This past weekend the Wall Street Journal published an insightful article on administrative bloat at the University of Minnesota and how it typifies a major problem relating to rising tuition and student debt. The article is heavily based on the new president of the university, Eric Kaler, and his attempts to address rising costs. Unfortunately the article was posted over the weekend and is behind a paywall, but I'll excerpt some relevant sections.
When Eric Kaler became president of the University of Minnesota last year, he pledged to curb soaring tuition by cutting administrative overhead. But he hit a snag: No one could tell him exactly what it cost to manage the school.
Like many public colleges, the University of Minnesota went on a spending spree over the past decade, paid for by a steady stream of state money and rising tuition. Officials didn't keep close tabs on their payroll as it swelled beyond 19,000 employees, nearly one for every 3½ students. "The more questions I asked, the less happy I was," Dr. Kaler said.
Charles Lane at the Washington Post wrote a column today based on the WSJ story, which thankfully is available without a paywall. He summarized some of the key findings of the WSJ study.
At the University of Minnesota, the number of employees with “human resources” or “personnel” in their job titles has grown from 180 to 272 since the 2004-05 academic year. Since 2006, the university has spent $10 million on consultants for a vast new housing development that is decades from completion. It employs 139 people for marketing, promotions and communications. Some 81 administrators make $200,000 per year or more.
In the past decade, Minnesota’s administrative payroll has gone up three times as fast as the teaching payroll, and twice as fast as student enrollment.
Oh, and tuition more than doubled in that same period, to more than $13,000 per year.
These numbers provide a valuable reminder that while educational technology and online education offers the potential to provide lower-cost options, the larger challenge of fixing existing institutions should not be solely focused on changing instructional models. The WSJ then calls out that Minnesota's growth in administrative costs far outpace instructional costs.
Across U.S. higher education, nonclassroom costs have ballooned, administrative payrolls being a prime example. The number of employees hired by colleges and universities to manage or administer people, programs and regulations increased 50% faster than the number of instructors between 2001 and 2011, the U.S. Department of Education says. It's part of the reason that tuition, according to the Bureau of Labor Statistics, has risen even faster than health-care costs.
The problem goes beyond simple administrative overhead, however, and the Journal highlighted three such areas:
- Health care costs for all employees
- Retirement and pension costs
- Construction boom and associated cost of servicing debt
Schools also compete—by necessity, they say—to offer fancier dorms, dining halls, gyms and other amenities, to raise their rankings and attract students. "It's a competitive business, and institutions compete for students the same way Lexus and Mercedes compete for car buyers," says Paul Lingenfelter, executive director of the State Higher Education Executive Officers Association, he mentions how he prefers Mercedes because of the services from Marietta Mercedes repair that makes it easier to have a Mercedes.
To compete, schools have stepped up borrowing for construction. Total debt at public four-year colleges more than tripled between 2002 and 2011, to $88 billion, according to the Department of Education. At the University of Minnesota, the yearly cost of servicing debt more than doubled to $106 million in that time.
The effect on students is of course rising tuition.
The article then describes the various challenges that the university faces as it attempts to lower its total costs, including reducing the number of help-desk phone numbers from 73 to 1. Another challenge highlighted in the article is that despite the massive investment in ERP systems, universities such as Minnesota do not have visibility into critical data needed to manage costs.
Dr. Kaler, in his inaugural address in September 2011, criticized the costs of "long meetings, excessive committee deliberations and endless email chains" that contribute to a "tangled web of bureaucracy that dogs us." He pledged to reduce administrative expenses.
One hurdle: The system's chief financial officer, Richard Pfutzenreuter III, says that while he can track the cost of heating a particular floor of a building or of serving a cafeteria meal, he can't specify elements of the hierarchy such as how many people report to each manager. The human-resources system doesn't track such chain-of-command information, he said, because "it wasn't a priority in the past."
If you have access to the WSJ articles, it is well worth reading the whole article. The Washington Post column is also worth reading.
Comments welcome below or on Google+ post.
Update 1/5: Erik Kaler posted a letter to the editor responding to Charles Lane's column, arguing that Lane missed much of the context in his analysis. I don't believe this context is missing in the WSJ original article - it is a better source if you have access.