The Spiraling Cost of Higher Education

In good times and bad, there is one thing as certain as death and taxes: the cost of going to college will continue its upward spiral. There are many reasons for this development, a few of which come to mind.

First, there is inadequate fiscal oversight by those charged with the responsibility of governing our colleges and universities. The most frustrating aspect, by far, of my twelve-year term as a regent of the University of California (UC) was trying to understand the fiscal affairs of the institution and to assert some influence on them. It would be difficult to accomplish this objective with regard to any multi-billion dollar enterprise, but that difficulty becomes a virtual impossibility when it comes to a major university.

For years, I worked as a legislative consultant and in areas that have required me to understand the fiscal activities of California State Government – an enterprise that is about 20-25 times larger, fiscally, than UC. That experience taught me that the State budget and related fiscal matters are a “piece of cake” compared to UC’s. I will not go so far as to suggest that this difficulty is deliberate on the part of UC administrators, but there were times during my stints as Chairman of the Regents Finance Committee when I thought that to be the case. Without adequate oversight, university administrators have no incentive to discipline themselves to be more efficient or resistant to the endless pressures, from all segments of the university family, to engage in activities that result in increased costs of running the institution.

Public universities are unique institutions, the administrators of which can easily craft a structure that insulates them from outside influences, including their own governing boards. On numerous occasions, I can recall being told that we had to include certain items in the budget because the governor or some key legislator was insisting upon its inclusion as a condition of budget approval. Later, I would learn that the representation was not quite as it had been characterized. When administrators craft the budget and lobby what they have crafted to the Legislature, the governor and the regents, it becomes more than tempting to “whipsaw” the separate parties, especially when the regents are in little position to distinguish fact from fiction.

The second major problem is the fundamental culture of “selective” universities, such as the University of California. Such institutions get caught up in a “keep up with the Joneses” method of operation by comparing themselves to other “comparable” universities. When the University of Chicago gives its administrators a salary increase, for example, the UC administration gives its administrators an increase. The next year, the University of Chicago gives an increase because last year UC gave one – and “the beat goes on.”

While there is something to be said about the need for universities to compete for top-notch scientists and other faculty “stars,” I have yet to see a compelling case made for UC having to compete with U-Chicago or Harvard or any other institution to recruit and retain some specific administrator. If the State of California can attract top people to be cabinet officers at salaries of less than $200,000 annually, why is it necessary for UC to pay double that amount? It is hard for me to understand why the requisite skills to be Senior Vice President of Finance in the Office of the President of UC, for example, are so significantly greater than that of being Director of Finance for the State of California. Counting beans is the same, no matter where you count them. Therefore, the salary comparison for administrative positions should be based on the California job market, not a national group of “select” universities.

Keeping up with national “comparison institutions” also accounts for what many would consider obscene “perks” such as housing and relocation allowances, low-interest mortgage loans, jobs for spouses, and other benefits that are not common among most public agencies. Relocation allowances on the order of $25,000 to $40,000 often bear no relationship to the actual cost of moving; they are little more than a “signing bonus.” I am certain that Bekins or Starving Students could get the job done for a fraction of that amount.

The third factor is the attitude that everyone must go to college, an attitude that unquestionably contributes to escalating costs of higher education, because it helps to create a market for a product that is considered as essential as food and housing. As long as college administrators can convince our society that “college is the gateway to upward mobility,” a built-in pressure for rising costs is created, because the product they are selling us is considered indispensable to our future.

Finally, governors and legislators, both Democrat and Republican, also bear a lot of unwitting responsibility for the rising costs of going to college in California. And, this problem is not unique to the “Golden State.” Here is how they do it. Every year, the university prepares its budget and adopts a fee schedule based on what it needs to provide a “quality education” (whatever that means). When the proposed fees (tuition) are announced, governors and legislators fall over themselves to “buy out” the fee increase in the form of a state subsidy to the university. Thus, they are able to say when running for reelection, “I kept college fees low.” In reality, they did no such thing. What they did was to allow the university to raise the fees, but not pass the increase along to students, and thereby escape the necessity of providing a product that the consumers (students) can afford.

Terms such as “accountability” and “transparency” are critically important with respect to public universities, but they are also quite elusive when applied to the fiscal operations of such institutions. That is why the cost of going to college continues its upward spiral and there is not much hope of that changing until fundamental changes are made with respect to university fiscal oversight.