic facts as how many employees report to each supervisor.

In other words, the ultimate beneficiaries of all those government tuition subsidies are the highly paid administrators and faculty members whose hiring, and retention, it enables.

Of course, I wouldn't deny that the growth of administrative payroll served educational purposes. In fact, I readily concede that the schools could identify all sorts of benefits.

Minnesota's president, Eric Kaler, told the Journal his school's doubling of "directors" at the Office of Equity and Diversity helped make the campus "more inclusive and more welcoming to people of different backgrounds."

What I would deny is that Minnesota or any other institution can readily quantify such benefits. In higher education, the tuition dollars are hard, but the product is, by its nature, soft.

When you plunk down $30,000 for a car, you know pretty much what you got, or at least what you were supposed to get. But a bachelor's degree in psychology is a rather more intangible investment.

That is the nature of education, to be sure. In their purest form, market concepts of cost-effectiveness don't neatly apply to what universities do, for reasons well explained by economist William Baumol of New York University's Stern School of Business.

Like medical care or the performing arts, Baumol says, education is one of those "industries" whose "output" defies precise measurement and whose production processes are hard to automate and standardize. It's a hands-on endeavor, with lots of human interaction, so there's a limit to how much labor you can save.

Still, that doesn't mean you can't save a lot of money through the intelligent application of technology. Already universities are offering lectures online, and that is only the beginning.

The higher-ed establishment has no cause for complacency in an era when YouTube routinely teaches young people everything from dance moves to Spanish, for free.

Surely this generation will question, radically, the traditional calculus that tells them it's a good career move to borrow and spend tens of thousands of dollars so that they can have their intelligence ratified by a bunch of Ph.Ds who aren't even on Instagram.

In the meantime, government should condition more of its support for higher-ed on actual cost-cutting by institutions. The days of pouring government money into the existing business model, no strings attached, need to end.

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