Assuming there are no other “drafting errors” in the Governor’s proposed budget for higher education, then the plan, if implemented, for a $300 million reduction in funding for the UW system, combined with a two year tuition freeze, has the following implications for the Madison campus of the University of Wisconsin.
From Chancellor Becky Blank’s February 5th presentation, after discussing how earlier cuts have been filled up to now by spending down reserves, she notes (slides 47, 48):
Some people might think it’s a fine idea to eliminate the Law School (unlike Dick the Butcher, not me, by the way). But I doubt that many of my fellow Wisconsinites think it would be a good idea to delete the Vet School, given the importance of agriculture in the state. CALS stands for College of Agriculture and Life Sciences; production of Vitamin D — a cure for rickets –, development of the means for mass production of penicillin, and the cure for pellagra, a once fatal disease, are all associated with units now encompassed by CALS. [1]
Slide 25 provides a comparison of salaries paid by UW Madison against other (state university) peer institutions; those institutions pay their full professors 43% higher on average than the University of Wisconsin at Madison.
The entire presentation is here.
The premise of these slides is that each unit within UW can only operate as they’ve done in the past. I find that a little dishonest.
Jeff: Public authority allows some flexibility, but as all sensible observers agree, the resulting savings will occur only after some time for adjustment. So…if I am a looking at a 2 year horizon, I don’t think this assessment is at all dishonest.
Jeff: Public authority allows some flexibility, but as all sensible observers agree, the resulting savings will occur only after some time for adjustment. So…if I am a looking at a 2 year horizon, I don’t think this assessment is at all dishonest. If you have an account that shows tens of millions of dollars of saving from public authority implementation within the next two years, I would welcome a link to that analysis, so we can dissect it, and assess its plausibility.
Nice glossy presentation but no indication of what % of costs are admin or what the admin cost growth rate has been.
A focus on cuts in the popular academic bits is good politics but how about some comparisons with WI university work force costs/overheads and those in the private sector? Is the university work force unionized? How do non-academic staff pension costs compare with the private sector?
Why not get an outside source like a good accounting firm or business school to look at the cost base? Comparisons with other universities are pretty meaningless – all have allowed steady cost inflation.
Why not be the first academic institution to tackle reality and get a grip on the future? The private sector did this 30-40 years ago. Wouldn’t it be fun to get a private equity firm to do this pro bono? Think of the delicious howling from the great and the good.
Tony Thomson aka cthomson: A powerpoint can be “glossy”?
thomson
“but no indication of what % of costs are admin or what the admin cost growth rate has been.”
i think you would find most academics also have this same question. administration costs and growth are a source of concern at many institutions of higher education. it is money being taken out of the classroom and into the executive suite. management costs most definitely should be contained.
“Comparisons with other universities are pretty meaningless – all have allowed steady cost inflation.”
a comparison with private rather than public institutions would be appropriate, no? comparison to different industries would not be appropriate.
Baffling, my impression is that private sector universities also have a high rate of cost inflation. Yale for example encouraged or allowed unionization of the catering and housekeeping functions for basically ideological reasons.
And what is so unique about many university activities? Comparisons with hotels and catering companies would seem logical for many university activities, for example.
An even more interesting exercise would be to unleash a well-known private sector cost cutter on the whole admin cost base on a pro-bono basis. Then publish the result and see what the alumni and the politicians make of it. My guess is that you could ream costs out of university admin without the academic side noticing any difference.
thomson,
“my impression is that private sector universities also have a high rate of cost inflation.”
you don’t like the public universities. i understand the ideology. but now you don’t like the private sector university business either? so you want to compare universities to another sector, like hospitality? nonsense. your bias is against higher education. period. by the way, many universities already outsource their food and cleaning services.
“Yale for example encouraged or allowed unionization of the catering and housekeeping functions for basically ideological reasons.”
just to be clear, you have a problem with the operations of a private entity?
private equity has administrative assistants. in comparison, i would imagine higher education administrative assistants are significantly underpaid. are you ok with using this as a basis?
Baffling, you confuse me. Since I graduated from Yale, Oxford and Stanford Biz, I don’t think I have a bias against higher education which served me well.
Many people of all sorts of political views consider the inflation in academic costs unsustainable. Typically organisations have difficulty in dealing internally with cost problems. Woods for the trees…
As to administrative assistants, what on earth is your point?
thomson
“As to administrative assistants, what on earth is your point?”
you want to compare university activities to those in the catering and housekeeping fields-notably so you could justify dropping the wages at the university as those hospitality wages tend to be rather low.
but administrative assistants are also at the university. why not compare these activities, or even managers, to those at private equity firms? you are deliberatively trying to make comparisons to lower wage industries. why not also compare to higher wage industries? unless you are looking for a particular result ahead of time. or are there no well run universities in this country?
“Many people of all sorts of political views consider the inflation in academic costs unsustainable. ”
and why exactly would i consider those outsiders views superior?
Because Baffling, those outsiders are called taxpayers and they pay the bills…
Clear?
thomson
“Because Baffling, those outsiders are called taxpayers and they pay the bills…”
not if it is a private university. which is my point to begin with. you are better off comparing finances between public and private universities, than trying to compare a university operations to the hospitality industry. unless you are simply biased against higher education to begin with.
Clear?
Federal funding for Yale runs at over $500 million per annum – hence the recent Yale panic over a possible Title IX violation. Even the richest universities have a firm grip on the taxpayer tit.
Things have changed, Baffling, but universities haven’t. Time for some tough thinking about the future, I suspect. And plenty of whinging and moaning – should be fun.
thomson, yale is still a private enterprise. not sure what right you have to tell them how to operate their business. a public school, obviously the public has a greater say in its operations. unless you agree that we should open up and assess the operations of goldman sachs, jp morgan, boeing, ibm, etc to a similar assessment, because they all operate off of government coffers as well. in fact, as publicly traded companies they should be scrutinized even more. i guess we could do the same with hospitals as well, given how much government money flows through them as well. are we going to audit all of these private enterprises as well? or are you simply biased against higher education?
Baffling – you are more and more baffling. Apart from massive taxpayer funding, Yale asks me for money all the time – or used to until I told them to f*** off. This habit surely gives Yale alumni some right to comment on what Yale does.
I used to work for JP Morgan. Fortunately Morgan does not ask me for money.
Morgan does require government approval to operate. This means that Morgan has to dance to the tune of the Fed, Controller of the Currency, etc. And to the tune of the Morgan shareholders.
No one at Morgan lives in some fantasy that Morgan can avoid controlling costs or deserves some sort of ‘freedom’ from constraint because of a pious early 20th century mission statement. Or that Morgan can avoid change due to changing external circumstances – like the legislature not being willing to pick up what ever tab Morgan hands them.
thomson
“No one at Morgan lives in some fantasy that Morgan can avoid controlling costs or deserves some sort of ‘freedom’ from constraint because of a pious early 20th century mission statement.”
nor does harvard, yale and numerous other universities believe they are above controlling costs. they deal with it every year. many universities have seen significant cutbacks since the financial crisis. remember the uproar out of harvard when they laid off nearly 275 people? why don’t you acknowledge cuts that have already been made? how far can you cut? bean counters from lala land!
again, you have a bias against higher education. you don’t think any university has tried to contain costs, and they are all out of control. not true.
“Morgan does require government approval to operate. This means that Morgan has to dance to the tune of the Fed ”
but the fed has no say in the employee costs and efficiency. you are mixing operational and solvency requirements. try again.
Menzie,
Do you have a link or reference to the University’s financials?
Mike: No; what I know is from this website.
Menzie,
According to the UW website the budget for 2014 is $2.9B; a $91M cut is only a 3.18%
Some interesting insights based on the information provided:
Faculty only teach 2.19 classes, if the faculty taught 3 classes you would save 591 positions or $82.8M.
The majority of the costs stem from staff (non-faculty) $1.6B. If you decreased the average staff pay by $1,025.85 or 1.2% (the average of $84,025.85 is derived from the numbers provided above) UW would save $20M.
A 1% increase in staff efficiency results in a savings of $16.4M; a 5% increase results in $82.1M savings.
After faculty and staff are paid, only $909M is left for other expenses.
It would appear there are ways to save money by making the system more efficient, however, schools would like the tax payer to believe they perform at 100% efficiency.
Budget:
http://www.wisc.edu/about/facts/
Number of Classes
http://www.wisc.edu/academics/
mike, you cannot arbitrarily say increase teaching load to 3 classes. classes have a wide variety of enrollments (say from 5 students to 1000 students per class). it is a really poor metric to use. many schools use high enrollment classes to subsidize the opportunity to teach a more specific class to a much fewer number of students, as a means to increase diversity of class offerings. and increasing class numbers taught will decrease research opportunities, as you cannot mentor as many graduate students while teaching more and larger classes.
Mike:
You haven’t any idea how a university budget works — most especially, you don’t understand where revenues are tied to expenditures (so that a cut in expenditures results in a cut in revenue) and you don’t understand the restrictions on transferring money from one fund to another. As just one example, note that 26% of the UW revenues (much more money than the state provides) are from grants. Grant money is provided on a cost-reimbursement basis. If you save a dollar, your grant funds are reduced by a dollar.
Your calculation of courses taught per faculty member was a real treat, especially where you assume that every course in the course book is taught each year, and taught only once each year. Neither assumption is true. You also assume that every faculty is available to teach every semester. That also is not true. You then followed this with the cost-saving suggestion of increasing the course load, as you calculated it, by a whopping 37%.
Given the flaws above, I can’t be charitable in my interpretation of your comment that: After faculty and staff are paid, only $909M is left for other expenses. Your implication, that salaries and benefits claim too much of the budget, is astounding. Given the services provided by a University, where do you think more of the budget should be going? Bronze sculptures? Polished marble floors? Sponsorship of a Tour de France team?
Finally, I have to wonder about the drive to optimize UW operations on the cost factor alone without considering that there is a market both for the specialized academic employees and for the education and degrees offered by UW campuses.
If the working conditions are poor (perhaps from compensation cuts together with your 37% increase in teaching load), top faculty will seek offers elsewhere. You will lose top graduate students and a lot of research funding with the faculty losses. Top research universities typically spawn a lot of enterprises based on the research produced by faculty and graduate students and staffed by the pool of workers educated at the universities.
If the product is cheapened too much, top students will flee to other universities, possibly leaving the state for good. With your overemphasis on cost reduction, you end up with the college equivalent of an entry-level econobox automobile. Nothing wrong with that, but there is already such a vehicle in higher education — community college. Your cost cutting might feel virtuous to you, but it would be a disservice to those who want an education from excellent faculty in an environment with a lot of research activity and it would be a disservice to the state that would benefit from new enterprises and a better-skilled workforce.
$91 million = $1,000 per UW student per semester. Current annual tuition for residents is $10,400 per year for 12-18 credits (roughly 4-6 courses per semester).
If it’s that important, raise tuition.
Steven Kopits: The governor’s proposal prohibits raising in-state tuition for the next 2 years. Please read.
Yes, I saw it Menzie. Tough to cut it all from spending.
Menzie,
Although in-state tuition can’t be raised for two years, isn’t it true that the University often charges lower than sticker tuition depending on a student’s situation, making up the difference with financial aid? Why can’t the University cut financial aid, which amounted to $113 million in 2011? And why can’t out-of-state and professional school tuition be raised?
Rick,
Just so we are clear, you wish to cut financial aid? In essence, shift the cost burden to those deemed least able to afford college and those who based on merit have earned a cut in tuition cost?
Kurt: Do you have to ask? That is exactly the logical implication of his proposed remedy.
Kurt,
No, I’m not in favor of doing that necessarily. I only brought it up as a reaction to the disingenuousness of the presentation, which, rather than talk seriously about cuts that could actually be made, goes to a lot of trouble to make the cuts look impossible. For example, the presentation talks about raising out-of- state tuition to make it seem like even doing that would leave a big hole, but then omits to discuss the fact that the actual tuition rate charged can be highly variable and is in fact adjustable by the school now.
In my view, Universities are the faculty, essentially. The first priority in spending should be attracting and paying good faculty. I’d like to see that increased. But there is a lot of nonsense spending going on as well, which is being hidden.
kurt, you must understand in the good old days of rick stryker’s college years, public schools were heavily subsidized by the state. this is why you could “work” your way through school. but now that those folks have gotten theirs, let’s please forget about the educational welfare they received. let’s rewrite history, where working at the library 20 hours a week “honestly” covered the cost of tuition back then. those old timers feel they really did work their way through college, so why can’t today’s current, lazy generation do the same? folks like rick then get ticked off if they are asked to subsidize the current generation. i know it is selfish, but you can always rewrite history to make yourself feel better. hence no need for financial aid.
I’m not sure I understand Blank’s facts. She says that if she eliminated 5 of her small schools, she could not fill the hole. However, we know the total cost of those schools, at least in 2011, from the 2011 Expenditure Report, page 17.
School of Business 50,559,843.96
Law School 24,920,601.40
School of Nursing 12,729,900.13
School of Pharmacy 23,111,338.11
Veterinary Medicine 54,501,817.15
That sums to a good deal more than $91 million.
Also, what does it mean to say that a $91 million cut is equivalent to 650 faculty positions, which is 31% of something unspecified? According to the 2011 expenditure report, salaries and fringe benefits were $1.5 billion. $91 million is 6% of total compensation expenses.
The way these numbers have been reported does not exactly enhance the credibility of the presentation. What we really need to see in order to judge whether the cut is too big is a very detailed breakdown of where all the money is actually going. For example, the University spends $183 million of the budget on what it calls “public service.” What is in that?
Falling well below the low bar of expectations I set for him Rick Stryker wrote:
I’m not sure I understand Blank’s facts. She says that if she eliminated 5 of her small schools, she could not fill the hole. However, we know the total cost of those schools, at least in 2011, from the 2011 Expenditure Report, page 17.
…That sums to a good deal more than $91 million.
Ahem. What do you suppose happens to revenue at those schools if expenditures are zeroed out? No more tuition receipts. No more grant money for research. No more gifts from alums and other supporters.
Revenue does a swan dive, so you have to cut “a good deal more than $91 million” in expenditures to save $91 million.
Ottnott,
Nice try, but I’m not going to accept your speculation on revenues any more than I’ll accept Blank’s vague assertions.
My point was that Blank really needs some backing detail, as the sum of the expenditures is much larger than 91 million, about $167 million. The only revenue that we can be sure will be lost is tuition, which according to the budget is about 17% of revenues, only $28 million. How much of donations will be lost really? To what extent will Federal or state revenues be lost? We get no details but just the assertion that the net savings is below $91 million. I’d like to see some hard numbers on that point rather than a sales job. If you have any hard numbers, produce them.
If we did get the hard numbers, I think it would be apparent that the size of the budget reductions is being presented in a very misleading way. No one who is serious would cut the budget by cutting in a way that would eliminate large sources of revenue as well. Blank is trying to bamboozle people into thinking that major parts of the University will have to be shut down in order to make the budget cuts. That’s nonsense–as we’ll see when the budget cuts are actually made.
Here we see a former Administration official turned University Chancellor doing what Administration officials do best: hysterically arguing that if we cut spending the sky will fall.
That’s a political move by the governor to squeeze UW Madison, and it’s not the right strategy to argue on the objective level against it. Menzie, tell your boss to readjust his/her strategy. Plus find outside-of-the state help.
Is the purpose of education to pay teachers?
What do these people have in common? (Hint: It is not a college degree qualifying you to work at Enterprise Car Leasing and $50,000 of student loans)
Steve Jobs
Bill Gates
Ted Turner
Oprah Winfrey
Walt Disney
ricardo, what percentage of folks without a college degree does that represent? so we should plan our future economy based on the odds of winning the lottery! brilliant!
Menzie,
I know you like to discuss Walker’s (dismal) employment record, so here’s an article I just came across (which you may have already seen as it was published yesterday):
http://www.reuters.com/article/2015/02/15/us-usa-politics-walker-idUSKBN0LJ0R320150215
so walker created a public-private corporation with state funds, hired a bunch of inexperienced economic development folks after pushing out the existing experience, lost track of state funding to projects, and significantly under delivered on promised jobs. will this be his economic model as president? hard to support this under achiever and his crony capitalism.
Gov. Walker is an idiot. And he’s an idiot who never went to college, so it’s no surprise that he doesn’t put a lot of value on higher education. That said, the chancellor’s presentation is typical of most every other university chancellor’s presentation that I’ve seen. Same old, same old. If she wanted to understand the problem she didn’t have to go beyond slide #3. UW-Madison isn’t just facing a short-term funding problem that will go away with Gov. Walker. Like a lot of other universities, UW is trying to pursue two mutually incompatible goals. In the old days it was possible to have both a teaching mission aimed primarily at undergraduates and an advanced research mission aimed at producing PhDs. Those days are gone. For a long time universities could rely upon state funding to support graduate level education and research. But as state funding dried up, universities found that they had to overcharge undergrads in the college of liberal arts in order to subsidize the high salaries of top flight professors. That also meant attracting out-of-state students because they paid more in tuition. Look at those university commercials during halftime…it’s all about the fun college experience at fill-in-the-blank school. Attractive young people all hanging out with their friends against a beautiful campus background. But that well is drying up. Sooner or later universities are going to have a come-to-Jesus moment and ask the regents whether they should focus on providing a broad liberal arts and business education for the 99%, or focus on providing an elite education for the 1% who want to pursue PhDs a top flight “world class” education “center of excellence” and all those other buzzwords. If the latter, then the regents will have to pony up a lot more money or else ask the beneficiaries of that elite education to pay a lot more. In terms of real economic inputs, it doesn’t cost anymore today to teach Chaucer and Shakespeare and calculus and Newtonian physics than it did 40 years ago or 100 years ago. What’s driving up education costs are teaching programs at the cutting edge. Do undergrads who do not intend to pursue PhDs (and that’s most of them) really need to learn what’s happening at the cutting edge…which will very likely be obsolete before the student graduates? It’s not the history major or the English lit major that’s driving up costs. Look at the chancellor’s presentation and look at the chart showing the growth in STEM majors. That growth in STEM programs may be great news for businesses, but those programs cost a lot of money. Those history and literature and music and foreign language majors are subsidizing the STEM programs. And the parents of those liberal arts majors are mad as hell and they aren’t going to take it any longer. That’s the problem that the chancellor needs to confront.
While Wisconsin suffers with a budget deficit, 5.2% unemployment, and education cuts, right next door Minnesota has a billion surplus, 3.6% unemployment, and is again increasing education spending.
http://www.startribune.com/politics/statelocal/290003591.html