Costs of Privatization

Here's a nice compilation of some recent studies that show that privatized medical care adds costs rather than reduces them. It stands to reason if you think about the costs of marketing (as much as 25% of for-profit university budgets) and the cost of profits, which go in varying but usually high degrees to investors and not to operations. But reason hasn't been a big part of the rush to private funding. The analogies between education and health care are interesting.

Endowment Toxins

I've been writing to my budget pals for a few months about when the toxic waste is going to surface in university endowments. It's only just beginning - in the form of the shadow of the holes in the crap investments thrown by operating cuts and now hiring freezes. Cornell announced a couple of weeks ago, the Chronicle of Higher Ed is starting to keep a list, which includes at least partial freezes at other Ivies like Brown and Dartmouth and a full hiring freeze of that greatest of all beneficiaries of the high-tech booms, Stanford University.

The New York Times has a good overview that begins, "Some of the nation’s universities are trying to sell chunks of their portfolios privately as their endowments swoon with the markets."

The crucial point in the piece is that university "endowments with more than $1 billion in assets reported 35 percent of their holdings" to be in "alternative investments" - i.e. the stuff that has been locking up or blowing up for six months now. This is a much higher proportion than can be found in pension plans, which means that the big endowments can be expected to fall more than say the 15% that the University of California's pension plan has fallen so far in this calendar year. Should we look for losses at Stanford, Yale, and Duke of 30% in one year?

Hence the logic behind this otherwise surprising announcement, reported in the CHE by Charles Huckabee, from the richest university on earth:

November 25, 2008

Harvard Freezes Staff Hiring and May Call Off Faculty Searches

In further signs that university endowments — even the wealthiest ones — are taking a hit in the nation’s economic crisis, The Boston Globe reports that Harvard University’s largest faculty division is freezing staff hiring and rethinking faculty searches, and The New York Times reports that Harvard and other institutions are exploring opportunities to sell some of the more volatile chunks of their endowment portfolios.

Michael D. Smith, dean of Harvard’s Faculty of Arts and Sciences, wrote in an e-mail message to department heads on Monday that Harvard’s endowment losses would have “a major and long-lasting impact” and would “require significant reductions in our annual expenses,” according to the Globe.

Harvard’s endowment, which was reported last year to be worth more than $34-billion, pays for more than one-third of the university’s operating budget. Two weeks ago, Harvard’s president, Drew Gilpin Faust, wrote in a letter to the campus that the university anticipated a loss of revenue because of the economic crisis. Neither Ms. Faust’s letter nor Mr. Smith’s message gave specific figures for the endowment’s performance in recent weeks.

According to the Times, Harvard, the University of Virginia, Columbia and Duke Universities, and other institutions that hold “alternative investments” are now trying to sell or considering sales of some of those investments. But finding buyers is proving difficult because such investments — which include hedge funds, private-equity holdings, and real-estate partnerships — are not traded publicly.

Other Ivy League institutions that are taking a hard look at expenses these days include Brown and Cornell Universities, which have also announced hiring freezes, and Dartmouth College, which is contemplating a 10-percent budget cut that it says may require a staff reduction. Dozens of other institutions around the country are taking similar cost-cutting measures.

Numbers: Majority Vs. Top

We're starting to get the negative numbers for pension and endowment funds that pay for faculty and staff retirement and also support education. The University of California's pension fund fell from $6.7 billion to $5.7 billion in the first three quarters of 2008. Cornell University reported a hiring freeze in response to endowment drops and state funding cuts.

Meanwhile, the salaries of university presidents rose an average of nearly 8 percent last year, and many presidents are making more than a million dollars a year. Some have refused raises, but most have not.

Media coverage so far has not been kind. Stories of big salaries reduce public willingness to pay tax dollars to support public universities that since they can pay these fat salaries, the thinking goes, must be flush to the gills.

My suggestion: public universities should send the opposite message by cutting their salaries by the same proportion by which their operating budgets are cut.

Since most people assume that executives cut their own pay only as a desperate last resort, when they have already fired thousands and tried to sell off the company, they will finally listen to our budgetary cries of pain

Colleges Told to Get In Line

The Obama campaign never bar0cked the higher ed agenda: its programs for increasing student aid and research funding have been modest. Even the apparent big ticket item -- doubling scientific research in 10 years -- is if you do the math pretty much what we had under Clinton and Bush Junior. (Money doubles every 10 years at a little over 7% annual compounded increases, which means maybe 3.5% real annual increases after inflation.)

Now expectations are being lowered even further, according to this story in today's Chronicle of Higher Education.

It would be nice to be sure that the Obama Administration's tacit motto were NOT "first money to the banks, then we'll see what's left over."

Adjunct Exploitation Hurts Students!!

It may seem like common sense that when you cut teaching staff, you hurt students. The cuts can take various forms. You can reduce the number of teachers and increase class size. Most public colleges and universities have done this, and learning has occurred in more large lectures and become more passive - or so you'd think we could all agree.

Another strategy is to change the ratio between full- and part-time instructors. This is even more popular as a cost-cutting strategy in higher ed than shrinking the teaching staff. Most schools can't shrink because enrollments keep growing. But they can and do replace full-time with part-time teachers, with lower salaries, fewer or no benefits, and more difficult working conditions. All of these reduce quality time with students. Or so you'd think we could assume.

In my excessively long experience with administrative discussions, however, the link between funding cuts and quality cuts is denied. "We can say quality is at risk," one top UC official told a group of UC Chancellors on one occasion. "But we cannot say that quality has declined. He was rebuffed by the faculty in the room, but the convenient and economical illusion continues.

This is background as to why these new studies of the impact of adjunct labor on educational outcomes are so important. IHE and CHE coverage is a good start on the effects on the student masses, not the 2% at the elite privates, of the fact that higher ed has doubled its proportion of adjuncts in the past 30 years.

Debate on Higher Ed Failure Rates

Inside Higher Ed has a good piece on Mark Schneider's critique of the American university's graduation rates, especially in the context of our higher spending as a percentage of gross domestic product. The core claim:

Even though the U.S. spends more of its gross domestic product on higher education than do other countries, and contains many of the world’s best universities, the country’s performance on measures of postsecondary attainment for its citizens, particularly young ones, is declining compared to other countries. Graduation rates provide further proof that “American higher education as a whole is failing to live up to its reputation as the world’s best,” he writes.

Schneider compares the median four-year graduation rates of American high schools (which, he acknowledges, have mandatory attendance policies that do not apply to colleges) with the six-year graduation rates at four-year colleges, and shows that across the board — at selected percentiles, by races, and across differing types of institutions (public, private, for-profit) — postsecondary institutions lag high schools.

There's good coverage here too of Cliff Adelman's critique of these numbers.

What needs more coverage is the causal link between weakening educational attainment and budget cuts. This point would cut against both Schneider and Adelman: higher ed's share of GDP is a number bloated by all sorts of activities that don't involve undergraduate education (most lab research, professional school education - its really expensive to create so many hedge-fund managers and M&A attorneys, etc). The "undergraduate education" share would be smaller. The share would also be split between a small number of wealthy schools who spend more and more and more and a large number of public universities whose expenditures in real dollars per student are flat or in decline. Since national attainment is about the mass population, you need to have high-quality mass higher education. That's what we used to be good at, and what we're less good at now.

Culture Wars Continue

The McCain/Palin campaign is a constant reminder that the culture wars live on. They are running against the Weather Underground circa 1969 - The Sixties remains the Right's primal scene, ground zero, bete noir, take your pick. To set themselves up as warriors against the terrorist 1960s they attacked Obama's occasional paths-crossing with Bill Ayers, a Weather leader back in the day andnow an academic.

Another academic came in for a symbolic McCain thrashing - the Middle East specialist Rashid Khalidi of Columbia University. He was actually friends with Obama when they both lived in Chicago and Khalidi taught at the University of Chicago. The Washington Post has a good editorial on the topic, denouncing what Khalidi calls the "idiot wind" emerging from the McCain campaign's last desperate days.

My favorite lines are those that imagine a life after the culture wars that, as I argue in Unmaking the Public University, has inflicted the social and culture equivalent of brain damage on the country as a whole. The lines:

• "Perhaps unsurprising for a member of academia, Mr. Khalidi holds complex views."
• "Our sense is that Mr. Obama is a man of considerable intellectual curiosity who can hear out a smart, if militant, advocate for the Palestinians without compromising his own position."

Wow. Let me read those lines again in a daily newspaper.

If curiosity and complexity circulated freely, with militance as their regular companion, and unsplattered with culture wars attacks, progress would be both intelligent and possible again.

Preventing this was the point of the culture wars in the first place. But the warriors' positions are now weaker than at any time in the last 25 years.