Several Experts Respond to

 “The Cost of Undergraduate Education at a Research University”
by Charles Schwartz
which is posted at
(compiled, with commentary, November 27, 2005)

A) UC’s Vice President for Budget, Larry Hershman, wrote me a letter, dated December 21, 2004; it is posted at  http;// . This responds to an earlier version of my work; it is quoted from twice in my long paper and is discussed more in “Financing the University – Part 8”.

B) UC’s President Robert Dynes commented on my work during an interview published by the San Francisco Chronicle (9/25/05);

Q: The university says that it costs more than $15,000 to educate undergraduate students and that the state is underwriting much of that cost. But Professor Charles Schwartz calculates that the actual cost is closer to the $6,000 that undergraduates are paying in tuition. Schwartz is saying that the state is basically subsidizing [only] graduate students and the faculty.

A: It is not true. The concern is that people like to think about separating the cost of educating undergraduates and the cost of educating graduate students. What's not folded in there is having undergraduates in research laboratories. I'm actually deeply concerned about graduate support and that we haven't paid enough attention to finding support for graduate fellowships to keep us competitive. We are not subsidizing. Charlie Schwartz just isn't right.

     This silly reply is discussed in “Financing the University – Part 9”.

C) In August, 2005, Ralph Nader wrote a column about my work. A journalist of my acquaintance contacted a well-known academic expert on higher education and asked for comments on that.  Here is the emailed response, which was provided to me.

Without reading the Schwartz articles, I can say that trying to separate the costs of undergraduate education from graduate education and research within a research university runs into the technical problem of cost analysis where joint production occurs.  There is no unambiguous way to allocate shares of joint inputs and their costs to specific outputs, such as undergraduate instruction.  Thus, an inevitable arbitrariness haunts any such numbers, and reasonable people can look at the same data and reach different conclusions regarding how costs should be allocated.  That criticism would apply equally to Dr. Schwartz's $6,648 estimate, and the University's $15,810.  Neither is obviously right, and another reasonable method could come up with yet a third number, which would also not be obviously right.  "True cost" in such situations is a metaphysical will o' the wisp.

That said, the concerns expressed at the bottom of the article about a rising tuition spiral, lost access for low-income students, and increased stratification among institutions and students are very real, and should be a concern to all of us.  But trying to use ambiguous cost data to get to those issues is not the right way to go.  Those are clear concerns for public policy, period.

Perhaps the right way to think about the allocation question is to examine the balance between undergraduate education and graduate education and research.  One might argue that California has over-invested in the latter relative to the former, e.g., was a 10th U.C. campus at Merced really a wise investment, as opposed to providing more space and opportunities for undergraduates?

     This appears to be a well-ingrained view among experts – that there is no objective way to disentangle the cost of undergraduate education from other missions at a research university (the “joint production” problem).  This expert is at least candid in admitting that he did not read my paper; thus he is probably unaware that I was able to use data from an official faculty time-use study to resolve that joint production problem.

D) I contacted the editor-in-chief of a highly respected journal and asked him to consider my paper.  He sought opinions from some informed reviewers.  Here is the first response (dated September 7).

I've now had your paper looked at by someone who is very familiar with cost-of-education estimates.  A formula for doing that was worked out by an expert committee of NACUBO under the chairmanship of Richard Spies of Princeton.  It is pretty conservative, based on the A-21 cost study and focusing on Instruction and Departmental Research.  It allocated faculty time 2:1 toward graduate students, and left departmental research in on the premise that the institution pays for it and it has an impact on what gets taught.  Excluded were "community facilities -- like the athletic plant, museums, etc. -- even though they arguably have an impact on the quality of the undergraduate experience.  Using this standard formula at ….., by the way, tuition covers about 60% of the cost of undergraduate education.

In your treatment, you leave departmental (non-sponsored) research out in calculating the 23% of faculty time allocated to undergraduates.  We would disagree strongly with that, because it's hard to imagine that departmental research does not affect the nature of the teaching of undergraduates.  Capital costs don't appear in your calculation.  Perhaps that's because UC covers capital construction from another part of the state budget.  But there needs to be some recognition of historical costs, replacement costs, or depreciation.  Professional schools, at least here, contribute significantly to undergraduate education both through faculty service on committees, courses open to undergraduates, and supervising undergraduate theses.  We think your exclusion of all these costs is wrong; the NACUBO study includes them but then applies the 2:1 allocation between graduate and undergraduate students.  You give the Academic Support category at $1.154 billion, but identify only about $500 million as relevant.  What about the rest?  NACUBO included a much larger fraction of those costs, and your exclusion looks arbitrary.  Finally, you excluded "community costs", but I think that especially in an institution as large and excellent as UC they deserve some attention.

In short, I think you took an unnecessarily narrow view of the kinds of expenses that [can] be attributed to the value of the undergraduate experience at Cal.  If the NACUBO methodology had been applied, I don't know where the cost-of-undergraduate-education would have come out -- but I think it would be closer to the published UC number than yours.  That's not to say that the UC calculation isn't open to criticism, and you make some effective arguments in your piece.  But as it stands it is not a convincing argument for a figure close to the real level of student fees.

     This is the most informed criticism I have seen; however it is wrong on several counts.  First, lets look at that NACUBO method (see ). They say: take all expenditures for Instruction (including support services and overhead) and for Student Services and then divide by the total student enrollment to get the cost-per-student of undergraduate education. They allow counting of graduate students with a weight of 1.25 (not a weight of 2 as  stated above).  They do keep departmental research entirely included with the following explanation (page 31 of pdf file).

Departmental Research. Several alternative proposals were considered, but NACUBO concluded that all departmental research costs should remain within instruction and student services. Departmental research is vital and has a direct impact on the value and quality of instruction provided to students. Any arbitrary attempt to distinguish between departmental research and instruction ignores the fact that the integration of research and education is a major strength of the nation’s colleges and universities and directly benefits undergraduates. Including departmental research costs within the instruction category is beneficial and appropriate for all institutions. Liberal arts colleges without major graduate student populations argue strongly that departmental research contributes direct educational benefits to undergraduates. Accounting rules used by research universities to account for federal grants under OMB Circular A-21 do not separate departmental research from instruction, and efforts to do so would be extremely burdensome for institutions.

Including departmental research within the instruction category provides for simplicity and uniformity. No simple and uniform method for disaggregating such research is available, and it is unlikely that large research universities could reach consensus on a uniform percentage that does not contribute to undergraduate education. Finally, the adjustment for weighting graduate students addresses a similar problem in the class of institutions most affected by this issue. After extensive deliberations and consultations on this point, NACUBO eventually decided that weighting graduate students is a cleaner modification that will offset any potential overstatement of undergraduate costs resulting from the inclusion of departmental research.

     It is fascinating to examine this reasoning. They say departmental research (nonsponsored research by faculty members) “is vital and has a direct impact on the value and quality of instruction provided to students.”  However, elsewhere in the report (page 13) they say, “NACUBO never intended its Cost of College Project to address issues of value or quality;” their objective is just to evaluate cost.  Perhaps faculty research does contribute something to undergraduate education; but should all of it be counted as cost assignable to that mission? At a liberal arts college, one could answer, Yes, because education is the sole mission.  But at a research university one has the commonly stated three missions of teaching, research and service.  

     They say, “No simple and uniform method for disaggregating such research is available”. Well, the official faculty time-use survey from UC is now presented as a direct and logical method.  If such data it is not available for other types of colleges, then NACUBO’s method may be the best available; but here it is for top ranking research universities.  If people want to question the accuracy of UC’s faculty time-use survey, that is something worth looking into; but don’t pretend that this data does not exist.

     Does counting graduate students (even at 1.25 weight) account for the inclusion of departmental research?  At a private research university, one typically finds the number of graduate students comparable to the number of undergraduates; but at the public research universities, undergraduates far outnumber the graduate students.  Yet, UC’s faculty time-use study tells us that faculty spend about half their work-time at research; So there is a very bad representation of the truth in NACUBO’s method.

     The report from the editor adds the comment, “it's hard to imagine that departmental research does not affect the nature of the teaching of undergraduates”.  This is a common-enough belief from my colleagues; but is it true?  A survey conducted by the Princeton Review organization asked undergraduate students across the country to report on how well their “Professors Bring Material to Life”: the highest scores were reported at a number of well known liberal arts colleges; the lowest scores were reported from our best known research universities (UCLA, Texas, Michigan, Harvard, Penn, Berkeley, Columbia, NYU, in that order from the bottom of the list, as published by Andrew Hacker in the NYRB November 3, 2005.)

     Further criticisms from the editor’s report mention a number of contributions to undergraduate education (museums, professional school faculty) which I thought too small to bother with and such issues as capital costs and athletic enterprises, which even Vice President Hershman did not include in his calculation of the cost of instruction.  There is also the following criticism, “You give the Academic Support category at $1.154 billion, but identify only about $500 million as relevant.  What about the rest?  NACUBO included a much larger fraction of those costs, and your exclusion looks arbitrary.”  That criticism was valid; and I subsequently added a note to my paper explaining that about half of the Academic Support expenditures came from the Health Sciences and were therefore removed from this calculation.

E) At my urging, that editor sent my paper (actually, a much shortened version that the editor had asked me to submit) to a second person for review; and here is what came back from that expert (September 30).   

This author’s accounting methodology is a mystery to me.  He can’t punt it all to “an extensive discourse in a longer paper,” leaving readers not to know what he’s doing.  He states that his calculations arise from cost-accounting principles and procedures, but I doubt it.  His statement of how cost accounting handles joint costs and joint production looks simplistic.  His call for universities to publish estimates of undergraduate education alone seems reasonable, difficult though it may be.  Finally, his estimate that an academic year of instruction for a Berkeley undergraduate can be had for the order of $7000 just doesn’t have face validity.  To believe this, readers will have to know much more about how he got it and then, in my view, the methodology will fall apart.

I think you need to consult with someone who has extensive high-level academic administrative experience and is also an expert on the economics of cost-accounting.  There aren't many of those. ….. is a senior example who comes to mind.

     This comes from a person who is entirely guided by preformed opinions (he says that my conclusion “just doesn’t have face validity”) but at least he admits that he didn’t bother to read my paper and see the methodology explained at length.  I did write to the senior expert he recommended; but that person declined to comment on my work.

F) I did contact another well established academic expert on higher education financing, someone whom I had met a while ago, and got this response to my paper (October 26).

Thanks for alerting me to your paper. It is an interesting exercise. It requires the leap of faith that the synergies of a research university can be disaggregated. (Some would consider these synergies to be a leap of faith!) I nevertheless consider those synergies to be important, and to add real value to an undergraduate education.

However, granting your premise, you have done a meticulous job of working with the best available data and assumptions. I have one quibble though, and a rather large one. You have condemned UC faculty to a 61 hour work week. I do not doubt that the faculty works long and hard, however I wonder if their compensation is based on so arduous a schedule. Specifically, I would surmise that the hours beyond 40 that they work are largely devoted to research--from which they could augment their intellectual, honorific, and pecuniary returns. Teaching, of course, has its intrinsic rewards; but I think it reasonable to assume that UC does not consider this commitment so elastic. In other words, it would be reasonable to consider the 26 hours per week devoted to teaching as required work even for a 40 hour work week. If that were all the state could require, then faculty would be devoting 65% (26/40) of their paid time to teaching, and about 32.5% to undergraduate teaching.

I will let you do the arithmetic, but this should increase the per-head cost of undergraduate education by about 30%. This would produce a less dramatic conclusion than your 100% figure, but the arguments you offer against the privatization of public universities would still be valid. At ….. our u.g. tuition is now …... Tuition pays the entire payroll. I guess the state pays the utilities.

     I replied that his concept of a 40-hour work week for research professors was absurd, certainly in my own experience. The University of California has a long standing set of policies about faculty work and obligations. Here are some excerpts from the Academic Personnel Manual (found from the UC Faculty Handbook.)

APM 005: University of California Regulation No. 3 (originated 1935)
Privileges and Duties of Members of the Faculty

3a. The Senate assumes that each of its members is devoting all his time and energies (his full “working” time) to the University. Such service to the University includes varied types of activities, such as classroom teaching, conference with students, studying and writing, research, committee work, administration, and public service. Members of the Senate who are not engaged in certain of these activities will naturally have more time for others.

APM 020: University of California Regulation No. 4 (originated 1958)
Special Services to Individuals and Organizations
Principles Underlying Regulation No. 4
Faculty Service

To accomplish its aims of providing higher education, of advancing knowledge and of contributing to the welfare of the State, the University invites to its faculty scholars whose interests, learning, and accomplishments give promise of continued effective service to these ends. The service of the individual member of the faculty may include varied types of activities, such as classroom teaching, conference with students, writing, research, committee work, administrative service, and public service. To these various activities the relative time allocations will vary with individuals, and for the same individual at different periods. It is not desirable or feasible to arrange them in a fixed regimen applicable to all persons at all times. Teaching is one of the essential functions of the faculty and the teaching “load” is intended to be moderate to provide time for fulfilling other obligations, the most evident of which are professional improvements and scholarly activity.

Certain commitments directly affecting other persons, as, for example, classroom teaching and administrative engagements, will naturally involve specific schedule and other obligations, but the University in general leaves the time allocations of such activities as study, writing, research, and public service to the discretion of the individual. It is assumed that Full-Time members of the faculty are devoting their time and energies (full “working” time) to the services of the University. (See further, Regulation No. 3)