The effects of the deepening global financial crisis and economic recession are now spreading and ravaging all sectors including higher education. In the United States, more than two dozen states have announced funding cuts to their universities, rich private universities are watching with mounting trepidation their huge endowments melt, and student funding streams are drying up as student-loan companies fold or tighten credit, parents can no longer tap into their evaporating home equity, and universities' financial aid portfolios dwindle, all happening at the same time as more people seek to wait out the crisis by returning to college. On my own campus and in my college faculty searches have been suspended, budget cuts are being made, and layoffs are expected.
These are grim times indeed for university administrators and faculty as they seek to confront these challenges as effectively as possible without compromising their core missions of providing and promoting excellence in teaching, research, and service. Moments of crisis offer both dangers and opportunities, in this case the danger of wittingly or unwittingly dismantling intellectual and institutional assets built over decades and the opportunity to reform higher education, to free it from some of the more negative clutches of the last three decades of neo-liberal restructuring. During this period higher education has been characterized by what I have called in more detailed studies on global transformations in higher education the seven Cs: corporatization of management, collectivization of access, commercialization of learning, commodification of knowledge, computerization of education, connectivity of institutions, and corrosion of academic freedom.
The first refers to the adoption of business models for the organization and administration of higher education institutions, the second to growing massification of higher education, the third to increased privatization of universities, the fourth to the rising production, sponsorship, and dissemination of research by commercial enterprises and for-profit institutions and the application of proprietary norms to knowledge production, the fifth to the incorporation of new information technologies into the knowledge activities of teaching, research and publication, the sixth to the expansion of inter-institutional and transnational cooperation and coordination, and the final to the erosion of institutional and individual autonomy to pursue knowledge production without undue external pressure and prejudice.
These trends are not new of course, nor have they all been harmful. Neither are they all products of the imperatives of neo-liberal globalization. Some reflect powerful shifts in demographic and social forces, or even subterranean movements in the epistemic and organizational architecture of knowledge producing institutions antedating neo-liberalism. In fact, many of the changes over the last three decades have been beneficial and brought new previously excluded groups of faculty and students to campuses, introduced productive processes of learning and research, and pluralized the sites and practices of knowledge production, circulation and consumption. But they have often been combined in new ways that have tended to undermine the role of higher education institutions as important centers of knowledge production for social progress turning them into glorified vocational schools or entrepreneurial outfits in which intellectual inquiry is eclipsed by the instrumentalist drive for private profit.
Above all, higher education increasingly ceased to be perceived as a public good deserving of adequate state support as the welfare state in the global North and the developmentalist state in the global South were dismantled with the ascendancy and hegemony of free-market fundamentalism. This is the opportunity the present crisis offers, to rethink the university as a public good, to roll back the excesses of the ideology of privatization, which has made higher education an increasingly unaffordable privilege, as I wrote last year on this site on the occasion of my two children's graduation from college (The Class of 2007: The Rising Costs of Middle Class Certification, May 29, 2007).
The following commentaries capture some of the immediate effects of the current crisis in the United States, the country with the largest, richest, and most diversified higher education system in the world. These are difficulties that many universities in the global South especially Africa are only too familiar with where they have been under almost permanent crisis for the past three decades and where administrators and academics have devised varied coping strategies, some more successful than others. PT Zeleza, Editor, The Zeleza Post.
As Credit Crisis Chills Campuses, Worries Mount By Robin Wilson et al.
When the stock market plunged 778 points last week, losing almost 9 percent of its value in one day, higher education responded in an uncharacteristic way: It began to buckle.
Colleges have often considered themselves recession-proof. But last week's events compounded an already difficult year for many institutions, which have suffered from declining state support, tightening credit, and losses on endowment earnings. As a result, the financial meltdown - with its promise of a prolonged economic downturn - prompted some institutions to take radical steps and wreaked havoc on the way colleges do business.
Boston University's president announced he would freeze hiring and stop all building projects that had not already been approved. Gov. Bill Ritter of Colorado tabled all taxpayer-supported construction, stalling several campus building projects. And Wachovia bank froze the accounts of nearly 1,000 colleges, leaving those institutions unable to access billions of dollars they depend on for salaries, campus construction, and debt payments. Some colleges are concerned they may not be able to make payroll.
Even as Wall Street rebounded a bit from its historic loss, campus leaders told The Chronicle they were considering other responses to the crisis: Public institutions talked about increasing tuition as other revenue falls, while private colleges said they would dip into their endowments to increase student aid and counter a growing scarcity of private student loans. Campus leaders discussed offering classes in the evenings and on weekends to maximize campus efficiency. And they said they would consider hiring more adjunct instructors instead of tenure-track faculty members and look for ways to improve cash flow by borrowing money from auxiliary operations like stadiums and bookstores.
"Every downturn has its own unique features," said David W. Breneman, a professor and director of the program in public policy at the University of Virginia. "But this is a financial meltdown the likes of which we really haven't seen since the Great Depression."
What also seems clear, though, is that the national economic crisis will not affect higher education evenly. There will be winners and losers.
Well-off private universities with large endowments - and public universities in energy-rich states with strong balance sheets - are on the plus side. They will weather the financial turmoil and may even improve their standing, poaching faculty members from universities that are struggling and using their stability to attract donors who do have money to give. But small, less-selective private institutions that are dependent on tuition, as well as public universities in states where the financial outlook is already grim, can expect to suffer. Some may even be forced to shut their doors. State legislators and education leaders in Michigan, for example, have already discussed the possibility - however remote - of closing a campus within the public higher-education system.
But one longtime university leader warned against overreactions and retrenchment. "In times of economic distress, you have to be very prudent. But you also have to start reinvesting," said E. Gordon Gee, president of Ohio State University. "The mistake of any university leader would be to hunker down. You invest in turbulent times. I never view it as an opportunity, but we need to take advantage of as much as we can."
Feast During Famine
In higher education, large-scale downturns in the economy have not necessarily been bad for business. When people can't find jobs, they enroll in college. Some officials - particularly those at community colleges and low-priced four-year institutions - expect that to happen this time as well. "Downturns are really good for colleges in terms of the supply of people into education," said Claudia Goldin, a professor of economics at Harvard University.
But any enrollment boost the current crisis may bring will likely be overshadowed by the financial pain and belt-tightening it will cause.
If past recessions, like the one in the early 1990s, are any guide, colleges will cut discretionary spending and stop investing in their staff and infrastructure. "Campuses became dog-eared," John Nelson, an analyst with Moody's Investors Service, said of the last recession. But they limped along until the economy improved. "Colleges are amazingly resilient," he said.
Still, some circumstances of the current downturn are different from those of the past. For one, institutions are carrying more debt. Most colleges devote around 5 percent of their budgets to debt service today, compared with around 3 percent 20 years ago, Mr. Nelson said. Debt service is an inflexible cost, not a place where colleges can tighten up. "If the recession is a long and severe one, we would definitely expect the results to be different this time," he said.
Another big problem: Banks have basically stopped lending money, or started charging much higher interest rates to colleges willing to take out loans. For the many institutions with variable-rate debt, which has fluctuated wildly this year, that has taken a far bigger chunk out of their budgets than they had planned.
Many colleges are also short on cash, said Dean W. Currie, vice president for business and finance at the California Institute of Technology. Whereas large research universities used to invest their endowments in stocks and bonds with a steady interest payout, institutions like Caltech have found they can earn more by investing in less-liquid assets like small start-up companies. But the payout on IPO's can take years. "That creates a cash problem," said Mr. Currie.
It isn't clear yet how the financial crunch will effect personnel, although, like Boston University, some institutions told The Chronicle they would leave unfilled faculty and staff positions open.
Kirk Beyer, president of the board of directors of the College and University Professional Association for Human Resources, said colleges tend to prefer to lose positions across the board through attrition. But buyouts and layoffs are likely to be among the options if budgets continue to tighten, he said. The University of Memphis last week announced a voluntary buyout plan for 115 positions, including administrators, professors, and staff members, that will save the institution $1.5-million.
Some more-well-off campuses will undoubtedly consider this a time to raid professors from institutions that are struggling. "Harvard could clean up in bad times," said Ms. Goldin, the economist there. But even deans at Harvard "get scared" in a bad economy, she said, so it isn't clear that will happen.
Endowment Effects
The health of college balance sheets is closely determined by the vitality of their endowments, which could suffer as earnings and giving drop. Ann E. Kaplan, director of the Council for Aid to Education's Voluntary Support of Education Survey, which tracks private giving to colleges, said donations typically slow down in a recession or stock-market drop, but recover quickly.
Edith H. Falk, CEO of Campbell & Co., a fund-raising consulting group, said she expects well-established fund-raising operations that have been around longer to do better. Colleges with smaller, newer programs may struggle.
The impact on fund raising varies in different parts of the country: Institutions in places such as New York, where the housing market has been hammered and the financial crisis has hit closest to home, are feeling the effects of the down economy more than those in Dallas or Houston, which have been more insulated because of record oil profits.
Some institutions already are changing their plans, based on the economic troubles. The University of Colorado had been gearing up to start a fund-raising campaign but might now delay it, said Ken McConnellogue, a spokesman for the Colorado system.
Westminster College in Missouri was also preparing a fund-raising campaign to double its endowment, starting this year. "We may push that off a year because we think that our donors are so nervous about their own money," said Wayne Lowen, vice president for business and finance.
Like other campuses, Westminster had already suffered a decline in its endowment earnings even before last week's market fall.
Westminster's 10-year model had predicted solid returns on its $55-million endowment. But the college changed its forecast to 0 percent in the last year and ended up making .5 percent. Now the college's board has asked Mr. Lowen to figure out how Westminster would fare if its endowment actually lost money.
At Winona State University, in Minnesota, which has undertaken its first-ever capital campaign of $10-million, donors are being affected in different ways. Last week, at the groundbreaking for Winona State's new wellness center, Merchants Bank announced a $500,000 gift to the college, the largest in the bank's history. At the same time, James Schmidt, vice president for university advancement, said one of the university's most loyal alumni, a man in his 80s, has told the college he won't be able to give as much as he would like. The man held more than $750,000 in Wachovia stock and has now lost a significant amount of money on those holdings.
"It just about made him sick to tell us that," said Mr. Schmidt.
But some people will make money in this market, and fortunate universities may benefit from that. Consultants say some wealthy donors may actually increase their gifts. And fund raisers expect that loyal donors will continue to give, but that it may take longer for them to fulfill their pledges.
Squeezing the Middle Class
Donors are not the only ones whose financial situations are now uncertain. Economic instability is also making it more difficult for families to afford college. That, combined with the shrinking availability of loans and the prospect that the economic downturn may lead to increases in tuition next year, may push some students out of the equation.
"Low-income kids counted themselves out of higher ed long before the economy tanked," said Sara Y. Goldrick-Rab, an assistant professor of educational policy studies and sociology at the University of Wisconsin at Madison, who is surveying 3,000 Pell Grant recipients in the state. "How will this affect their expectations? Will starting and finishing college be an affordable possibility with a real payoff?"
At Fordham University, 150 students who had private loans last year don't this year, says Peter A. Stace, vice president for enrollment. If students' financial situations change drastically over the course of the academic year, colleges can adjust their aid forms. A student already on the bubble might become eligible for a federal Pell Grant or for more grant money.
Fordham also keeps a pool of institutional aid set aside for students who fill out forms late or have major changes in their financial situations. This year it has a fund of several hundred thousand dollars.
Vassar College already has had to dip into a contingency fund and into endowment earnings because it is spending $1-million more on student aid than it had planned.
The increase results from a combination of things. This year Vassar moved to "need blind" admissions, and more students overall qualified for aid than the college predicted, including upperclassmen whose families were hit by the failing economy. For example, one student's parents owned seven large rental properties which provided the bulk of the family's income. But the family suffered foreclosures on all the properties and is selling its own home. Vassar awarded the student a $40,000 scholarship in addition to federal aid.
Building next year's class may also present challenges for colleges. In a tight economy, families are likely to focus more on affordability and less on finding just the right college for a student academically, socially, and culturally.
Students will probably apply to more colleges and shop around for the best financial-aid package, said Robert A. Sevier, senior vice president for strategy at Stamats Inc., which advises colleges on marketing. As a result, colleges may see their yield, the percent of accepted students who enroll, go down and become even harder to predict.
Private colleges may also simply lose students to more-affordable twoand four-year public institutions. Enrollment at Tidewater Community College, in Norfolk, Va., is already up this fall, to about 26,750 students, continuing a trend of steady growth.
Deborah M. DiCroce, the college's president, believes the current economic situation will bring even more students to Tidewater. She expects to see not only adults who are out of work or need new skills, but also recent high-school graduates who decide that studying for two years at a community college makes more financial sense than going straight to a more-expensive university. At $1,523 for a 15-hour semester, Ms. DiCroce said, Tidewater costs about a third of what the state's four-year colleges do on average.
Campus officials are hoping for the best - a quick turnaround - but preparing for the worst. The crisis will force them to make tough choices: Should they reduce payouts to protect their endowments or increase them at a time when students are sure to need more help? And if they have less to invest in people, programs, and buildings, which should come first?
"At a time like this, you have to make trade-offs and do some things, but not others," says Catherine B. Hill, Vassar's president. "For us, the big question is are these financial changes cyclical, or are they permanent?"
This article was reported by Elyse Ashburn, Scott Carlson, Audrey Williams June, Eric Kelderman, Kathryn Masterson, Beckie Supiano, and Robin Wilson, and written by Ms. Wilson.
WINNERS AND LOSERS IN THE SHAKE-UP
The nation's economic turmoil could have a big impact on higher education, leading to different outcomes among institutions and states. Chronicle reporters and editors analyze the possible repercussions.
WINNERS
- Colleges with big endowments, low debt, and strong name brands
- Community colleges, affordable public colleges that can handle the demand, and distance-education programs
- Institutions with deep pockets that can expand programs, poach faculty members, or buy up stocks on the cheap
- Colleges that focus on doing a few things well rather than being everything to everyone
- Institutions with diverse donor pools or donors who can make money in this market
- Big energy-producing states - Alaska, Colorado, Texas, Wyoming - that are benefiting from the high price of coal, oil, and natural gas
LOSERS
- Middle-class families
- Colleges that rely on donor money for student aid
- High-priced, tuition-dependent private colleges
- Colleges that are behind schedule on projects and maintenance
- Fund-raising programs heavily dependent on Wall Street
From The Chronicle of Higher Education October 10, 2008
Tough Times Put The Squeeze On Colleges By Larry Gordon
Schools could be hard-pressed to meet demands during the financial crisis, but many say they will give grants higher priority than new buildings and more faculty.
With family investments and house values battered by the financial crisis, colleges and universities in California and around the nation are seeing an increase in students seeking financial aid and are bracing for even more.
At the same time, higher education's ability to meet that extra need is in question because the value of many college endowments has dropped as well, experts say.
"It's putting more demands on the system when the system can least afford the new demands economically," said Phil Day, president of the National Assn. of Student Financial Aid Administrators. "It's going to be tight.
Nationwide, applications for financial aid jumped 16% this fall compared to last year, said Day, a former chancellor of the City College of San Francisco. And that figure probably will rise again in the spring and next fall if Wall Street does not bounce back from its recent losses, he said.
Some schools may need to cut back on other spending to fund extra scholarships, Day predicted. "What's more important than making sure the students have access?" he asked.
Whittier College, Stanford University, Santa Clara University and many University of California campuses are among schools that have recently seen additional students asking for extra aid, officials said. They and others are expecting even more if the economy worsens.
"Like every individual American and every corporation, colleges are concerned about what is happening in the economy. We are well aware it might affect our enrollments," said Lisa Meyer, Whittier's vice president for enrollment.
Meyer said her office is increasing grants and boosting staffing to help students find loans if their families' college savings accounts have been hit by Wall Street losses or if they can no longer borrow against their homes.
But she said that Whittier, which enrolls about 1,300 students, cannot afford to meet all of the new need with grants. "There are fiscal realities we have to live within," she said. Whittier's relatively modest endowment was about $80 million on June 30, and officials there and at many other schools are awaiting figures on their portfolios' current, presumably lower, values.
Stanford University, which enrolls about 15,000 undergraduate and graduate students, had a $17-billion endowment on June 30. That allowed Stanford this year to expand its undergraduate financial aid to offer free tuition to most students from families earning less than $100,000 a year. It joined a small number of affluent schools giving such breaks to students from middle- and lower-income families.
In recent weeks, Stanford also has seen a hike in requests for additional help and anticipates more appeals when tuition bills are sent out for the winter quarter, said Karen Cooper, director of financial aid. "Some families are being impacted by the economy. We have examples of parents who have been laid off, small-business owners facing difficulties. All that is going on," she said.
John Etchemendy, Stanford's provost, said any decline in the university's endowment would not alter the new aid plan. "Earlier this year, we made the largest financial aid increase in our history because we knew that lower- and middle-income families were already facing serious financial pressures," Etchemendy said in a statement.
Before taking steps to reduce financial aid, schools will probably first postpone new construction and stop hiring faculty, several experts said. Boston University, for example, has announced a construction and hiring freeze, and other schools may follow suit if the situation does not improve.
"Is everybody worried about return on endowments with the market down so heavily? And are we worried that philanthropic giving will be diminished? Sure," said Molly Broad, the president of the American Council on Education, the research and lobbying organization for higher education.
But she said: "Financial aid is the last place I could imagine they would cut back."
In recent years, universities with significant endowments have faced pressure from Congress to spend more of the investment returns on scholarships or risk jeopardizing their tax-exempt status.
Another concern this fall is that some financially stressed families may push current high school seniors to apply only to community colleges, which cost less than four-year public or private schools.
"We are sure that's going on," said Nancy Coolidge, the University of California's systemwide coordinator of student financial support. In response, she said, UC would work hard to encourage students to apply for both admission and financial aid, and she predicted that many would be pleasantly surprised to learn how much aid was available.
Several experts said steps taken by Congress this year to bolster the student loan market had succeeded in most cases in providing financing. Families that previously tapped home equity lines of credit are turning in higher numbers to federally backed student or parent loans, schools report. Some concerns persist about loan availability next year if the banking system remains unstable.
Santa Clara University in Northern California has had a small increase in students seeking extra financial aid, but no one is in jeopardy of dropping out because of money worries, officials said.
If the financial crisis continues into next year and layoffs rise, requests for aid will probably increase, and the university will try its best to accommodate the need, said Richard Toomey, associate vice provost for enrollment management.
Santa Clara, which had a $697-million endowment in June, is among many schools using formulas that average their endowment returns over three years.
That "evens out the hits and misses," Toomey said, and allows schools to maintain financial aid and other programs in bad years.
In Claremont, Pomona College had, as of June 30, $1.79 billion in its endowment, a very large amount for a school that enrolls 1,520 students.
Karen Sisson, Pomona's vice president and treasurer, said that a dip in the endowment's value would not lead the college to reduce aid. Pomona this year replaced student loans with grants.
"One of the blessings we have with our endowment is we do have the capacity to weather the storm," she said.
At Northeastern University in Boston, about 10% more students than last year have asked for additional midyear aid, according to Anthony Erwin, financial aid director.
His office also is fielding calls from parents asking "what if" questions about whether reduced investment values could make them eligible for more aid. So far, the university has been able to meet all legitimate needs.
"I think all of us in higher education are watching the financial markets and how families are going to react," said Ronne Turner, Northeastern's dean of admission.
If the crisis had begun two months earlier, some colleges might have lost freshman enrollment, said Sarah Flanagan, vice president for policy development at the National Assn. of Independent Colleges and Universities.
For now, she has not heard such stories, but "there is a lot of nervousness out there," she said.
From The Los Angeles Times October 19, 2008
Lacking Enough State Support By Angelo Armenti Jr.
The global economic crisis promises to aggravate the already troubled financial situations of public universities across the country. My institution, California University of Pennsylvania, is among those that have had to cope with fiscal challenges for a long time. Having watched the decline in public financial support over the 16 years since I arrived as president, in 1992, I can state without fear of contradiction that we are being privatized without a plan.
Indeed, if the trend in appropriations over the past 25 years continues - and it will now probably worsen significantly - zero percent of our budgets will come from our state government. Much sooner than later, we will become, de facto, private institutions.
My university is one of the 14 "state-owned" universities and former state teachers colleges that make up the Pennsylvania State System of Higher Education. In 2008, Pennsylvania State University, one of four "state-related" universities - which, while not state-owned and -operated, have the characteristics of public institutions and receive significant state appropriations - received 22 percent of its budget for education and general expenses from the state. We and the other state-owned universities received about 37 percent, similar to what Penn State received 13 years earlier. An extrapolation of the data shows that Penn State can expect its budget share to fall to zero by 2033 - just 25 years from now. Similarly, we can expect to see our budget share from state support drop to zero in 2041, only eight years later.
While that extrapolation focused on the percentage of educational and general budgets supported by the state, an analysis of the actual purchasing power of the appropriated dollars, taking inflation into account, confirms a significant decline over the past 25 years. In terms of constant 2007 dollars, state appropriations fell by 16.5 percent. When coupled with a 35-percent increase in full-time enrollments, that led to a 30-percent drop in inflation-adjusted appropriation dollars per student during that time.
The decline in the share of our budget that comes from state support has occurred independently of the political affiliation of the governor or the majority in control of the House or Senate in Pennsylvania over the past several decades. It has proceeded under both Democrats and Republicans.
An explanation of the nonpartisan nature of the decline may be seen in America's rapidly changing demographics. In the 1950s and 60s, the majority of households in America included at least one person 18 years of age or younger - that is, someone who could benefit directly from public higher education; today only one of three households includes someone 18 or younger. It would seem logical that support of public colleges and universities might become less of a priority as soon as elected officials of both parties realized that the majority of voting households could no longer benefit directly from public higher education and cared more about health care and crime.
Thus presidents in our state system of public institutions must act schizophrenically. Like private-university presidents, they must raise revenue from private sources. Simultaneously, like the leaders of public institutions that they are, they must operate under onerous government regulations and employ archaic business practices that are no longer relevant in today's environment. Twenty-five years ago, most public-university presidents did not need to be concerned with private fund raising. Today virtually all do. Back then the procurement of needed goods and services at public universities was complicated, bureaucratic, and slow. Today it still is.
For example, current state regulations require that any purchase in excess of $10,000 (one-hundredth of 1 percent of our university's $100-million educational and general budget) be handled through a lengthy competitive-bidding process. Similarly, the hiring regulations that apply to our 800-member staff require searches typically lasting three to six months.
The most onerous regulations, however, follow from the lack of independent counsel for the Pennsylvania State System of Higher Education. (The general counsel to the governor appoints the legal counsel for the system.) That lack has resulted in conservative interpretations of various applicable laws and, more specifically, in the key legal opinion that tuition received from the personal checkbooks of students and parents must be regarded as "state dollars," thereby limiting the uses to which those funds can be put - so the state system itself, for example, offers no need-based scholarships for low-income students.
Since my institution and other public universities in the system are operating at the same percentage of state financial support today that Penn State, a state-related university, did just 13 years ago, one can logically ask, "At what level of state support does a 'state-owned' university become 'state-related' in terms of a release from those state regulations from which state-related universities are currently exempt?"
The state should work with the Pennsylvania State System of Higher Education to develop a multiyear plan for converting, in an orderly fashion, those state universities into private institutions, rather than allowing the current unplanned disinvestment in public higher education - privatization without a plan - to continue as it has for many years.
Universities like ours, created by and subject to law as well as a plethora of other policy directives, confront many obstacles to excellence. As we become increasingly privatized over the next 20 or 30 years, those of us in public institutions must work with state policy makers to develop a new operating paradigm that will enable us to preserve our mission - providing high-quality education at the lowest possible cost to students - even as our state support continues to erode.
The only stable paradigm that I can see emerging is what I would call "privatization with a plan." I doubt that we will see a reversal of the downward trend in public support for public higher education, although we may see a leveling off at around 10 percent. For that reason, it is important that we focus on trying to remove, as part of the "plan," the restrictions that keep us from operating as well as we could as eventually private institutions.
What we have witnessed in the past 25 years is simply democracy at work - majority rule in a time of shifting demographics. It's just unfortunate that the majority of voting households have different priorities than those of us who continue to believe in the crucial importance of public higher education to the future of our country. We can only hope that, before we reach zero state support, restrictions will be lifted, giving us the flexibility that we desperately need.
Angelo Armenti Jr. is president of California University of Pennsylvania.
From The Chronicle of Higher Education October 31, 2008
Public Universities at Risk: 7 Damaging Myths By Christopher Newfield
The presidential election has generated new proposals for reinvestment in America's basic social infrastructure: roads and bridges, health care, job training and employment, renewable energy, and education. Barack Obama's campaign has called for a "National Infrastructure Reinvestment Bank," which has growing Congressional support, and last January mayors and governors from both major parties formed a coalition to start the rebuilding process.
The current financial crisis will undoubtedly cause short-term public budget cuts as government officials figure out how to pay a staggering bailout bill. But in the long run, it will reduce many leaders' confidence in market forces and encourage greater interest in public investments in the economy. People will be increasingly reluctant to let financial markets determine their standard of living.
Yet even though higher education is an important source of economic and social progress, public investment is not keeping up with increased enrollments or the costs of high-quality teaching and research - and the future doesn't look any brighter. According to the State Higher Education Executive Officers, state investment per public-university student was at a 25-year low in 2005, and the gains of the last two years are likely to be wiped out by today's weak economy. The presidential candidates offer only modest proposals for supporting public higher education when they say anything at all, and in most states, public universities are focused largely on minimizing another round of financial cuts.
Why is public education the poor pupil of public investment? Part of the explanation is political: A quarter-century of culture wars has undermined the egalitarian values and tax-based public infrastructure that made America a mass middle-class society after World War II. Since 1980, stratification by income has steadily worsened, and higher education has been caught in an ideological crossfire between traditional supporters and conservative elites who want to set that broad middle-class majority back. It is easy to blame the sponsors of the culture wars in particular, and the country's political leadership in general, for turning the public away from an inclusive social vision and the public institutions that make such visions real.
But after spending nearly a decade serving on and leading faculty committees for planning and budgets, participating in countless budget discussions, and working on two large-scale budget reports, I've concluded that the fault lies not only with the usual suspects but also with ourselves. Many public-university administrators are incapable of convincing political and business leaders of the need for financial support because they are no longer fully convinced themselves. They have systematically, if unintentionally, deprived themselves of their best arguments and have adopted a series of myths about public investment:
Myth 1: The public hates taxes now more than in the past. The claim here is that voters in the "golden age" of the 1950s and 1960s were happy to pay taxes, and that allowed higher-education leaders to do great things. In reality, railing against taxes is a timeless American tradition. The creators of the "Master Plan for Higher Education in California" in 1960 fretted in print that the public would never pay for it. To make matters worse, in 1959 - at the start of the first term of the state's governor, Edmund (Pat) Brown - the economy had fallen into recession and the state budget deficit amounted to 20 percent of the total budget. Yet California higher education grew because Governor Brown restructured the tax system, raised the top income-tax rate from 6 percent to 7 percent, and pushed high-quality higher education as part of a package of infrastructural development that would serve the entire population. That led to the most important expansion in public-higher-education history.
Myth 2: The public rejects tax-based support for higher education. Some college leaders accept politicians' self-serving claim that an anti-taxation majority wants a "user fee" approach in which students use their own money to pay for an education that is for their own benefit. The idea is that the public sees college as a private good to be supported by private funds, with the addition of some grants and loans to help low-income students.
But in fact, voters say in surveys that the main problem with higher education is not that it is too public but that it is too expensive. A 2005 survey by the University of California suggested that high cost was starting to outrank high quality as the dominant image of the university in the public's mind. The National Center for Public Policy and Higher Education has found similar concerns. In 2008, 62 percent of the people it surveyed thought that many qualified students do not have the opportunity to go to college. We can infer that voters with some relation to college education will oppose privatization when it is defined honestly as colleges making ever-greater use of families' private funds. Voters have tolerated the shift from public to private financing because political and educational leaders have told them to - not because they have an ideological commitment to privatization.
Myth 3: Privatization of public higher education has been happening for years and is an established practice. In fact, data cited to demonstrate the irrelevance of state support are misleading, because they include many valuable university activities that have little to do with core education. When our faculty budget group broke down the University of California's budget by removing all noncampus revenues (national laboratories, medical centers, auxiliary enterprises, contracts and grants assigned to individual faculty laboratories) and isolated the money actually available for campus operations, we found that the university relied on the state for 60 percent of its core operating budget as recently as 2001. That means the instructional activities that people associate with college remain far more dependent on state money than people are told. In addition, public research universities get most of their remaining "nonstate" support from federal agencies. Privatization means leveraging public money for donor-designated purposes, not giving private capital for general purposes like undergraduate instruction.
Myth 4: State cuts have no effect on educational quality or student outcomes. The cuts themselves are insufficiently appreciated. Consider just two dismal metrics: An Urban Institute study showed that higher education's share of state appropriations nationwide fell from 6.7 percent to 4.5 percent in the last quarter of the 20th century, and a University of California report found that state support for each student has fallen about 40 percent in real dollars since 1990.
Qualitative evidence of deterioration in educational conditions is easily found by talking to faculty and staff members. Our budget group heard more stories of decline than we could print: plumbing leaks that damaged lab equipment after years of nonrepair, the absence of graduate fellowships for students with special financial conditions, among many others. Rather than making little difference, public cuts reduce institutional quality - and, in turn, affordability, access, and attainment.
Myth 5: Revenues from industry can replace lost public money. At our university, we ran the numbers on a particularly strong research operation: Faculty members have doubled the contracts-and-grants income in real dollars since 1990. But even when gross revenues increase, net revenues to university operations are generally negative because research money goes to individual professors and labs to perform specific research. The supplemental overhead monies that are supposed to cover the "facilities and administration" costs of research actually fall short of covering full costs. The figures vary, but universities can easily lose 3 cents to 5 cents on the dollar from federal grants.
Industry sponsors and nonprofit foundations pay even lower overhead rates than the federal government. The result, according to an unpublished study by the University of California Senate, is that the university needs 60 cents to support every dollar of external research but nets only half of that. Extramural research is a vital social good that must be supported, and at higher than current levels. But it should be treated as a legitimate expense, not as a revenue stream.
Myth 6: Privatization won't hurt public universities because revenues from philanthropy can replace public support. Philanthropy can and does pay for many wonderful projects, but almost none of it goes to support university operations. Over all, 80 percent of public-university endowments are restricted to donor-specified undertakings. At the University of California, that figure ranges between 95 percent and 98 percent. Our budget group calculated that to replace the $1.1-billion in public money lost between 2001 and 2004, the university would have to raise $25-billion in new, unrestricted gifts.
Myth 7: Cutting higher-education support is a national trend that cannot be stopped. That belief is a self-fulfilling prophecy because leaders inside and outside higher education keep saying it's true - even though attitudes toward taxes aren't worse today than 50 years ago, the public doesn't want high fees, reduced state support has hurt educational quality, and industry and wealthy donors can't replace public money. The myth is also self-serving because it supports a convergence of interests among politicians who don't want to say taxes are good, university leaders who don't want to offend politicians or sponsors, and a public that has been trained to want more for less.
This is a quiet tragedy of major proportions. The broad prosperity and social advancement of post-World War II America depended on superb public universities. They created and spread wealth and justice by combining top quality with mass access, bringing advanced skills to a wider and more diverse majority of the population than ever before. Are we now going to let that kind of quality gradually retreat to the Ivy League-style private institutions that teach at most 5 percent of all college students? If we do, the country will lose most of the broad social gains it has made over the past 60 years.
Avoiding this decline will require new levels of honesty about the real costs of leading-edge higher education and new financial models that start from truth in budgeting. There is no alternative to educational leaders telling the simple truth to their counterparts in politics and business: Public cuts in financial support have hurt public universities, their students, and their research. Those cuts now must be reversed and investment in higher education renewed.
Christopher Newfield is a professor of English at the University of California at Santa Barbara and author of Unmaking the Public University: The Forty-Year Assault on the Middle Class (Harvard University Press, 2008).
From The Chronicle of Higher Education October 31, 2008
Higher Education: Special Interest or National Asset? By David J. Skorton
The deepening financial crisis that is now affecting markets and people around the globe gives new context to what our nation is facing. Americans cannot think of business as usual in any sector of public or private life, including higher education. President-elect Barack Obama will have very little financial latitude and enormous immediate problems, beginning with the wars in Iraq and Afghanistan, a troubled health-care system, and the complex economic conundrum.
It is time to strengthen and clarify the role that we at colleges and universities can play in this unsettling environment. The nation is at an unprecedented moment, one that higher education can seize as an opportunity to become a more crucial determinant of the direction taken by the United States. Higher education has not been on the national agenda except insofar as we are viewed as less and less affordable, and to some extent less relevant to a broad range of challenges. In effect, policy makers and the public view us as an elective at a time when more, not less, knowledge and preparation are needed to overcome our national difficulties. That must change.
Foremost, our national leaders must reinforce the public sector's part in the "three-legged stool" business model that has made American higher education so successful. Those three sources of support are from students and their families, the university itself, and state and federal governments. Unfortunately and undeniably, the public-sector support has declined relative to need. For example, the value of Pell Grants has not kept pace with inflationary increases in the cost of education, and federal student aid has gravitated from grants to loans.
The inability or unwillingness of the public sector to carry its weight is creating enormous challenges at a time when demand for higher education has never been greater, and when the issue of affordability is paramount. The next administration must set policy parameters to preserve its stake in the "education compact" that has served the country so well, and in the long run ensure that higher education can play its relevant part in sustaining the national interest.
Higher education must also change. The political process, at a time of reduced flexibility in discretionary federal spending, has made colleges and higher-education associations appear to be just so many special-interest groups, rather than enterprises oriented toward helping the country solve its most pressing challenges. We approach Washington and our state capitals with a grab bag of requests. At times we seem more intent on protecting our own flanks than on dealing with issues that are relevant to society.
What specifically can and should we do to regain our credibility and help solve the difficult and complex problems now facing our country?
First, at a time of fiscal dislocation, there is nothing more compelling than leading by example. Those of us who work at colleges and universities can all learn from the significant streamlining that has been done at other higher-education institutions, particularly public universities. We all must work to aggressively and systematically reduce costs to gain savings, even if relatively marginal, and use those savings to slow the rate of tuition increases. For our students and their families, every dollar counts.
Second, the enormous potential of higher education to examine problems dispassionately and thoroughly must be deployed to inform the policy debate on the thorniest issues. We must cease abdicating our policy role to think tanks and once again become the nation's intellectual bully pulpits, debating the best ways to solve real-world problems - health-care delivery and renewable energy, to name only two - as an extrapolation of our missions of research and outreach. We can support the rise in student volunteerism in our local communities and nationally. We can focus more directly on our role in public culture by maintaining and even enhancing our efforts in the arts and the humanities.
Third, we must become better citizens locally and regionally and a force for economic development in our states. We need to help our states think about better ways to fulfill their obligations to their people even as public resources diminish. Our community colleges, already very valuable, can, with appropriate government support, become even more nimble and effective in responding to local needs for work-force retraining. Our four-year colleges and universities can also collaborate more aggressively with local companies to develop internships and summer-job opportunities that can pay off in highly skilled additions to the regional work force a few years down the road. Our land-grant universities have extension components that could be linked more closely to regional economic development. Our research universities can contribute even more in the area of technology transfer and the promotion of business incubators and start-ups.
Robust collaborations between higher education and the business community in every locale must be potent forces for economic development. Many of our institutions are already successfully pursuing such activities, but national models and best practices must be developed. The times require that we redouble our efforts.
Fourth, American higher-education institutions also have the duty to think internationally and set up the programs that ensure a sufficient work force for the new global economy and a ready flow of research leading to innovation. Our main industries of growth know no national boundaries. With the information and idea sharing that the Internet makes possible, we in higher education, too, must disregard those boundaries. We can accomplish basic research and innovation - and their application in pharmaceutical development, agriculture, and numerous other areas - as easily on the other side of the globe as down the hall. We must work with counterparts and partners overseas to build capacity so that all boats may rise. In short, our nation's well-being depends in part on the success of the global economy. That, in turn, depends on the availability of a sophisticated work force far larger than can be trained only in colleges and universities on American soil.
Fifth, in difficult economic times, colleges may be tempted to balance budgets on the backs of people. But we need to lead with humanity and attention to all employees in not only good times but also challenging ones. Faculty members are the heart of our institutions, and we must vigorously defend the tenure system as well as offer adequate salaries and start-up packages. Further, at most colleges and universities, the majority of employees are not in the faculty ranks yet are just as important, only in a different way. We should help ensure their financial welfare as much as possible. We must be employers that lead the way to show that American organizations should protect our human resources even, or especially, in a time of financial duress.
Finally, we need to explain ourselves more clearly and plainly to the American people, who struggle to pay our tuition. As the price of higher education continues to escalate, students and families are finding it harder to gauge what they think they will get out of a college degree. One of the great strengths of American higher education is the great variety of institutions it embraces. Yet we have not done as good a job as we should to articulate the distinguishing features of different colleges and universities and the types of students that each kind of institution can best serve. We have made a strong case that a college degree will improve one's career options, but we have forgotten to explain, in light of our distinctive missions, what we impart during the years of study. That explanation must clearly indicate the overarching importance of a liberal education and the place of the arts, humanities, and social sciences in developing educated citizens. It's time to reconnect.
At Cornell University, we claim no monopoly on good ideas, but we will use our resources to maintain a tight focus on access to higher education and faculty-initiated research, scholarship, and creative activity throughout the disciplines, and to act as an employer of choice - following progressive human-resource practices, while recognizing that financial realities require doing so in a creative way.
I call on my fellow leaders in higher education - in community colleges, liberal-arts institutions, and research universities - to come together to make higher education more relevant on the national and international agenda. Through our presidents' associations, we need to share among ourselves the many innovations that individual colleges and universities have developed. Working with political and business leaders throughout the country and abroad, we must begin to act not as just another special interest but as an asset: a steppingstone to send forth generations into a world where the ability to apply knowledge makes all the difference.
If there was ever a time for higher education to be front and center in solving societal problems - including those related to economic diversification and development - that time is now.
David J. Skorton is president of Cornell University.
From The Chronicle of Higher Education November 21, 2008
Harvard Fears Big Cuts After $8bn Fund Slump By Suzanne Goldenberg
The global economic crisis has breached America's ivory towers, with Harvard University yesterday considering steep cuts to make up for an $8bn fall in its endowment fund.
The plunge in Harvard's financial reserves - 22% in just four months - has brought a jolt of grim economic reality to the richest US university. It is especially striking given the past performance of Harvard's investments. The university's endowment fund stood at $36.9bn last June, after 20% growth in 2007.
The immediate future promises even further retrenchment, the university's president, Drew Gilpin Faust, wrote in a letter to deans. She said Harvard was braced for as much as a 30% fall in its endowment fund's value by June 2009. "We need to plan with a clear-eyed view of the reality that confronts us," she said.
"The prospect of significant endowment losses has major implications for our budgets and planning, especially since our other principal revenue streams also stand to be challenged by the crisis."
Some sections of Harvard rely on the endowment fund for more than 50% of operating expenses. The letter said the university would work with departments to cut spending, and might scale back or put on hold a long planned expansion.
The news comes as universities across the US are forced to make cuts or delay development plans because of shrinking endowments and reductions in state funding. Stanford University, whose endowment fund was valued at $17bn earlier this year, announced its own cost-cutting programmes on Tuesday.
Stanford which has the third-biggest endowment fund after Harvard and Yale, said its president and provost had volunteered to cut their salaries by 10%. Its president earns more than $700,000 a year. It also told departments to submit plans for budget cuts of up to 15% over the next two years. Other elite institutions, such as Brown and Cornell, have imposed a freeze on staff recruitment.
State universities also face difficult financial choices. Last month, California's state universities, the largest US public network of colleges, said it would reduce its student body by 10,000 next year because of a drop in funding.
Private universities have already been forced to acknowledge that falling home values and share portfolios could put an Ivy League education out of reach for even more people. Harvard, Princeton and other top universities, where tuition and lodging typically cost $45,000 a year, earlier this year began offering places for free, or at steep discounts.
The rising costs of college were becoming unsustainable for most Americans even before the current recession, a report form the National Centre for Public Policy and Higher Education said yesterday. The cost of a college education rose by 439% in the last 25 years, while median household incomes rose by 147%, it said.
News reports have talked about families lowering their ambitions for their children from private to state universities and community colleges, and from four-year degree courses to two-year programmes.
The downturn has also fed resentment about the lifestyle of leaders of private universities, who command large salaries and often get free housing.
From The Guardian December 4, 2008
Soaring College Costs: Public and Private Perspectives By Liz Robbins
The cost of a college education is soaring to another layer of the stratosphere, on its way to being unreachable for most students. Not exactly shocking news, which came out of this week's report "Measuring Up 2008," issued by the National Center for Public Policy and Higher Education.
The biennial report said that other nations were providing better access to education, which could diminish the competitive advantage of students from the United States.
This is a distressing issue for Americans living in the recession, considering that Tamar Lewin's article on the report generated more than 500 comments yesterday.
From 1982 to 2007, costs of fees and tuition rose by 439 percent, while the median family income has increased only 147 percent in that time. The net cost for one student to attend a four-year public university for a year amounted to 28 percent of the median family income, while a four-year private university cost 76 percent of the median family income.
As private and public institutions are grappling with how to cut costs, some university presidents, representatives of the public-versus-private debate, discussed the value of the education they offer, even if it has not risen by 439 percent since 1982:
George Washington University in Washington, D.C., used to regularly lead the nation in total annual costs to students, until Sarah Lawrence College in Yonkers, N.Y., overtook it this year by setting each incoming freshman back $53,166 a year. At George Washington the tab is now $50,357 per year, including tuition, room and board and fees.
Since Steven Knapp became president of George Washington in August 2007, he has, among other initiatives, introduced fixed tuition for up to five years, and quadrupled the school's fund-raising goal for financial aid. The university sent a letter to students informing them of a reserve fund available in case their parents' financial situations had changed.
What's the best recruiting pitch for students to work out a way to pay $50,000 per year?
"We're a university with an extraordinary location," he said, explaining that the campus is just four blocks from White House, near the World Bank, at the intersection of a new presidential administration and an economic crisis. "Students who want to understand that, who want to be part of addressing those problems, are attracted to this kind of institution. We have a very strong tradition of public service."
Bill Gates, the co-founder of Microsoft, was speaking on campus Wednesday, urging among other things that lawmakers and the Obama administration take a more active role in financing education initiatives.
Early-decision applications at George Washington are running 15 percent higher than usual, Kathryn Napper, the executive dean of admissions, told The Lede, and total applications are up about 19 percent, with five weeks to go before the Jan. 10 deadline.
"We're all surprised, because of the economy," Ms. Napper said. "But from what I understand, most private schools are up, so it is a trend. Perhaps some people are hedging their bet, that early decision might be a good way to go." That line of thinking seems to be widespread.
Lou Anna K. Simon, the president of Michigan State, oversees a university in a state especially hard-hit economically. Her duty, she said, is to adhere to the institution's founding philosophy, established in the 1880's: "Good enough for the proudest, open to the poorest."
Since 1990, when the annual cost of an education there was $7,567, the university has admitted 5,000 more students a year, she said, "to meet the demand," but adding to the cost. The annual tab for Michigan-resident student now runs to $20,456, including tuition, room, board and fees.
Ms. Simon said in an interview that tuition "is not the only way to understand the cost of education." She cited special services like the continuous meal service included in housing costs, or the residential-college experience offered in the university's honors college. But as she tries to raise funds privately to support financial aid programs, and set aside $500,000 for the university's Adverse Economic Circumstances Fund to help students whose parents might have lost their incomes recently, Ms. Simon said she is frustrated with what she said was disinvestment in public education.
"There hasn't been a 439 percent rise in value because states have made the decision that higher education is more of a private good than good," she said.
Jim Boyle, the president of College Parents of America, an advocacy group for parents of prospective college students, said that the universities' plight was not unlike those of the automakers testifying on Capitol Hill today.
"There are some analogies with automakers and higher education," Mr. Boyle said in a phone interview from his Virginia office, adding that he was originally from Detroit himself. "People are turning to other markets for cars. Iimagine where universities would be if students go to the University of Tokyo." (Some American students are already doing just that, looking abroad for a less costly education, as The Times reported last week.)
Mr. Boyle added: "Plus, the Big Three are saddled with the cost of labor, just like universities, because of the way they treated tenured and paid professors. They are very much stuck in ways of doing things."
How, then, to reverse, or even just stop the alarming trend in college affordability?
"Since the vast majority of students go to public schools, it really becomes 50 different conversations, between state legislatures, governing bodies, and schools, how much the cost of college should be," Mr. Boyle said. "Given all the pressure on state budgets, it's been an issue. The universities need to do a better job of promoting the importance of higher education in order to keep the price down to their constituents."
And, he said, universities must also show legislators how they will cut costs, much the way the chancellor of the University System of Maryland, William E. Kirwan, did recently in order to receive state aid.
"It's gotten to the point where public education is no longer realistic for students to work their way through college," Mr. Boyle said, "particularly at flagship universities, which charge the most, because they can."
So how, then, at the nation's most expensive institution of higher education, does Sarah Lawrence contain costs and yet justify these same costs? Karen Lawrence, the president of Sarah Lawrence, cited the student-faculty ratio (which is 6 to 1) and the "unparalleled" contact.
"Almost all of our classes are conducted as seminars, with fewer than 15 students, and each student meets individually with the faculty member for each class every other week to discuss an independent project initiated by the student," Ms. Lawrence wrote in an e-mail message. "In addition, every first year student meets with his or her faculty ‘don'" or advisor weekly to help chart his or her academic program. Students' relationships with their dons continue throughout all four years of college."
From The New York Times December 4, 2008
