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.

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

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."

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.

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.

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.

Today the Chronicle of Higher Education published the results of a job satisfaction study. It shows a sag in satisfaction in mid-career, but overall very positive reviews for jobs in academia.

71 percent of faculty members give high marks to collaborative governance on their campuses; 68 percent of tenured professors agree their colleges support a strong teaching environment; a nearly equal percentage of male employees (82 percent) and female employees (83 percent) say their institutions provide resources for work-life balance; and both groups are similarly satisfied with their jobs as a whole (86 percent for men and 88 percent for women).

These numbers are much higher than what I'd expect talking to friends and colleagues. There are two reasons for this.

First, the article notes, "The percentages of positive responses were fairly high because the study was not a random national sample but instead was conducted only at institutions that felt confident enough in the quality of their workplaces to participate in the Great Colleges to Work For survey."

Second, public universities do significantly worse than the privates:

Faculty members at public colleges have less confidence in their senior leadership than do professors at private colleges (65 percent to 56 percent). Among the more-senior faculty members — full and associate professors — the news is even worse for public-university leaders. Just under half of public-college professors in the top two ranks have confidence in their senior leadership, compared with 66 percent and 60 percent, respectively, at private colleges. . . .

In several other key categories as well, private colleges outperformed public institutions. Professors at nearly every rank gave their private institutions higher marks for research and scholarship opportunities. At private colleges, 79 percent of faculty members ranked their teaching environment positively, compared with 71 percent at public institutions.

Employees over all at private institutions ranked their compensation and benefits better than those at public institutions did (66 percent to 63 percent), as well as their work-life balance (84 percent to 78 percent). One area where publics performed better than privates: health-care benefits (75 percent to 68 percent).

I have written a whole book on this topic and am bleakly satisfied to get some confirmation that there is fairly widespread awareness of the deterioration of working conditions in public higher ed.

Stagnation in professorial careers is an equally interesting issue, and this study is one of the first I've seen to take this on so directly:

For faculty members especially, the midcareer point is fraught with anxiety about what's next. After receiving tenure, they are no long-er protected from a heavy load of committee work. Some remain stuck as associate professors for years without a promotion. And unless they are superstars in their fields, it's not easy to get a job elsewhere.

"Faculty careers are flat unless you go into administration," says Saranna Thornton, a professor of economics at Hampden-Sydney College. "Even if you become a full professor, you essentially do what you did as an associate professor."

The flat career can poison the individual and the institution: associate professors feel themselves to be dead-enders long before they get labeled as deadwood by their peers, chairs, and deans. And decades of flat or declining funding means long series of ideas that are never actually implemented, which makes the stuck feeling worse.

I've caught up with a truly shocking story that was broken last fall by UCLA's student paper the Daily Bruin. Since the university is one of my main areas of research I like to assume I'm not naive, but this piece took my breath away. It has the elements of deep corruption, and not just of aberration - large donations followed by admissions to super-competitive programs for OK-to-good relatives of the donors; open boasting by beneficiaries, suggesting there's no climate of prohibition around seats-for-sale; a leak; an inside investigation that finds no abuses and holds no one accountable; scattered outcries, resignations, and protests; a wall of administrative silence.

For a long time the for-sale sign on academia was seen as an isolated problem. It went with mediocrity, desperation, or individual corruption. As recently as 2003, Harvard's president emertius Derek Bok could write a book called The University in the Marketplace, express muffled rage at medical faculty for their arrogant obliviousness to the conflicts of interests they eagerly pursued, and still insist knowledge was not being corrupted. But the continuous pursuit of major and minor donors - as a central academic activity - is starting to change the focus, goals, metrics, etc of the institution.

Actually there's lots of evidence that this has already happened. Slaughter and Leslie's 1997 classic Academic Capitalism clearly explained the iron logic of income substitution. Jennifer Washburn's University Inc. was a well-documented cry for help that still needs to be addressed. Longtime science reporter Daniel S. Greenberg has a new book called Science for Sale that tells a nuanced story about mixed motives. All of it calls for better connections between the new dominance of fundraising culture and changes in both the directions of research and their results.

What we have to avoid is this: a new hybrid in which ultra-selective admissions generate small numbers of brilliant and economically diverse students that offer a front for lucrative academic influence-peddling. But this is what happens when fundraising gets woven into the research and teaching life of departments. It's the business version of Potomac Fever in Harvard's Kennedy School of Government, where every new project seems pitched to presidential candidates and the conclusions are written for their leading aides. We have enough knowledge for hire already - aka the major media. The university has to sound different from CNN or why not cut its public revenues to zero?

We Senate types are all out here pumping for public higher ed and yet we look more and more like the folks who run the plumbing-supplies store for Tony Soprano. That is, our corruption is looking less and less like an occasional accident and more and more systematic.

In May, the resident who went on the record for the November Daily Bruin story resigned from the department.

In his resignation letter, Kent Ochiai blamed the program’s chair for making his residency unbearable after the Daily Bruin published an article last November exposing preferential admissions within the orthodontics program for donors and their relatives.

Ochiai’s refusal as an applicant to donate a large sum in order to secure his own admission prompted The Bruin’s investigation.

One of the most moving and graphic tales of adjunct life appeared in today's Inside Higher Ed. By graphic I mean a mixture of descriptions of impossible teaching loads, terrible hours, unpayable debt, non-healthcare, and summer unemployment pay. But in the midst of it he says this:

Some have asked why I continued to teach as a part-timer if things were so tough, and to be honest, every spring I begin asking myself that same question. In fact, I have left teaching twice. The first time I was offered a position as a business manager for a corporation that owns travel stops throughout the Southwest. The money was good, the hours were close to what I would put in as a part-time instructor (counting prep time and time grading papers), and I had benefits.

I hated it.

There is something about teaching that keeps pulling me in. I love writing, and I love sharing my passion for it with my students. I love feeling that I might be making a positive difference in people’s lives. I love feeling like I’m contributing something to my community.

The first time I left teaching, I stayed away for one year. The second time, I resisted the call for two years. Twelve years ago I moved to the Seattle area, landed teaching jobs at three different schools, and have been performing the juggling act of a freeway flyer ever since.

Then there's a semi-happy ending - for him.

The temping of a whole higher ed teaching profession is a crazy, thoughtless, destructive thing whose passage means we are sleepwalking about money and all means for all the Jacks who teach and teach and teach and don't write these articles.

The whole point of the humanities for me is to rescue our obscure selves from oblivion, which is where temping puts all the brilliant Jacks. So how screwed up is it that we teach the humanities with adjuncts? They teach, get back in their car, drive away, disappear.

This trend has to end.

The New York Times has had good coverage of problems in the student loan industry - to put it politely. They have a good new piece on how some major banks are cutting back on loans to community college students, who are generally the least-well-off economically and who amount to 40% of the country's college students. The banks seem to be segmenting the student loan market, with loans to students at expensive private universities remaining fairly easy to get. "The banks generally say these loans are bigger, more profitable and less risky, in part perhaps because the banks expect the universities’ graduates to earn more." Some community colleges are getting redlined.

Michelle McClain, 40, who is studying to become a teacher, learned on Friday that she would have to find a new lender after Citibank dropped William Jessup University. The news angered her.

“The loan is between me and the lender,” Ms. McClain said. “I’m the one that’s taking out the loan, I’m the one whose credit is in jeopardy if I don’t pay it, I am the one totally responsible for the loan, and as long as I’m going to an accredited college, I don’t understand why it would make one iota of difference where I am going to college.”

In a speech last week, University of Missouri President Gary Forsee cited some all-too-familiar stats about the decline of public funding for Missouri higher ed. Missouri is 47th out of 50 in per-capita spending on higher education, in part because the share of the U of M budget that comes from the state has fallen from over 60% to 30% in the last eight years.

Missouri's growth in student enrollments was also weak (39th of 50), so its increase in approporiations between 2001 and 2006 was actually above average (SHEEO's State Higher Education Finance FY 2006, Figures 12 and 13). That's a sad commentary on the rest of the country. Missouri is a little sadder though - its tax effort per capita is 0.71, where the US average is 1.0.

Forsee asks how Missouri can prepare itself for the economy of the future with that kind of higher ed spending. The same question goes for states that think they are the economy of the future, like California. California is still above the US averge, but not by much. A super-competitive economy supposedly means you need to be much more special to do well, not be somewhat above average.

We also need to explain how universities help broader social goals, like supporting "minority-majority" states that work because they are equitable. But even in mainstream economic terms, higher ed investment looks poor.

Harvard alum Carroll Bogert has an excellent op-ed in the New York Times about what to do with Harvard's big endowment besides make it even bigger. She notes that T

he university’s endowment stands at $35 billion and is likely to hit $100 billion in a decade. At an annual growth rate of 13.3 percent — the average since inception, and regularly exceeded in recent years — Harvard can cover next year’s entire undergraduate financial aid budget with what it earns in the market in eight and a half days.

Deciding that swelling this flood of money was pointless,

A few hundred alumni have formed Harvard Alumni for Social Action, to try to channel 25th-reunion giving to destitute universities in Africa. In three years, we’ve raised $425,000 — a lot for the University of Dar es Salaam but hardly a match for our annual class “gift.” And evidently not enough to win the respect of President Faust, who has begged off meeting the group. Harvard clearly doesn’t like any effort that might divert a dollar away from its Cambridge coffers.

Bogert offers some decent explanations for why college grads - or at least Harvard grads - love to make the rich richer, but more to the point, you can find the Harvard Alumni for Social Action here.

Some of the best recent defenses of public higher education have come from the business press, in the form of attacks on the huge and growing resource gap between even the strongest publics and the top privates. The powerful 2007 essay, "The Dangerous Wealth of the Ivy League," was published by Business Week, and begins with a wicked dig at vanity dorms at Princeton and goes on to say what few education leaders will say: the privates are cherry-picking faculty at the publics, paying much higher salaries, spending far more per student that their former peer "flagship" publics, and pulling away in lab facilities, publications, and other measures of knowledge production.

A year before that, the NY Times business columnist Joe Nocera criticized top-end fundraising in "The University of Raising Big Money." The movement for increased payouts at the fattest endowments kicked in later, and Nocera may have helped it along.

Public universities have over 4/5ths of total enrollments. Their quiet impoverishment affects everything - general skills, social integration, upward mobility, new technology, useful research, the general development of people and their society. Pulling top-quality resources back to the elite privates that educate 1 -2 percent of the college public is a perfect recipe for steady decline. Many more people need to start noticing this.

About a month ago I went to Sacramento with a group of University of California faculty to try to offer legislators a faculty perspective on the need to spare California higher education from another round of cuts. We had messages developed by two reports that I had co-authored with other members of the Academic Senate's systemwide University Committee for Planning and Budget (UCPB).

Message 1: UC's state funding isn't too high, in spite of what the Governor alleged of all state agencies when he proposed across-the-board cuts, since it still hasn't gotten back to its 2001 levels.

Message 2: private money can't replace public money (even if we wanted it to), since there isn't enough of it.

Message 3: the Governor's proposed cuts can be filled in only with massive student fee hikes. (If all of the cuts were replaced only with student fees, the latter would need to increase 45% in one year.)

Since such an increase is unethical, counterproductive, and politically impossible, the UC Regents will increase the main student fee 7% percent this week and let the cuts come out of operations. This leads to . . .

Message 4: Students will pay more, and get less.

We were met by Democrats with a combination of agreement and fatalism. One said, "of course you're right, these cuts hurt the university and it hurts students. But there's no money this year. And there won't be any money next year either."

This is of course a political statement, not a financial one. There's plenty of money: even the state budget, perpetually hamstrung by Prop 13 requirements, controlled by the 1/3 Republican minority, riddled with constitutional budget guarantees for huge sectors like K-12 ($50 billion a year right there), and pitting higher ed against our incredibly expensive and yet still always federally-sanctioned prisons, receipts are down only 1 percent this year. The big structural deficit could be solved some other way - like the Governor reversing the cuts in vehicle licensing fees that account for about half of it. Whatever: our state poverty is political, and it's a politics that suits a governor who is already running for some other office.

Since politics is leverage, not logic, we asked about that. The Dims leadership won't do anything for higher ed this year - what's the payoff in that? The Chair of the Board of Regents, Richard Blum, investment banker and husband of Sen. Diane Feinstein (D-Calif.), seems already to have agreed not to embarrass the Governor with large fee hikes or enrollment freezes. And enrollment freeze was our only leverage in Sacramento. The UC administration gave that up, though threatened it politely for next year. No wonder even the Dems were promising nothing.

One of us went back to Sacramento last week and visited a Republican leader of one of the leg's higher education committees. This state Senator said he wanted UC to thrive and remain admired, but wasn't sure we were doing enough to fundraise in all categories. In fact, UC faculty have doubled their sponsored research (as measured in real dollars) since 1990. UC fundraisers have tripled their fundraising income in the same period. Licensing income is up but remains small (always under 1% of UC's overall budget). None of these numbers come close to addressing the budget cuts on the gigantic scale on which UC operates.

The key fact about public higher education is its sheer size. Better fundraising might close some gaps at a school with 1000 or 10000 students, but not at one with over 200,000. People say well, Princeton does great fundraising and look how rich it is - what's wrong with UC Berkeley?

What's "wrong" with Berkeley and UC is in fact what's right with it. Total enrollment in the Ivies in 2006-07 was 112,839. That means that the entire Ivy League's enrollment was 90,000- 100,000 less than the UC system alone - to say nothing of Cal State. The Ivy League's endowment was about $81 billion in 2006 (vs. UC's $6 billion or so), or say 20 x per student of UCs.

It just doesn't make sense to compare UC to an Ivy League university - it's a different kind of institution. UC makes enormous efforts in both research and fundraising, but on behalf of the population of a state that is bigger than most countries, and not just for a few thousand students at at time. This leads to . . .

Message 5: The only way to combine wide public access with the highest quality is with great public funding for public higher ed.

The real question is this: do we as a society really want to educate everyone to the highest possible level? That is, are we really trying to minimize the waste of the whole society's talents or not?

If we don't support great public funding for public universities, then our real answers are no. And for the case that society's major players didn't support this, see my new book!

Here's a good example of a state governor - Ohio's - facing down a budget deficit and maintaining state funding for higher ed next year, along with his long-term plans. Here in California we should be so lucky.

The key quotation:

[Gov. Strickland] did not recommend any cuts in the nearly $2.38-billion that colleges are receiving from the state this year, an amount that represents a 7.7-percent increase over the previous fiscal year. The governor also proposed continuing to finance a statewide freeze on tuition that has been in effect for two years.

"In my judgment, higher education had been the budget whipping boy for far too long," he says. "It was time to keep faith with higher education."

Amazing! Higher ed is obviously a crucial long-term investment. It's also economically countercyclical in the short term. In the early 1930s, Hoover, Mellon and the other laissez-faire folks running the federal government watched consumption drop, profits decline, workforces shrink (in response to falling profits), and consumption drop even further as people lost their jobs. We're again learning a lot of New Deal lessons about the stabilizing (and constructive) effects of government action and investment. I hope in California we can follow Ohio's lead and learn them before another 2-3 year cycle of cuts (potentially our second 15-25% drop just in this decade), damages UC and CSU all over again.