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Higher Education's Political Climate
I. Financial Strategies (back to top)
Financial strategies for universities all deal in some way with coping with, or otherwise beneficially altering, the natural trajectories of either the costs or revenues or both of the modern university. Financial strategies have as their end, at the most minimal level, financial survival, but at more ambitious levels, the enhanced capacity of the university to teach, to discover, to serve, and perhaps to grow.
The fundamental dilemma of universities everywhere is that both our costs and our revenues have trajectories--paths of natural increase or decrease to which our institutions, and indeed the entire higher educational enterprise, will fall in default unless actions are taken to alter them. And these natural trajectories are not benign. The natural trajectory of our institutional unit costs--whether per-student, or per-scholarly advancement, or per-units of real student learning--is rapidly upward, for reasons I shall discuss. The natural trajectory of total societal costs must accommodate not only these increasing unit costs, but must accommodate in addition the accelerating expansion of knowledge, population, participation, and other demands on the university, all of which bring new costs. But the natural trajectory of revenues, although more complex given the differing natures of taxpayer, parental, student, and philanthropic sources, is everywhere insufficient to meet these expanding costs.
From this fundamental divergence of trajectories lies the need to have financial strategies that promise to alter either the costs or the revenues or the underlying production paradigm (or all three) of the modern university. At risk if we fail is the quality and even the viability of our universities, as well as the capacity of these institutions to meet the growing and changing demands we put upon them.
II. The Trajectory of Costs (back to top)
Let us examine first this natural trajectory of costs. Why, some say, should the costs of universities increase so? Is this not in itself evidence of bad management, or a fundamentally unproductive professoriate, or the lack of a good financial strategy, or the absence of the kind of leadership willing to make the difficult decisions that modern businesses have made to remain viable in the competitive global economy? And do we not, then, need to devise financial strategies and find tougher leaders that can emulate those businesses and industries that have successfully restructured or re-engineered or otherwise downsized to reduced their fundamental trajectories of costs?
I say "not necessarily." Not because I do not know how to cut costs; indeed, I cut $200 million while heading the State University of New York. And not because I find cost-cutting disagreeable--although I mistrust anyone who does not. Rather, I believe that the cost pressures in our industry have little to do with inadequate cost controls or insufficient managerial mettle, and that the proper financial strategy for a modern university is fundamentally different from the optimal financial strategy for a modern business. I further believe that most of us are doing better--that is, coming closer to this optimal strategy--then certainly our critics, and perhaps even we ourselves, frequently give us credit for.
The upward trajectory of higher educational costs is a function of four factors. The first is the fundamental labor intensity of the enterprise, both of teaching and of scholarship, not unlike most service industries. As a consequence, our unit costs will rise inevitably relative to the rates of increase of costs in the more productivity-sensitive sectors of the economy, whether public or private, where the constant application of capital and technology can be expected to yield lower rates of unit cost increase.
Our critics say that this immunity from productivity is not immutable: that the wise application of new instructional technologies to teaching and learning--multi-way, digitally-connected, distance learning, for example, or video and computer-assisted self-paced learning--can indeed yield productivity advances if the professoriate would but allow it.
In theory, I cannot disagree. But the barriers in the university to real cost savings from technology reflect far more than a stubborn, job-preserving, Luddite opposition. Indeed, most faculty whom I know and work with are stretching themselves to learn more about video, the computer, interactive software, and the internet, and about new pedagogies for their use. But the pressure to do more and better with technology---not just to do whatever we do more cheaply--is virtually irresistible and unstoppable.
Since producing considerably more--whether of teaching, learning, scholarship, or service--for only a little more cost is clearly an increase in productivity, there can be little doubt that technology has already increased the productivity of the modern university, and that this productivity increase can be expected to go on for the foreseeable future. It has simply not made the university less costly, especially to the taxpayer, and probably will not do so--not, at least, without very fundamental changes in our paradigms of teaching and learning, about which I will say more below.
A second factor underlying the inflation of unit costs is the pressure, largely self-imposed, to do whatever it is that we are doing better: a powerful, fundamental incentive for enhancement. Far from being complacent, as our critics sometimes claim, the academic profession is perpetually dissatisfied with its own performance and is constantly looking for better ways to teach, better ways to organize the curriculum, and new breakthroughs in research. True, the drive may be for individual scholarly prestige: sometimes self-aggrandizing, to be sure, and with insufficient regard for the good of the institution. And it is not absolutely clear that the university always needs to get any better--not, at least, without sensitivity to the opportunity costs of betterment.
But it is inevitable that the faculty and most academic leaders will want their products to be better, and will believe that "betterment" is their obligation regardless of any cost-benefit calculations. And so it is equally inevitable that the university will, at least if it is able, consume more costly inputs such as computing power, library resources, sophisticated scientific and telecommunications equipment, paper, space, and the like, and therefore will cost more, all in what we and our faculty colleagues will genuinely believe to be a proper and even a noble quest for a better product.
A third force, contributing not to the rise in unit costs, but to an increase in society's total expenditures on higher education, is the expansion of both population and participation, the latter occurring particularly with those traditionally less accommodated: females, those from lower socioeconomic classes, and in some countries, newer immigrants. There is certainly some theoretical upper limit on university participation, when the class, gender, ethnic, and regional disparities are no longer significant and when the limits to university participation reflect only natural ability and personal inclination. But we in the United States are not there yet. Nor are the nations of Europe. So the rise in unit costs will be accelerated by an inevitable rise in the number of units--students--that we are required to serve.
The fourth fundamental force accelerating university costs--again, total rather than unit costs--is the accretion of degrees, or the increasing level or amount of higher education partaken of by the average student. This phenomenon is a function of the increasing amount and complexity of knowledge, the tendencies of most professions to enhance their status by requiring more education prior to entry, and, especially in the United States, very high present rates of attrition, or wastage, and the resulting pressure for (and likely success in) enhancing persistence, thus increasing the effective enrollment from the same size cohort of entering students.
There may be countervailing pressures on the European Continent: forces that would reduce the number of years the average student takes to earn a first degree, and even reduce the content--and the cost--of an acceptable first degree. The rise in the non-university sectors in many European countries--Fachhochschulen in Germany, HBO in the Netherlands, Instituts Universitaires de Technologie in France--and the introduction of an earlier Diplôme d'Étude Universitaires Général in the French university--are all efforts to reduce the length of stay, and thus the institutional cost, of at least some students.
And they may work, for a while. But then the opposing forces will reassert: the academic drift that has made full universities, at least in name and often in substance, out of the British polytechnics, and so many of the US comprehensive public colleges; the inevitable increase in knowledge required for success in most occupations; and the accretion of degrees as a natural consequence of competition for jobs and promotions. Some of this increase in teaching and learning will be accommodated through entirely new degrees, new technologies, and new pedagogies, and may be paid for in new ways, with less reliance on the taxpayer. Nonetheless, the underlying trajectory of demands on our universities will continue to be for more and higher levels of higher education, presenting more demands on available public revenues.
III. The Trajectory of Revenues (back to top)
The revenues from which such costs are to be paid exhibit no such fortuitous natural upward trajectories. University revenues are the sum of the revenues from five sources:
Only these five. And they must, in sum, increase in step with the natural increase in total university costs. But only consider the limits on these revenue sources.
Governments everywhere struggle under escalating burdens of pensions and other social welfare costs. Europe, with high social welfare costs and typically from one-third to more than one-half of national gross domestic product in the public sector, is trying to shift productive resources to the private sector and to reduce public deficits to comply with the requirements of Maastricht. Eastern Europe labors under the enormous costs of building an internationally-competitive productive infrastructure, weaning a labor force away from dependence on state enterprises and governmental employment, and reversing generations of environmental degradation. The United States struggles with an over-consuming, under-saving population that is unwilling to tax itself for the public benefits it demands--and yet is increasingly restive about its public deficits.
Taxation everywhere is getting technically more difficult as productive enterprises and even wealthy individuals are increasingly able to flee to countries with lower wages and lower taxes. And electorates nearly everywhere have been getting more conservative, particularly in their distaste for taxation, deficits, and government spending.
Government, or the taxpayer, will almost certainly have to bear much of the additional costs of expanded participation in the university. But this will leave all the less for covering the rising unit costs--the natural cost trajectory--of the existing university faculty, staff, and facilities. There will almost certainly be less revenue from most governments than will be needed to do all that the universities will be expected to do with the kinds of faculty-student ratios and scholarly support that we have come to know and expect in the classical Western university.
It is tempting to seek to close the gap through purchasers of university services and products: mainly corporations, foundations, and governments that buy research through grants and contracts; individuals and insurance companies that purchase medical services and hospital care; and individuals and corporations that purchase special training for tuition fees. These sources may bring in vast revenue, particularly to larger research universities, and especially to those with academic medical centers. But the universities also incur enormous costs by the activities that generate these grants, clinical revenues, and special tuition fees.
In the end there will be a significant volume of university activities that can be expected to generate revenues sufficient to cover their own very considerable costs. But it is not clear that these activities will be able to generate the appreciable additional revenue required to help out on the costs generated by those parts of the university that do not bring in much, if any, of their own non-governmental revenue. The general teaching faculty and support staff, for example, may bring in some tuition, but not enough even in the United States, with its high tuition even in the public sector, to cover costs, and certainly not in Europe, where most faculty and all students still operate under the assumption, or at least the fond hope, that government, or the taxpayer, will cover all of the costs of instruction. Relatively few faculty in the humanities or social sciences can cover the costs of their research by external grants, for which there are few sponsors. And even in science, there are actually few truly reliable external sponsors outside the fields of biomedical research, defense-related research, and those engineering and applied science fields with relatively certain and immediate commercial applications.
So we turn to students and their parents. Can they pay enough additionally each year to keep up with their current share of higher education's inflationary engine and perhaps a little extra to cover some almost certain shortfalls from governments, or taxpayers? There is a large body of thought in the United States that believes so: that is, that parents and students, the latter through part-time earnings and student loans, can pay a significantly larger share of university costs, not only keeping up with increases in their present share--approximately 20 to 40 percent of total instructional costs, or roughly $2000 to $4500 per year for public undergraduate university education--but can assume an even greater burden to compensate for the failure of government to keep up with its share, and maybe an additional share beyond to pay for those whose parents are too poor to be expected to pay anything for the higher educational costs of their children.
But it may not add up, even in the United States where parents are used to bearing a heavy cost at least for their children's first higher education degree. The costs of student living--that is, lodging, food, clothing, entertainment, transportation, and incidentals--are already $8000 or more a year for students who live away from home, before any tuition or fees. This is already a heavy burden for most families, even where there is a tradition of parental responsibility for the children's university education , as in Germany, and even more unrealistic in the Scandinavian countries, where there is less of a tradition of parental responsibility for the costs of their children's higher education.
The beginning of tuition in nations where it has not yet taken hold, and the very great increase of tuition in countries such as the United Sates, where it is already considerable, may be inevitable precisely because government revenues are failing to keep pace with costs, and tuition increases may become the only realistic balancing factor: the source of revenue that has to make up for shortfalls from the other sources, primarily government. But continuing increases in the costs born by student and parents, at rates of increase in excess of inflation merely to maintain the student and parent share, and considerably greater than that if the family is to make up for shortfalls caused by insufficient government funding, will be politically and practically difficult, especially with increasing emphasis on making university education more accessible to those from lower family incomes.
IV. Higher Education's Political Climate (back to top)
So we are left with trajectories of costs and revenues that naturally diverge--and in the wrong directions! But the identification of an appropriate financial strategy is further complicated by a public ambivalence toward higher education and especially toward its university sector.
On the one hand, as I have already identified, higher education, and especially the major universities, are becoming increasingly important and recognized to be so:
But the public, at least in America and it would seem in much of Europe, also has another, less favorable, view of the academy. Some view the professoriate as too privileged, both insufficiently productive and overly insulated from the rough and tumble and insecurity of the private sector labor market. Some resent the university gatekeeper from having kept them out. A few who have made it economically and socially without benefit of the university disparage it, both for inflating its importance and (ironically) for letting too many through.
Some, principally from the political right, view the university as full of leftists, Marxists, Critical Theorists, Post-Modernists, Post-Structuralists, and others who may be insufficiently protective of the common culture and at the same time insufficiently entrepreneurial as well as insufficiently responsive to the needs of the middle class. Still others, principally from the left, view the same institution as hopelessly conservative and elitist, at once both overly privileged and subservient to the worst features of competitive capitalism.
But the most common denominators to the university's financial predicament are, on the one hand, increasingly scarce discretionary public revenues, and on the other hand, the ascendancy of neoclassical economics favoring private sectors, market solutions, and a diminishing role for pubic institutions.
V. Financial Strategies for Universities (back to top)
With this financial challenge, and within this political climate, I see four general financial strategies for universities:
Let us look at each.
Financial strategies on the Income Side
Financial strategies to increase income are generally the first to be advanced. They maintain the university's traditional primary orientation to research and scholarship. Solving a financial problem through increasing income, if successful, requires no disagreeable choices about which programs, or even which faculty, should be triaged to make way for new advances and growth. If we can increase income enough, we can have our growth and our change without abandoning any worthy colleagues, any precious programs, or any of our conventional paradigms of teaching and learning.
Increasing Grants, Gifts, and Contracts. The most popular (which is not always to say the most successful) financial strategies for revenue enhancement would increase the revenue brought in through gifts, research grants and contracts and other entrepreneurial activities. Successful strategies for each call for incentives and investments. The bedrock incentive strategy is to ensure that the university as an institution, and the key individuals capable of implementing income-generating activities, benefit from any success. This must begin with the assurance that the government will not reduce revenues in proportion to the new revenues brought in. For example, nothing is so certain to discourage a large private donation than the prospect of the government effectively confiscating the gift through a compensating budget reduction. Likewise, faculty will be discouraged from the arduous task of securing grants and contracts if they are not advantaged by at least some of the "coins" of the academy: time for additional research, funds for equipment and travel, graduate assistants, and possibly some increase in compensation. And finally, colleagues of the principle investigator may also need to see some of the revenue in return for picking up more of the teaching and service load of the faculty "star" who is winning the large grants and contracts.
The enhancement of income from grants and gifts also requires strategic investments. Such investment might be made, for example, in high-profile faculty who are capable of attracting grants and contracts as well as in the scholarly infrastructure of laboratories, equipment and computing facilities, and graduate assistantships needed to win in the enormously competitive arena of governmental, foundation, and private sector research sponsorship. Since the game is very nearly "zero-sum"--that is, a competition for an essentially fixed amount of money such that for each significant new winner there needs also to be a new loser--the strategy can pay off for only a relatively few universities, generally those that can most afford the necessary up-front investments.
Another limitation, as we have already seen, is that most revenue-augmenting activities of the university bring their own increased costs. Thus , even those relatively few universities that successfully increase their share of the available sponsored research funds will also incur significant additional costs, both direct and indirect. The additional indirect costs may be offset by research overhead if the sponsors are willing to pay their fair share--which more and more are unwilling to do. In addition, the university may never recover the non-monetary costs of diminished academic quality that may stem from the diversion of faculty time and allegiance away from teaching or from the diminution of resources in those fields not supported by government and corporate grants and contracts.
Increasing Tuition and Fees. A financial strategy on the income side will also attempt to enhance revenue from parents and students--consistent with, or at least cognizant of, the history and tradition of differing national views of the appropriateness of tuition. Seven strategies may help to enhance revenue from parents and students:
Dubious or Limited Income Side Strategies
Where financial strategies to enhance revenue from students and parents go wrong is when they attempt to mask the fact and the ultimate impact of the tuition or fees. For example, there are several popular strategies that promise, mistakenly and mischievously, to all but eliminate the distasteful consequences of sharply rising tuitions. Among such strategies income contingent loans and graduate taxes. These are ways of handling student deferred payment obligations--essentially, student indebtedness--not in schedules of fixed repayments due, but in legal obligations to repay some percentage of future earnings. Features of the particular scheme will determine the extent (if any) to which high-earning repayers will subsidize low-earning repayers by assuming some portion of the repayment obligations of the low earners.
Some kind of large scale student borrowing or deferred payment plan is essential to any strategy that would replace taxpayer revenues with students revenues. And having the repayment correspond to earnings, or the changing ability of the borrower to pay, is a good idea. But the deferred tuition payment obligation, in whatever form--whether student loan, graduate tax, or income contingent repayment scheme--remains a transfer of cost burden to the student carrying a stream of future payment obligations, the discounted present value of which, in the aggregate, must be equal to the present revenue gap that the university is attempting to fill with the deferred tuition, however financed. In short, these are still loans that must be repaid, differing from conventional student loans only in that the timing and the ultimate discounted present value of the individual student's repayments will not be known until near the end of each individual student's earning lifetime. But the average repayments--or the repayments over any large cohort of students--must still be sufficient to repay the aggregate debts, or repayment obligations, of those students.
Income contingency is a good complement to any financial strategy that features a substantial student tuition burden, presumably to make up for an anticipated withdrawal of government or taxpayer revenue. But "income contingency," whether of the sort practiced in Australia, Sweden or the United States, does not fundamentally alter the substantive underlying strategy, which is to shift more of the cost burden to at least most students, nor will it make the ultimate repayment burdens, for most students, any less.
Another example of a dubious income-side financial strategy is the tax-exempt tuition savings concept that has been adopted by several US states as a political response to the issue of very high (and sharply rising) tuitions mainly in the private sector, where the most expensive undergraduate colleges and universities now exceed $25,000 per year. As with most tax abatements, the true incidence of those tax breaks--that is, who actually pays for them--is obscure. A problem with such special "tuition savings plans" is the lack of clear evidence that they actually increase net savings--as opposed to merely shifting savings away from savings instruments with less governmental subsidy. And there has also been little evidence to demonstrate that student matriculation, persistence, or academic performance are improved by these tax advantages to their parents.
A similar scheme, to assuage anxieties caused by recent sharp increases in public university tuition is to give relatively affluent parents with young children the opportunity to prepay the tuition for their children. The state or the university holds and invests these funds until the moment of matriculation, and the parents presumably gain by transferring to the state or the university the risk that tuitions might increase faster than the rate of return they could get by investing their money now themselves. Such plans, like the tax exempt savings plans, of course do nothing by themselves to alter the fundamental cost trajectory of the university or the likelihood that revenues will have to come increasingly from either parents or students in the form of tuition. Nor do such plans do anything for the very great number of families who do not have the spare cash to invest in a highly illiquid, long-term savings instrument for the possibility that their children will enter a university in ten or fifteen years and be otherwise unable to handle the costs. Such plans are not inherently wrong. But they are dangerous in that they allow politicians to claim--maybe even to believe--that they have solved a fundamental problem, when they have, in fact, done absolutely nothing either to alter the university's cost structure, or to accommodate the students and families who will otherwise have significant difficulties meeting the likely shift of university cost burden from taxpayer to parent and student.
Conventional Strategies on the Unit Cost Side
It is useful to consider two quite different approaches to the reduction of unit costs. The first assumes continuation of the conventional teaching-learning paradigm. In the United States, particularly for first degree students, this paradigm has faculty teaching "courses" or "classes," defined by a body of knowledge and a set of learning goals, meeting for periods of fixed duration, usually fifteen to sixteen weeks, at the end of which each student is awarded so many "credits" and a grade. After approximately four years of full-time study or the part-time equivalent thereof, and with enough of the proper courses and acceptable grades, the student gets a degree. European first degree higher education is more examination oriented and less reliant on "courses" and "credits." But here, too, there is a similar teaching and learning paradigm, based on the faculty lecturing and the student listening and presumably learning, supplemented by reading, writing, and limited laboratory work, much of the latter under the tutelage of lower-paid, junior instructors.
Financial strategies on the cost side, designed to lower costs per student or per course credit, and assuming the prevailing, teaching-learning paradigm, include: (1) enhancing institutional managerial competence; (2) enhancing institutional flexibility and autonomy; and (3) reducing the average per-student costs of the instructional faculty. Let us consider each strategy.
Enhancing managerial competence. As a strategy, this is essentially nothing more than "good management practice," as applied in a university context. Among the familiar, conventional "good management practices" are:
Enhancing institutional flexibility and autonomy. Flexibility and maximum institutional or agency autonomy is simply good public finance practice, but practiced by most governments mainly in the breech. Flexibility and autonomy serve the end of maximizing the university's outputs of teaching and research for the public (taxpayer) dollar, and also provide incentives for maximizing other-than-governmental revenue. The university, rather than the ministry or the state budget office should have the authority, for example, to:
Lowering the average per-student costs of instruction. Per-student instructional costs are a function of three elements: (1) the average class size; (2) the average instructional load--that is, the number of classes that the average faculty member is expected to teach; and (3) the average cost per faculty member. The latter element--the average cost per faculty--is essentially the average total compensation per faculty member, which is a function mainly of the mix of faculty as between higher-cost, full time, "regular" faculty, presumably appointed primarily on the basis of scholarly potential, and lower-cost junior or part-time faculty, appointed mainly to teach.
From the above cost elements arise four basic strategies to reduce the average per-student costs of instruction.
Dubious or Limited Cost-Side Strategies
As with the financial strategies on the income side, there are a number of cost-side strategies that are frequently urged upon the university, but that are either limited or of dubious applicability. Among these, for example, would be:
The substitution of low-cost, generally part-time faculty for higher cost senior faculty. This strategy can save money. However, it also brings substantial costs to the university and to its academic programs. And to the extent that the new part-time faculty are actually doing the work of the full-time regular faculty, but at lower cost and with less institutional commitment, the strategy is clearly one of exploitation.
Across-the-board increase in teaching loads. This is a strategy favored by those who do not understand what the faculty does all day, and who generally believe that an across-the-board increase in teaching loads would simply give the public (which is paying the bills) a "fair day's work" out of faculty who these critics believe to be insufficiently productive now. The problem is not that all or most faculty could not teach more. Rather, the problem is that the resulting institution would cease to be a "university," in the form and with the behaviors that we now know. It would not be a "more productive" university as much as it would be a different sort of university. And should this requirement be imposed only on some universities, the better and more mobile faculty would simply move to universities that would promise them the same teaching loads as before, and the quality of the target university would be all the more diminished.
Mergers can, at least in theory, lower unit costs by increasing the scale of operations and achieving savings on such overhead expenditures as physical plant, libraries, and administration. But such savings require cutting faculty and staff, including top-level, highly-paid administrators, as well as closing facilities, eliminating some academic programs, and giving up precious institutional identity--measures that are often bitterly resisted, both institutionally and politically. If the "merger" is only nominal--i.e., retaining most facilities, programs, and faculty, and merely eliminating a president or rector and a few other top-level administrators--the result is more likely to be more complicated management, demoralized faculty (of both institutions), and the failure to realize the significant savings of either a genuine merger or the outright closure of one of the supposedly "merged" institutions.
New academic calendars. There is no doubt that the conventional academic calendar, with its long summertime break, many other holidays, and less-than-full use of the days and weeks when the university is in session, seems highly unproductive. However, in the United States, at least, what is often not recognized is the degree to which many universities have already filled in many, or in some cases most, of the seeming interstices of unproductive time, with e.g.:
Furthermore, at least in the United States, many serious attempts at moving toward "year-round study" have been attempted and failed, mainly because the student demand was simply not there. Apparently, the seeming advantage to students of completing their undergraduate or first degree studies faster and entering earlier into the world of business or professional practice, or into graduate or advanced professional study, has simply not been evident to the students. This is not to say that institutions should cease the attempt to make more productive use of their faculties and facilities. But the costs of major changes in academic calendars have frequently proven higher than anticipated, and the financial advantages have proven to be very elusive.
Distance learning. This is too limited a forum to delve deeply into the instructional and financial implications of distance learning, particularly in the conventional teaching-learning paradigm where the faculty teach and the students listen and presumably learn, simultaneously, or synchronously, but physically separated, joined for the purpose of the teaching and learning by television (preferably high-resolution, multi-way, interactive) or the Internet, perhaps supplemented by telephone or fax. There is no question that these instructional technologies can enrich the teaching and learning. There is also no question that one professor, with considerable technological investment and extensive staff support, can teach to many locations, and possibly to far more students, than he or she could teach "face-to-face" at a single site. And if the goal is to reach out to otherwise place-bound students, unable to travel to a common site for any number of reasons, but able to get to remote sites to receive a transmission, distance learning can extend access at considerable savings over the alternative of placing faculty at each remote site. However, for a single institution seeking to cope with diverging trajectories of costs and revenues, most applications of distance learning can enrich the learning but will actually cost more rather than less.
Early retirement. A favorite financial strategy of governments, corporations, or universities that are "downsizing"--that is, shedding personnel for the purpose of cost cutting--is early retirement, whereby high-paid senior staff are "bought out" into voluntary early retirement, generally with some form of supplement to their pension. This may get rid of personnel costs that the institutions intends simply to do without, but without the disagreeable need to "fire," "lay-off," or "retrench." But the consequence is that the university is made smaller by no plan at all: rather merely by the accident of who chooses to avail himself or herself of the early retirement option. Or, the savings are obtained by replacing the departing high-paid person with a much lower-paid junior person--again, generally without thought to the consequence to institutional needs or to quality. The early retirement plan can, of course, be more selective, aimed only at the less productive senior faculty. But such a practice may encourage the university to continue to be derelict in addressing the real, if rather small, problem of unproductive senior faculty, substituting the easy but costly "buy out" solution in lieu of the more difficult, but far more responsible, solution of addressing the insufficiently productive individual and helping him or her to maintain a productive career of teaching and research, perhaps by changing the mix of teaching and research efforts with the passing of time and the waning of scholarly productivity.
In any event, the consequence of early retirement "buy-out" is too often the loss of productive senior faculty, at an age far before their true value to the university ought to be diminishing. Or, the effect is to pay persons extra to retire "early" who might well have retired anyway, without the extra expense to the institution or to the government. Early retirement is politically easy, and administratively expedient, and will doubtless continue to be part of the arsenal of cost cutting techniques. But it carries costs, often hidden, to both the institution and to society.
Unconventional Strategies on the Cost Side: Enhancing the Productivity of Learning
The above strategies all assume the conventional teaching-learning paradigm of the research university, at least as it applies to the first degree student. Unconventional strategies, at least as applied to the costs of instruction, allow consideration of entirely new ways to teach and to learn--and thus to reduce the unit costs not so much of instruction, but of learning.
The conventional teaching-learning paradigm, particularly as practiced in the United States, but also substantially in Europe as applied to first degrees, takes students enrolled in courses or classes, defined by blocks of time (terms, quarters, semesters, or whatever), as the principal generator of cost. The assumption implicit in this paradigm is that "students enrolled in courses for fixed blocks of time" is a valid measure of the university's instructional output. And the only way to increase productivity in such a paradigm is to lower the cost per course or per credit unit--largely in ways discussed above: e.g., increasing the number of students sitting in the average class, or increasing the number of classes taught by the average professor, or reducing the average cost of the average professor.
But what if we were to consider the "costs per" for purposes of ascertaining institutional productivity as the cost per unit of learning? Then the university would become more productive not as it cut the cost of a course (e.g., by putting in a less costly faculty member) or as it put more students into the average class, but as it increased the amount of student learning generated by the average faculty member (or dollar) of instructional expense.
Under a learning productivity perspective, "cost" is driven not so much by faculty salaries and course loads or average class size, but by factors that contribute to, or distract from, student learning. "Costliness" then becomes a function not so much of small class sizes or low teaching "loads," but of the amount of time that the students is not learning (i.e., vacations and other diversions), or learning aimlessly or redundantly or otherwise ineffectively. The university becomes more productive (at least with respect to its instructional mission) as it generates more learning per dollar--whether of faculty compensation or computing expense, or other university expenditure. In more concrete terms, learning productivity can be enhanced by e.g.:
Such strategies must still, in the end, lower the trajectory of costs or increase the trajectory of revenue or both. And such unconventional strategies, to work, require changes in faculty and student behavior that will not come easily, even with the best of intentions. The greatest resistance to most ideas for reducing the amount of non-learning time--particularly the long vacations typical of most university first degrees--comes, not surprisingly, from students, although faculty can be expected also to resist at least uncompensated increases in teaching time.
Rational Defiance
A final strategy specifically in response to declining governmental/taxpayer support to the university is what I call "rational defiance." This is a strategy that rejects the notion that the classic, Western, Humboldtian university is too expensive for the modern industrial state or that the university as we have come to know it must be fundamentally "restructured" and "downsized." To some, this strategy will appear to be a "head-in-the-sand" defiance in the face of the "winds of change" everywhere else in modern industrial economies: a mark of professorial self-indulgence, and a confirmation of the university's well known incapacity to manage.
But this indictment may be both unfair and fundamentally incorrect. A strategy of rational defiance assumes:
The strategy of rational defiance assumes four other things:
In short, we are in a kind of very high stakes game for increasingly scarce resources. In light of the enormous pressure on governments for reducing whatever public commitments they can, and in light of the difficulty universities have in reallocating resources and reducing programs even when called for, and in light of the university's ability to generate considerable (if not unlimited) non-governmental revenues, it is to be expected that governments will attempt to reduce the level of taxpayer support to the universities. But this does not (necessarily) mean that no more public revenues are possible or that downsizing is inevitable. Nor does it mean that the governments in power do not value universities. But it does mean that as long as we continue to absorb cuts in public revenues and seem still to be strong, the cuts will almost certainly continue. And as long as we--university rectors, presidents, and other academic leaders--give credence to notions that universities are incapable of change, or that universities need to "fundamentally restructure" (whatever that might mean), or that universities must downsize because that is what businesses have done, we will be absolutely certain to continue to lose public (taxpayer) resources.
The key to the strategy of rational defiance, then, is the proposition that the modern Western industrial state does have the pubic resources to provide, largely (but by no means entirely) at taxpayer expense, a university education in the above-described Western Humboldtian tradition to a substantial proportion (say, one-fourth) of the traditional university age cohort. It further presumes that governments will naturally resist such expenditures, and escape them when they can, in order to fund other public goods and services or to achieve politically-popular tax cuts. The vulnerability of the university is that it seems to survive continuing budget cuts, and that it seems to have sufficient non-taxpayer revenue potential (e.g., tuition and grants), and that it seems more inefficient than it really is because the products are multiple and hard to measure. Therefore, a rational government strategy is to attempt always to cut the university, at least until demonstrable damage has been done, with political consequences. And the rational university strategy is to resist and defy these cuts--but only so long as the university is well managed, and its resources are being reallocated internally in search of institutional priorities, and efforts are being made to increase revenues from other-than-governmental sources.
Some principal elements of a strategy of rational defiance are:
A strategy of rational defiance does not attempt to "get out in front of," or otherwise anticipate, a downsizing nor does it demonstrate its willingness or ability to absorb more budget cuts. Rather the fully rational university under these assumptions will resist any public strategic planning for drastic change, and yet "plan to cope" when it absolutely has to.
A strategy of rational defiance is a kind of brinkmanship. It is not a financial strategy favored by traditional management consultants or those who fancy themselves on the cutting edge of institutional change. It is defensive and avowedly political. It is not a substitute for all of the other strategies. Indeed, it can only work when most of the rest of the financial strategies presented in this paper are being pursued with some success. But it is also a strategy of hope and a defense not only for the traditions, but the performance, of the modern university.
10/15/96
* Paper presented at the International Rector's Seminar, The New Autonomy of Universities: Profile-Structure-Strategy, sponsored by CHEPS, the Center for Higher Education Policy Studies (Twente, the Netherlands) and CHE, Centrum für Hochschulentwwicklung (Gütersloh, Germany), Pontresina, Switzerland, September 19-21, 1996. Revised October 15, 1996.