Time To Prune The Ivy

Poor teaching. Arcane research. Skyrocketing tuition. Racial strife. These days, there seems to be less and less to admire about America's most valuable economic asset: its colleges and universities.

Long the crown jewel in America's educational system and the envy of the world, academe has failed to rein in its soaring costs. Between 1980 and 1992, the tuition, room, and board for attending a private college swelled 9.2% a year--twice the rate of overall inflation and even higher than the much bemoaned medical inflation. The cost of going to a public college increased at a 7.8% annual rate, with much of the jump in costs coming in the past several years.

With family income hardly keeping up with economywide inflation, it's no wonder that more and more people are finding it harder to finance a college education. College costs as a share of median family income jumped from 26.6% to 39.9% for a student at a private school and from 12.1% to 15.9% at a public one.

Outcries about rising tuition aren't new. For years, university defenders dismissed the price squeeze as a concern: Look at the return on investment from a college education, they said. Scholarships and loans pick up part of the tab, they added. But now, the lethal combination of a stagnant economy and government fiscal retrenchment has thrown universities into a huge financial crunch. And schools are encountering fierce resistance to covering budget shortfalls by raising tuitions.

Like many U.S. companies, colleges have no alternative but to boost productivity and streamline operations. Higher education is a huge, sprawling enterprise with sclerotic bureaucracies and too many marginal operations. "We see departments and staff people that duplicate and triplicate responsibilities," complains Craig Greenberg, president of the University of Michigan student assembly. Says Robert Zemsky, director of the Institute for Research on Higher Education at the University of Pennsylvania: "All the forces that are driving IBM and General Motors to restructure are sweeping universities."

"MORE SELECTIVE." A growing number of universities are embracing the restructuring mantra and hacking away at administrative and faculty bloat. They are trying to move away from an overemphasis on research and toward teaching. More are adopting new technologies to improve teaching and the dissemination of information. Some are shifting money and talent into fields where they have a comparative advantage. "We can't do everything anymore. We have to be more selective," says L. Jay Oliva, president of New York University. Adds Michael Granfield, vice-chancellor of the University of California at Los Angeles: "We're committed to no more across-the-board cuts. We'll preserve the highest-quality departments and schools."

So far, the restructuring is holding down tuition increases--at least this year. Private college hikes are running on average at about 6%, the lowest rate of increase in more than a decade, albeit still twice the consumer price index. Public college tuitions should also be less than last year's 10% hike.

Still, restructuring in higher education will spark a lot of infighting and will take many more years than the typical corporate overhaul. College heads wield limited authority, and campuswide decisions typically involve countless committee meetings. Last year, Brandeis University adopted its restructuring plan, but only after nine months of committee work by faculty and administrators, intensive campus consultations, and two "town" meetings for the faculty to question the administration. At most universities, faculty members jealously guard their turf, and they worry that corporate-inspired restructurings have no place in academe. "A restructuring is very difficult to accomplish politically in a university environment," says Eamon M. Kelly, president of Tulane


In addition, too many university boards aren't pressing hard enough to restructure their institutions. The typical board at an independent college has 28 members and meets three or four times a year, usually for less than a day. "There is a wake-up call in the air for trustees," says William F. Massy, formerly chief financial officer and currently professor of education at Stanford University.

SUPPORT SERVICES. What drove college budgets so far into the stratosphere? Several things. In the past few decades, course offerings and academic fields have proliferated. Rarely were old departments weeded out or programs cut back as new ones were added. A lot more money went toward scholarships, especially at private universities and liberal arts colleges. Research costs jumped, with scientists requiring state-of-the-art equipment. Average faculty salaries almost doubled in the 1980s, after badly lagging behind inflation in the 1970s. And confronted with fewer qualified applicants, schools poured money into sprucing up campus amenities and support services to entice students.

University empire-builders hired an army of administrative bureaucrats to staff their enterprises. Between 1975 and 1985, nonteaching professional staff at colleges and universities expanded by 61%, while the number of faculty grew by only 6%, according to an Education Dept. study. In the 1980s, administrative expenditures for each full-time student in public universities rose 19%, compared with 5% for instruction expenditures per student, after adjusting for inflation. At private universities, administrative costs rose 34%, vs. 26% for instruction costs.

Some cost pressures won't abate much in the years ahead. Research spending is still mounting at many universities. So is the demand for scholarship money. And the battle for qualified students remains fierce. To attract the best applicants, Georgia Institute of Technology is building a new student center and pouring an additional $100 million into expanding the school's intercollegiate athletic facilities. Georgia Tech President John P. Crecine is lobbying for a big jump in state funding and says much higher tuition is almost inevitable.

But more and more universities and colleges will contain costs by slimming down. Tulane in New Orleans recently closed a projected $18 million budget gap by overhauling its administrative structure. More than 200 staff jobs were cut by combining departments and substituting computers and advanced technology for middle managers. About three dozen faculty jobs will be eliminated over two years through attrition and early retirement. The university reduced its enrollment from 1,375 to 1,225, and annual tuition increases will be kept to 3%. The university is now studying how to reallocate resources among its academic departments.

Syracuse University, under Chancellor Kenneth A. Shaw, is reducing its enrollment by 20% and has cut tenured faculty by more than 120 and administrative staff by nearly 300. The university has also slashed its computer science budget by 50% and engineering by 30%. Over the years, both departments' budgets had grown modestly, even though enrollment fell by half. But Syracuse isn't just cutting. It has added $1 million to the budget of its Maxwell School of Citizenship and Public Affairs and increased spending in its architecture, arts, and communications departments. Brandeis University is dialing back in some fields while boosting its Near Eastern & Judaic Studies and international economics budgets.

Undergraduate teaching is also getting a new emphasis. At Cornell University and New Jersey's Drew University, a professor's teaching ability now counts for half the tenure decision. For years, "universities concentrated on research, and teaching was an afterthought," says Thomas Kean, head of Drew and former Governor of New Jersey. "Now, the pendulum is swinging back, and there is a return toward the value mf teaching."

LUSH RESEARCH. A number of schools are experimenting with new technologies to transform the teaching of students and reach pupils outside the university. Interactive computer systems, for example, are changing the teaching of foreign languages. Carnegie Mellon University (box) sees a growing market for reaching out to companies that face budget and time constraints. Many companies can't afford to lose workers for even a week. So CMU's business school has developed a training program for traders that can be sent to the student's personal computer at work.

To bring in more money to fund research, universities are expanding their ties to industry. And the payoff from such links are enormous. Academic research is critical to advances in computers, biotechnology, and other high-tech industries that are boosting U.S. competitiveness. The rate of return on academic research is a lush 28% per year, including indirect benefits to the economy, according to Edwin Mansfield, economist at the University of Pennsylvania. "What happens in universities will have a huge impact on the economy," adds Paul Romer, an economist at the University of California at Berkeley.

Clearly, the stakes are high. Done wrong, university restructuring could drive away faculty, alienate students, and eventually damage the nation's productivity growth. Done right, the world's best system of higher education could become even better.

      Expenditure per full-time student
                                    Public    Public    Private    Private
      in constant 1989-90 dollars   4-year       4-year     4-year       4-year
      Percentage change 1981-90   university    college    university    college 
      Scholarships & fellowships    34%           5%          52%         64%
      Administration                19            12          34          26
      Research                      21            21          19          17
      Student Services               8             2          34          31
      Instruction (includes salaries  
      and benefits)                  5             2          26          18
      Libraries                      5           -13          17           5
      Operation & maintenance of 
      plant                         -6           -17           5          -4
         BRANDEIS Aims to reduce a $12 million budget deficit over four years. 
      Full-time faculty will be cut from 362 to 315 and will take on a greater course 
      load. Administrative staff will be cut by 3% on top of a prior 3%
         CITY UNIVERSITY OF NEW YORK Wants to consolidate some programs at its 
      several major campuses, while expanding offerings in science, math, and various 
      health fields.
         SYRACUSE Will shrink enrollment by 20%. Some department budgets being 
      slashed by up to 50%, while others receive budget hikes.
         TULANE To close a projected $18 million budget gap, reduced administrative 
      staff by more than 200. Faculty will be reduced by 33. Studying restructuring 
      of academic departments.
         UNIVERSITY OF MICHIGAN Adopted a five-year plan to reduce spending by 2%. No 
      salary increases this year for staff making more than $25,000. Decentralizing 
      power to school units. Teaching quality management techniques to all employees.
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