The cost of goods, services, pay, and benefits in higher education rose 2.3 percent for the year ending June 30—a figure that is nearly a percentage point higher than the Consumer Price Index for the same period but less than half the 5-percent rate that colleges experienced in the 2008 fiscal year.
The Commonfund Institute, which calculates the annual Higher Education Price Index figure and released it on Wednesday, said administrative salaries and fringe-benefit costs showed the biggest increases.
Administrative salaries rose by 5.4 percent, up from 5 percent a year earlier; fringe-benefit costs went up by 3.6 percent, down from 5.5 percent in the previous year.
Salaries for faculty members rose by 3.4 percent, down from the previous year's rate of 4.1 percent.
The index also takes into account changes in clerical salaries, service employees' salaries, and the cost of supplies and materials, and of utilities. Although the supplies and utilities costs are not weighted as heavily in calculating the index as are such factors as faculty and clerical salaries, the Commonfund Institute said the chief cause for the decline in the index in 2009 was the slowing rates of inflation for supplies, materials, and utilities.
For the first time. the Commonfund Institute also provided an estimate of the Higher Education Price Index by region, using regional faculty-salary and fringe-benefit information, which accounts for nearly half the weighting in the calculation formula. (The institute did not factor in any region-specific information for any of the other factors.) Of the regions, New England had the highest rate, 3.4 percent, while the East South Central and the South Atlantic regions, with rates of 2 percent, had the lowest.
In calculating the index this year, the institute used data from sources entirely aligned with the July-to-June fiscal year. In the past, some of the data were drawn from sources that report on the calendar year, and so the information was sometimes out of date. As part of the change, the institute has also gone back and recalculated the index for the years since 2002. This explains why the rate of 5 percent it now ascribes to the 2008 annual index differs from the rate it announced in July 2008.
Comments
1. 11211250 - September 09, 2009 at 11:22 am
One reason for increasing administrative costs is the ever increasing administrative burdens placed on universities. One big example are the unfunded mandates from the feds and their unwillingness to fully reimburse universities for the added administrative costs associated with compliance. These include enforcing export control regulations, tracking of hazardous chemicals in labs, increased accounting measures, costly paperwork of verifying time and effort of faculty on grants, conflict of interest regulations, increased paperwork for human subjects research, and on and on. These are important things, but costly and the additional costs fall on the backs of institutions.
2. deliberate - September 09, 2009 at 04:16 pm
The outrageous and unjustified salaries of administrators and the addition of layers of administration are the main reasons. Universities mirror society in increasing economic inequality.
This increasing inequality is the cause of the current economic troubles
3. _perplexed_ - September 09, 2009 at 04:30 pm
Sadly, much of the cost of complying with the regulations noted by 11211250 arises not from actual compliance, but from documenting that compliance. Avoiding conflict of interest is now insufficient-- institutions must document that such conflict of interest has been avoided; and that requires hiring staff and administration.
4. 11232037 - September 09, 2009 at 04:59 pm
Perhaps I'm being too much of an engineer, but I really had to check on what the data said, especially given the headline, "Administrative Salaries Drive Rise..." According to the HEPI regression index, the eight major factors (faculty salaries, admin salaries, service salaries, etc.) included in the regression equation represent something over 99.99% of the variance in the data. Excellent. Since we are always talking about dollars, I can believe that the coefficients for each of the factors are standardized or otherwise equivalent. And when I look there...
The regression (beta) coefficient for faculty salaries is .3537; the coefficient for administrative salaries is .1043. In other words, even though faculty salary increases may be smaller, the effect of the amount spent on faculty salaries is *three times* the effect of the amount spent on administrative salaries. (see for detail: http://www.commonfund.org/Templates/Generic/RESOURCE_REQUEST/target.pdf?RES_GUID=B33D695A-6AE6-4017-A589-F21999043EBB)
Why am I commenting? I'm currently faculty, but even if I became administration tomorrow, I don't stop having a faculty appointment. More importantly, my reading of the data suggests that the headline is factually incorrect. It's easy to get upset at administrator salaries (if you aren't an administrator), but if there is a small number of administrators and a large number of faculty, the majority of money spent isn't on administrators, and you cannot say that administrator salaries is *THE REASON* for overall expense increases. Here's a (slightly exaggerated) example:
Let's say people in a state buy 1 million cars, and the price of cars goes up 2% on a $20,000 price tag. That's 1 million times $400, or $400 million in extra spending. Let's say 10 rich persons in that same state spend 15% more on million dollar order bases of champagne (demand is up, so the price has skyrocketed). That's 10 times $150,000, or $1.5 million in extra spending. Even though the rate of increase is much more, and the increased cost per item is much more, we cannot say that the price of champagne is driving consumer spending in that state.
Again, my reading of the regression statistics is that the faculty salary effect is three times the administrator salary effect. If I've misread the regression statistics, then ignore me or flame me until I'm crispy. Otherwise, can we try interpreting what the data actually show?
-BC
5. lotsoquestions - September 10, 2009 at 10:44 am
BC: I would argue that it's meaningless to talk about how much of a percentage change in higher ed costs can be attributed to the RAISES which adminsitrators got when then real problem is that we have too many administrators overall. Maybe ed costs don't go up that much when you give each administrator a raise, but overall a very high percentage of the ed costs in general are attributed to the need to pay all those administrators.
I've done some detective work in my school and it seems that every year my administrator hires between five and ten times more administrators than faculty. Every year my classes get larger, fewer classes are offered and students have a harder time getting the classes they want. I have never seen the number of courses offered go up though the number of students regularly does. Each time the number of students goes up, we get more administrators to administer the students (whatever that is) but we don't get more faculty to teach the students. That's the real problem. It appears that for every fifty new students we get a new student life staffer but we only seem to get new faculty when the old ones leave. ARe we simply looking at the wrong numbers?
6. ken_d - September 10, 2009 at 12:45 pm
11211250 and _perplexed_ , an article recently published by the National Council of University Research Administrators confirms your suggestion that Federal research work does not cover its full administrative costs, ( see http://www.ncura.edu/content/news/rmr/docs/v16n2_F&AIssues_Sedwick.pdf )
Given this fact, one might ask why universities go after this work in the first place, knowing it will require internal cross-subsidies from their other endeavors. Presumably this is because they still few the marginal revenues from the Federal work as greater than the marginal costs.