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College Costs Too Much Because Faculty Lack Power

By Robert E. Martin

Surveys reveal that the public believes a college education is essential but too expensive. People feel squeezed between the cost and the necessity. At the same time, public colleges complain that they are being squeezed by declining state support and increasing pressure to educate larger numbers of less-prepared students.

Yet society has provided higher education with a river of new real revenues over the past several decades. Since nonprofit institutions of higher education follow a balanced-budget model, expenditures are capped by revenues. Therefore the real cost per student cannot increase without a corresponding increase in real revenues. So the problem has not been too little revenue.

Nevertheless, college affordability has declined. So the crucial question is: Where was all that new money spent?

A common theme among higher education's critics is that shared governance is to blame for colleges' profligate ways, because faculty have too much influence over how money is spent. And the critics are right: Shared governance does play a role. But it is not the "shared" part of "shared governance" that has failed; quite the opposite. The fault lies in the withering away of the shared part. Reason and data alike suggest that the largest part of the problem is that it is administrators and members of governing boards who have too much influence over how resources are used.

The pursuit of self-interest by both faculty and administrators is at work here. Higher education is, of course, a labor-intensive service industry. An institution's labor cost per student is the sum of wages and benefits divided by the number of students. The cost per student goes up as wages and benefits go up, or as the ratio of staff to students rises. When that ratio goes down, productivity increases, and the cost can go down, even if wages and benefits go up. Staff-to-student ratios, then, are the key to understanding higher-education costs.

A study of those ratios from 1987 to 2008 for research universities, colleges, and public master's-level institutions reveals that the number of faculty and administrators per student actually grew over those years. But we can't lump faculty ratios and administrative ratios together, because they are significantly different. On the academic side, the tenure-track ratio increased modestly at public research universities and to a greater extent at private research universities and colleges. But in both cases, the institutions significantly increased their use of non-tenure-track full-time and part-time faculty. So although faculty-to-student ratios went up, most of the increase was based on the use of contract and part-time faculty.

On the administrative side, the ratios of executives to student and professional staff to student increased—the latter by 50 percent. In 1987, except at private research universities, where administrators outnumbered tenure-track faculty, colleges had approximately as many tenure-track faculty as full-time administrators. By 2008 there were more than twice as many administrators as tenure-track faculty at all types of institutions.

So, during the years studied, costs grew further out of control as administrators and governing boards consolidated their control over institutional priorities—hardly a healthy trend for genuinely shared governance.

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