• Monday, May 28, 2012

Previous

Next

The Decline of American Public Universities

April 12, 2011, 6:03 pm

For some time, I have felt that there has been the beginning of a decline in American public universities. It is not a sharp obvious decline, but more of a slow genteel one, much like the decline of the British Empire in the first half of the 20th century.

Many indicators are revealing: First, four-year public universities’ share of enrollment is starting to decline as a proportion of total higher-education enrollments. Also, public universities’ per-student funding is declining relative to that at not-for-profit private institutions. Applications are soaring at elite private institutions, but rising far less robustly, if at all, at most public institutions.

The latest AAUP salary data confirm this trend with respect to faculty compensation. At doctoral-level universities, average pay runs 22 to 33 percent higher (depending on rank) at the private institutions relative to public  ones—this was certainly not true when I began teaching two score and six years ago. At least 10 private liberal-arts colleges pay their full professors more than $129,000 a year on average—more than most public universities with large graduate programs. On a personal note: I was once offered an endowed full professorship at Claremont McKenna College, which now pays full professors an average of over $145,000, compared with less than $101,000 at Ohio University, where I stayed and from which I recently fully retired. Perhaps I should have heeded Horace Greeley’s 19th-century advice to “go west, young man, go west.”

In the past three years, far more faculty jobs have been added at private institutions than public ones, if the AAUP data are to be believed (and they have a good reputation for accuracy). None of the top 40 institutions in the Forbes student-centered college rankings is a traditional state university, and likewise the public schools are absent from the top institutions in the U.S. News & World Report rankings, an evaluation system that is more reputational and input-oriented in nature.

While several campuses of the University of California, the University of Michigan, and several other institutions still have sterling reputations for academic research and graduate education, it is clear that the public institutions are in relative decline, particularly with respect to undergraduate study. The two important questions are: Why? and What, if anything, should be done about it?

The conventional answer to the first question is that in recent years state governments have given higher education a lower priority in budget allocations than during the Golden Era of public universities in the first generation after World War II. An aging population and an abysmally costly and inefficient health-care system are leading to health-related costs crowding out other things in state budgets. The K-12 lobby on the whole is stronger than that for higher education as well, and increasingly people look at college as a private good that the generally fairly affluent students who dominate colleges should finance themselves. Soaring salaries for university presidents and other top officials in recent times has not helped the political climate for public institutions either.

That brings me to the unconventional part of the answer: I think federal student financial-aid programs on balance have hurt state universities. Student loans have allowed many middle-class students who would have attended the local state school to apply to more expensive private institutions, contributing to a relative decline in the prestige of state schools. The rise in federal aid has reduced the pressure on politicians to generously increase funding of state institutions, since kids can now borrow needed funds relatively cheaply. This has added to the perceived need by state schools to raise tuition rates, reducing somewhat the tuition premium associated with attending private schools. Also, some federal funding, notably Pell Grants, may have increased student attendance at college, but also tended to increase dropout rates and raise issues of the quality of students and academic programs.

Many state schools have lost their way, straying from the original mission laid out for them in the Morrill Act a century and a half ago and in other state legislation. Research aside, too much money goes to fund bloated bureaucracies and rather opulent country-club-like entertainment for students (rec centers, student-union buildings, subsidies for intercollegiate athletics).

Should we worry about all of this? I am not too concerned, because to me the issue is whether we adequately provide opportunities for well qualified students to attend some college, and it seems to be that is far more important than the type of institution attended. We are gradually breaking down the distinction between public and private institutions−most so-called private schools already indirectly get much government funding, and most public schools are increasingly reliant on private funding. So the distinctions are blurring and may fade in time. I suspect the time will come when state funds are disbursed more to students and less to schools anyhow, which would further destroy the increasingly artificial distinction between public and private institutions.

This entry was posted in Uncategorized. Bookmark the permalink.

  • Print
  • Comment
  • Guest

    This is an interesting article but I think it does not address the fundamental issues in why public universities are losing market share. Public universities are losing market share because they are grossly inefficient in recognizing and adapting to market changes. This situation plays into the hands of their competition and further contributes to their loss of market share and inability to control their own destiny.

    Financial Situation
    Average taxpayer costs for a public education are in excess of $11,000 per student per year, plus taxpayer opportunity costs associated to a variety of forgone taxation contexts. (Public universities pay no federal and state income taxes, no sales and use taxes, no property taxes, and no taxes on interest and capital gains on the sales of assets, leaving the opportunity shortfall to be picked up by taxpayers). Average tuition (not including rapidly inflating hidden fees and assessments including $200-900 conference athletic subsidies) is more than $7,500 per year. The total per student expenditure for a public university education is around $20,000 per year! Factor in graduation rates of 20-60% and the “average cost-per-degree” metric (which no one is required to measure) can easily exceed $100,000.

    How is it that public universities can be so costly and inefficient yet escape public scrutiny while millions of dollars in the form of lost business, inefficiency, and misdirected funds slips through their hands? It is difficult to see the disturbing waste in our state universities because there are no requirements to gather, manage, and report the information that illuminates the lack of effective enterprise management.

    At the management level, however, the absence of real-time and comprehensive performance metrics forces presidents to rely on charisma and the performance of sports teams to assure us that the university is running as well as can be expected.

    Leverage for Efficient Change
    Public universities are too massive and their structures are too culturally hidebound to transform themselves through incremental change. Leverage must be sought. The leverage created by a small number of organic changes in how public university presidents lead and manage their institutions would lead to efficiency increases amounting to millions of dollars of additional revenue for the typical institution. Quality—much of it being measured for the first time—will also improve. The institutions will become stronger, better, and less dependent on taxpayer support.

    We all stand to benefit if public universities become more proficient in directing and controlling their future. Here are a few of a dozen changes that will lead to increases in adaptability, efficiency, and quality, and will decrease reliance on external funding.

    - Become Metrics Rich
    In the rarified atmosphere of the public university, one sees behavior that simulates the management of unmeasured functions and their outcomes. To meet public goals efficiently, presidents must manage the revenue, costs, market share, enrollment, outcomes, and other measures for each of the hundreds of programs delivered. They must manage these metrics separately, and must adjudicate and balance them as a whole. Only public universities believe they can manage the unmeasured. The 1920’s information models currently in place, and the many technical systems that don’t talk to each other and won’t give up information without a fight, are incapable of guiding precision management.

    The first change, therefore, is to install a modern accounting, management information, and decision-support system. This system will produce richly detailed real-time information on each program and all functions internal to the university. It will also report on program growth trends, changes in market share, and other competitive threats and opportunities. Public university leaders will learn much from this comprehensive information system. The information will be shocking. Some will look for someone to blame. Others will get right to work. Change will take place. With the new metrics in hand, here are other changes that will follow and be guided by the continuous flow of meaningful intelligence.

    - Recapture Market Share
    Public university presidents stand idly by while for-profit and independent colleges take millions of dollars in revenue from under their noses. They enjoy complaining about or criticizing the competition, but they don’t do anything about it. The interlopers have no interest in programs that lose money. They want to secure the public’s high-volume, high-profit programs for themselves. The interlopers’ successes, and there are many of them, leave state universities with growing program costs, declining revenue to support important programs that tend to produce negative margins, and declining market share with which to control future markets. In terms of their own survival and ability to adapt, the publics are losing the worst possible programs to the competition and keeping the worst possible programs for themselves.

    In 15 years, for-profit universities have grown from 1% to 11% market share. They did so by offering services that exploit the inattentiveness and inferior programmatic and service responsiveness of public universities. If the tide is not stemmed, public universities will be left with lossy programs while outsiders enjoy the fruits of the profitable markets. Stemming the tide, even by half, will return hundreds of millions of high margin dollars to our public universities. This tide will not be easily stemmed. To compete effectively, presidents need information they can use to manage programs with precision, adjusting each program to meet the needs of the market.

    - Measure and Report by Program
    Students pursue a course of study in programs, not institutions. Their lives are affected by their relationship to that program. Universities, regional accrediting bodies, and the Department of Education think more in terms of institutions. What few metrics they take tend to represent the aggregate behavior of the institution and, of course, are reported three years after the fact, useless for purposes of leadership and management. It is not difficult to imagine a student who might enroll in a university, feeling good about its published graduation rate of 65% only to learn that the graduation rate of his program is 22% and the average time to degree is 5.7 years. Securing program-specific metrics in real time will permit university leaders and administrators to make intelligent decisions which, over time, will reverse the current decline.

    - Manage Time and Cost to Degree
    The time it takes to earn a 4-year baccalaureate is ballooning to 5 years or more because our public universities can’t deliver the courses needed when students need them to graduate on time. Our public universities teach supply chain management very well but they prove incapable of practicing it. More than 20% can be saved by creating systems and incentives to graduate students on time. Students save even more.

    Even though the core business of our universities is the production of credits and degrees to defined standards, public universities do not manage all-in degree costs. Unmanaged as they are, there is no way to provide presidents incentives for reducing them or achieving outside reductions in the rate of increase. This negligence is a leading reason why public university costs increase at two or three times the rate of inflation, even in good economic times. It is also a leading reason why prospective students choose for-profit and some independent colleges over state universities. Even though the for-profit’s tuition may be higher ($14,500 vs. $7,500 + hidden fees), the total cost to degree is substantially lower because they don’t have waiting lists or turn away qualified applicants and they have the ability to graduate people on time. The student cost of a one-year extension in time to graduation is roughly equivalent to the first year post-graduation salary plus the tuition and fees for the additional year, less any earnings that would have occurred anyway. Public universities don’t get this. Skillfully managing cost-per-degree with precision information would save the average public university several percent a year, leading to double-digit savings in five years.

    - Implement 3-Year Degrees
    Properly delivered, 3-year baccalaureates deliver higher quality at lower cost. Universities, here and in Europe, are realizing 23-28% savings from these popular programs. Students save even more because they secure higher paying jobs sooner. Properly delivered means that professors must stop teaching and evaluating learning out of the 1906 play-book. Too many among us teach and evaluate they way we were taught, appealing to methods whose roots lie in the teachings of Socrates and Dewey. None of us would be so tolerant if our personal physician or airline pilot expressed a comparable sentiment.

    - Reverse Growing Productivity Losses
    In most areas of the economy, the more you make, or do, or serve, the lower the unit cost. In public universities, the productivity curve is inverted. The more professors make, the less they teach and the more they receive independent compensation for research or from the private sector. I am not downplaying the importance of these activities. The research function is vital to our nation at many levels, and independent consultation increases the quality and depth of the connection between the university and the community. These activities are important and our public universities do them well. What I am suggesting is that a modern information system would account for these functions properly and permit the institution to better manage incentives for all important services, including teaching well.

    - Eliminate Unneeded Programs
    Expand Needed Programs. Cutting unneeded programs sounds like common sense but it seldom happens. Lacking precision information about the performance of each program, public university presidents have little choice but to follow their instincts and their instincts can be clouded by the lobbying of special interests. Public universities offer too many programs for which the need is no longer there, or for which there are no jobs or that take unnecessarily long times to complete. Even when these programs lose great amounts of money and lack evidence of demand in the market, the university lacks the metrics to form a clear picture and justify intelligent action until unnecessary revenue and opportunity have been lost. Given current and future budget constraints, the program decision matrix approaches zero sum. The failure to phase out an unneeded program is likely to mean that an emerging need for a new program will be met by a private university before the public university can respond.

    None of these changes will be implemented easily. They are possible, however, and the first step is implementing a modern information and decision-support system that provides the kind of metrics necessary for intelligent self-management and growth. Perhaps most important, as the market’s standard bearer for tuition increases, these changed public universities will be in a better financial position to exert downward pressure on the market’s increases.

    Robert W. Tucker

  • manoflamancha

    Private Universities gain “market share” by maintaining high standards, especially in admissions. RWT wants to have a more corporate form of public university, with lots of WSJ style “metrics” etc. Rubbish, I say! The State Universities are failing because they accept everybody, including the IQs<100. Governments, at the federal and state level, have nearly destroyed them by impossible mandates, and "Titles", which have degraded standards. Micro management of this mess, with all your bloody Wall Street "metrics", will not change a thing, except give us new problems, such as more "insider" trading and fake economics.

    RWT is obviously not of the academy, so where is his Used Car lot?

  • Guest

    I see many issues here, including the ones you raise. We do know a few things for certain: (a) public universities are losing market share, (b) they are losing it to independents and for-profits, more-or-less in proportion to their enrollments, and (c) they are losing the high-margin programs that have traditionally been relied upon to pay for the negative margin programs (e.g., the profits of public university business programs offset the loses of their graduate lab science programs); no independent or for-profit is stealing the graduate physics lab courses from the publics.

    When you combine these facts with the recent and probable future losses in state funding for publics, and the public’s sluggish change management mechanisms, I believe that some kind of disruptive innovation will be required to reverse the decline. If I am interpreting him correctly, Mr. Vedder isn’t excessively concerned. I am. However, not knowing exactly what that innovation should look like, it seems correct that we should begin by gathering more useful and accurate information, followed by a number of obvious changes that will be beneficial.

    As you have speculated, it seems that we are observing “slippage” along the entire K-16 education chain. While there are many ways to look at this “standards” issue, one way of looking at it is under-appreciated in my view. Higher education is no longer made up of the small cluster of niche markets of very smart and/or the very rich. It hasn’t been for some time, even though you can still see individuals acting as if it were on these pages. Higher education is now open to almost everyone, including those who didn’t make it out of high school on academic grounds. Some see this as a bad thing, the very essence of decline in civilization. Others see this great expansion in participation as a positive force, arguing that all education is good and some higher education is better than no higher education. My position is a little different. Whatever we may think of these changes, personally, it is a serious mistake to fail to recognize and accommodate them. The publics, in my view, have not adapted well and thus my original comments.

    Robert

  • Prof_truthteller

    Whoo-ey so nice to see someone has everything all figured out and has all the answers. I guess all college president need to do is hire an expensive consultant like yourself and implement all your recommendations. I wonder if you can point us to any college on your client list as an example.

  • Guest

    It is difficult to imagine how anyone could view these organic and, in my view, sea change issues as resolvable or even addressable through consultation. Aside from suggesting a few ideas that will improve the publics’ financial situation and stem outflow of students, I don’t presume to prescribe the direction of its growth; nor do I think consultants are needed to get there.

    As I hope I made clear,

    ” . . . the first step is implementing a modern information and decision-support system that provides the kind of metrics necessary for intelligent self-management and growth.”

    This vital first step will probability require five years to implement. Information is enlightening and empowering. At that point, my guess is that other needed changes will have become clear and well underway with broad support from constituents.

    I recognize that some of my colleagues would prefer to see higher education remain faithful to its antiquated guild structure with the attendant information and decision silos that served us reasonably well through the 1960′s. I may be wrong but I think this desire is shortsighted. Public higher education is already at risk for losing the ability to direct its future.

    I welcome any constructive suggestions you may have.

    Robert

  • nugatory

    I can relate to this. Our university has at least a dozen databases. None of them talk to each other. We stick our finger in the wind when we try to determine which programs are meeting real needs, which will we need more of three years from now, and which we should be winding down in five years. In the broadest of ways, we know which programs have positive revenue and which are negative, perhaps the highest and lowest 25%. We don’t have a clue about the middle 50%. A few years ago, we began implementing standards for advancing new program ideas but is hasn’t gone very far. Most departments lack the expertise to determine future needs with any degree of accuracy.

  • Prof_truthteller

    RWT, I guess in a text-only exchange you couldn’t see my sly smile. To be more plain, I am wary and skeptical of anyone who seems to have all the problems and their solutions all figured out.

    Many of your recommendations require implementation by college presidents and their administrators, however, in my career as an academic, of the several hundreds of chancellors, vice chancellors, presidents, vice presidents, deans, directors, managers, and who knows what-all importantly titled persons, I have met maybe five or six who would even know what the hell you were talking about, let alone have clue how to implement them. Thus my snarky comment about consultants. Our last college president needed to hire a consultant to figure out how to meet accreditation, and even so, managed to botch that process.

    I am not one to defend ‘antiquated’ methods. However we can’t discard methods or ideas just because they are old. Socrates and Dewey, and I may add Darwin, Newton, Einstein, Sun Tsu, etc., are luminaries from whom we still have much to learn, and while their teachings have nothing to do with the technical aspects of modern air transportation or medical practice, humans are still humans and ideas of value never lose relevance, and continue to be a source of inspiration, improvements, and innovations.

    I agree with most of your recommendations regarding metrics, but I have two concerns that perhaps you have the answer to as well:

    One, data driven decision making processes, I believe, must somehow accommodate the qualitative data that is embodied in long term staff and faculty who have the “ground truth.” You can’t dismiss the knowledge gained over ten, fifteen, twenty plus years working with students and knowing the history of the institution. Respecting that knowledge, and incorporating it into the solution, will affect buy-in and thus the much-needed support of the people who will actually do the work of implementing any proposed changes.

    Two, this is all pretty expensive. Our modest public college can barely afford to keep one full time institutional researcher, who is 150% occupied generating and maintaining data for mandated reports such as program review, regional, and programmatic accreditation, progress reporting for grants, etc. Our IT department as well is stripped down to the bone, and some programming languages are not supported because no staff knows them and there’s no money for training them or hiring new staff who do know them.

    So, the final question, who’s going to do the work? And, how will the college pay for it? Our budget is a public document, I’ve reviewed it, there’s no excess or wiggle room. We are seriously looking at layoffs. The patient is dying from loss of blood, and you are recommending aerobics exercise and strength training?

  • Guest

    prof_truthteller, These are big issues, big questions, and big solutions, to be sure. It sounds like we both understand that no more than icons can be expressed in this forum. With that in mind, a few thoughts:

    > “I am not one to defend ‘antiquated’ methods. However we can’t discard methods or ideas just because they are old.”
    - Agreed. One of my dissertations (at a public university) created an axiology from the latter WIttgenstein’s work. I’m not insensitive to rich ideas, irrespective of their age. What I’m talking about is the fact that too many professors go beyond failing to exploit what the various modern sciences have informed us with respect to teaching better, they actively resist such change, sometimes proudly. This needs to change. Embedding teaching skills into training designed to prepare one for college teaching would change that in short order, and with no obvious contribution to cost.

    >”One, data driven decision making processes . . . must . . . accommodate the qualitative data that is embodied in long term staff and faculty who have the “ground truth.” You can’t dismiss the knowledge . . .”
    - I couldn’t agree more. However, it is common to assume that advocating for metrics means advocating for simplistic metrics and dismissing the contextual ground that gives deep meaning to isolated facts. If you are familiar with the history of AI, you are aware of how easily the importance of “ground” can escape one’s attention. I have no such approach in mind. This said, you will acknowledge that the collective wisdom of the professoriate subsumes 9 of every two facts with equal certainty and equal indignance if this “wisdom” is ignored. Longitudinal metrics are required to sort these out (recall Pauling’s maxim). (As it turns out, I’m not making the 9:2 number up for illustrative purposes; this is the empirical collective track record of a few thousand faculty for successfully predicting needed programs 3-5 years hence. I probably don’t need to tell you that they are equally convinced that both the winners and losers are certain to succeed.)

    >”Two, this is all pretty expensive . . .”
    - We may disagree here except in noting that it is definitely not an IR or IT issue. Neither of those disciplines can offer top-level guidance here, although they will be needed to implement some of the decisions. This is a new function that I believe can pay for itself, even along the way. It’s risky for many reasons to try to get into specifics but do a little matchbook math on how much money your university could pick up if you were to drop a few of your least useful programs and spent just a little money reversing the loss of your high margin programs to the competition. At the typical public university, the number is in the millions of dollars.

    >”. . . in my career as an academic . . . I have met maybe five or six [leaders] who would even know what the hell you were talking about, let alone have clue how to implement them.”
    - I agree that this is more of a problem in the publics than the independents, where the typical president gets this and is working on implementing some portion of the changes at this moment. While I know quite a few more than 5 or 6 public presidents who do get this, I agree that the number is too low. They should all get it, get busy, and quit begging the legislatures for a hand out. I really don’t know why public university presidents are so out of touch in this way but I suspect that it has to do with the demands of their job, as currently defined, and how they got to be presidents in the first place. In my experience, there is typically one senior leader who does get it. It may be a CFO or a VP of Enrollment, or someone else. Usually, however, the engine of change is already in place.

    >”Our budget is a public document, I’ve reviewed it, there’s no excess or wiggle room. We are seriously looking at layoffs. The patient is dying from loss of blood, and you are recommending aerobics exercise and strength training?”
    - In some respects, this is the easiest part of the change process. The answer lies in grabbing the low hanging fruit. If you were to do “looked but didn’t enroll” telephone interview research (not mailed or web questionnaires) with students who then enrolled in a for-profit or independent operating in your market, you would learn what the competition is offering that you aren’t that is causing these students to pay more for their degrees. The current position of the publics is that these students must be stupid! They are not stupid and your university needs to understand — and deliver — on the value proposition that is driving enrollments (and millions of dollars) elsewhere. My research says that your students (collectively, I don’t know which school you represent) would prefer to attend a public university but end up enrolling somewhere else. Why? Because you drive them away in a variety of ways that have absolutely nothing to do with their empirical (not necessarily your definitional) ability to succeed. Figure that out and deliver for three programs and you have your seed money for change without even having to kill that hemorrhagic dinosaur in Department X. Just don’t blow the newfound cash on dorm renovation or the president’s swimming pool. Get an agreement up front that the newfound money is going to be used for organic change. Really! I can’t tell you how many times I’ve seen this step taken only to see the money stolen to support a dead-end, negative leverage pet project.

    Robert

  • 11144703

    ‘The Evolution of Selectivity’ and “holistic review” are euphemisms for avoiding TOO MANY ASIANS at the most selective campuses.