I wonder if the heads of the various state departments of transportation ever get together and question the efficacy of their "business model"? Or do they just take what they're given from the state legislatures, and do what they can with it, and if some roads just don't get re-paved during a recession, well, that's the decision of the taxpayers?

"Our business model is broken" does not mean "give us more money," as mbelvadi implies. It means "We have to change." The driver for this view is not only a shortage of funds, but also a commitment from public institutions (and others) to ramp up services in order to graduate more students and provide the nation with the educated citizens we require for a healthy future. It recognizes that even post-recession, adequate funding will not be available. I watched the debate. Kirwan and Mellow had the data and the will to advocate a new tack, contrary to our industry's standard "give us more money," in which higher education faces the brutal facts and deals with them constructively. They made a compelling case.

The business model is completely broken. It is obvious. To survive into the 21st century academia needs to move forward and start to realize that it needs to become part of a new global economy. there must be an integration of appropriate e-commerce along with the traditional methods of revenue generation. tuition, endowments and fundraising simply won't be enough it must move towrdas capturing the true potential of the maketplace. This is a new, new economy and it must be utilized to its fullest potential.

I am amused and confused to references about American higher education's alleged "business model." First, I ask, WHICH business model? General Motors of the 21st Century? Apple Computers of the lat 20th century? Both -- and many other variations -- are "business models" with vastly different essentials and results. Most state university presidential appeals for federal help remind me of higher education's version of "cash for clunkers." Check out the Delta Group study on public research universities and see the growing amount and percentage of state and tuition dollars that go for non-instructional costs. At my university, some administrators make salaries of over $450K, a few more than $700K. Tough times, eh?

The business model has led to the two-tiered faculty, under which faculty on a tenure line can earn over twice as much faculty who aren't for teaching different sections of the exact same course, with worse discrepancies yet in job security, benefits, and professional advancement. The business model justification is: "Sure, it's unfair and bad for education, but if we can find teachers who will cover a course for $2000, no insurance, and no security beyond the semester, what sane businessperson would offer more?" Such teachers are now teaching half the undergraduate courses in America, and they're 70% of all faculty.

This is good for nothing but the bottom line; it's good for no one but the guardians of it and, sometimes, the 30% of faculty who can go on sabbaticals while their courses are covered by contingents. The fact that this is even a debate indicates who's won it. "The Value of Higher Education's Business Model" is for business, not education.

In addition to the business model, we also need to re-evaluate the education model. The Halle Institute at Emory University discussed this issue at their Knowledge Futures forum: http://bit.ly/knowledge-futures

A recurrent theme was open education and the disruptive nature of social networks.

Anyone (like hoppingmadjunct) who thinks public universities are in it to make money or pay high admin salaries (and have a business plan to accomplish that) is woefully uninformed. The precarious financial situation at many of our institutions is real, and doing the job is the goal. And anyone who'd like to be paid a faculty salary to do an admin job should just step right up, while our adminstrators can take similar jobs paying several times as much in the private sector. The model is indeed broken, but the useful alternative is unclear.

For those who wish to base their arguments on facts.

Average Annual per-Student Tuition:
Public: $7,000
Independent: $26,000
For-profit: $14,000

Average Annual per-Student Taxpayer Taxpayer Cost:
Public: $9,500+
Independent: $7,500
For-profit: ($500) taxpayer gets a check

Novel idea: If students are choosing for-profits over publics, which they are in large numbers, perhaps the publics might consider entering the 21st century to offer the programs students want at the times and places they want them, and with good supporting services.

Intered, I am curious if your figures for the for-profit institutions include taxpayer-funded federal aid and loan programs? The default rates rate on student loans at for-profit programs are pretty consistently about twice as high as those for graduates of publics and 3-4X that of independents. Seems like a pretty significant taxpayer investment that ought to be included in your figures, if it isn't.

Brit nails it on athletics spending.

Why indeed can't the NBA and NFL (and MLB and NHL and other pro leagues for that matter) subsidize what amounts to their minor league system?

aaronj,

Default rates by institutional type are included in the model. They should be parsed more finely, as I will support below, but the data are not there to support the analysis.

As you probably know, virtually all of the controllable variance in default rates is accounted for by the socio-economic status of the loan recipient. Institutional type is trivial when you control the variables scientifically. The feds have been provided this intelligence more than once and by impartial sources. They have chosen to remain silent on the topic, one can assume, because it does not support their biases. You would have to know the personalities of the actual players to fully appreciate this. They are a long way from being fully rational.

Default rates for those portions of the for-profits that serve working adults are the lowest in the industry (e.g., classical UOP, Capella, Argosy programs -- unfortunately, all have become less discriminating in their inputs the past few years and thus the rates are sneaking up). Default rates for career colleges and community colleges that serve the underclass are the highest in the industry. When a community college or career college serves working adults (e.g., with programs targeted at a specific industry), the default rates plummet again. By the way, public universities have high default rates as well when they launch programs to serve the underclass.

For this latter market sector, whether educated by community colleges or career colleges, I have argued that the complete economic picture (taxpayer, community, individual) is more complex and not accurately portrayed by the feds in their public posture. We have not attempted to build a complete model but it seems that an empirical case might be made for all three stakeholders in just this common typical case: An unemployed downstream partial welfare recipient (i.e., child of lower income family) is taken off the public roles and becomes an employed taxpaying member of the lower middle class, even if he fails to pay back all of his student loan. If you look inside career colleges, these are their students. No one else wants them.

I'm not suggesting that students walk away from their loans. I am suggesting that the economic picture is much more complex and favorable to the career colleges than the feds want to paint it (community colleges as well but they are not the object of the feds focus). I see a lot of ignorance and disinformation right now. The feds, specifically DoED, are responsible for raising empirically unfounded public ire about this student loan issue. Among other things, we believe they seeded national Op Eds on the topic.

My view, impartial I believe, is that all three institutional types suffer shortcomings that need to be addressed. Of the three, however (and here is where I get into trouble because we love to love our state universities -- I graduated two myself), the most expensive (all-in costs), wasteful, and least productive are the publics. Insulated from market forces as they have largely been, they have changed very little in the past 75 years, except to produce fewer credits and degrees per dollar.

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"...argued that higher-education finance is indeed fractured..."

I misunderstood the title of the article. I thought it was going to be about the business models used at each higher education institution. On that subject, I have a lot to comment about. I'm writing a book entitled "No Business in School."

However, this panel was discussing the state funding strategies for each of the various types of instituions for higher education within their state. In NJ, higher education funding as a percentage of total state budget, has not changed drastically over 30 years:

1989 6.1%
1999 8.3%
2009 7.4%

Intered, Do you have the change in support in each category for the last 30 years? That would be interesting.

Average Annual per-Student Taxpayer Taxpayer Cost:
Public: $9,500+
Independent: $7,500
For-profit: ($500) taxpayer gets a check

jthelin has it right! When these academic "leaders" get together, it is like a group of stoners contemplating their own navels! The Whitewaters of Change (as Peter Vaill) would say, are the rapids that the schools are currently trying to negotiate, and some of the schools don't even know they have left the placid, predictable, and forecastable model of the reflective pond that has served them during the twentieth century!

Unfortunately, most American colleges and universities, from community colleges through the Ivies, have created monstrous and bloated bureaucracy where no one is held accountable, as General Motors operated during the twentieth century. For years universities prime focus was on gaining research revenue from primarily the Federal Government. Students have always been treated as a necessary evil at those schools and received mediocre teachers with flashy degrees, or most likely, graduate assistants. The noted scholar, Jose Arguelles, recognized the terrible out of balance in our culture to techne, or the masculine - engineering, hard sciences, weapons development and medical infrastructure servants. We have diminished the arts, the feminine, and the intuitive. That is another problem that schools and social evaluators don't seem to recognize.

Costs are constantly increasing for higher education more that any index of cost of living and inflation. The answers are going to be found in taking a hard look at what our global society is becoming, recognize the benefits of collaboration between schools and within schools, eliminating the embarrassing and childish behavior between faculty and departments, and developing a way to focus on education, using technology and face to face methodologies for knowledge development. Also the schools need to eliminate redundant and superfluous functions, and focus on their students, not on "research" exclusively. Our private industry could pony up some funding for research, too.

University administrators better beware of the Shadow - not the radio one, their own collective ones!