Old and New Thinking about Financing the Research University
by Charles Schwartz, Professor Emeritus of Physics
University of California, Berkeley
The leading research universities, like my own
University of California (UC), are having a difficult time with
finances. The standard complaint from our administrators is that
the governments, state and federal, are not providing enough money and
that is why, regrettably, they have to raise student fees so much.
I want to take a different look,
focusing on an old accounting habit that gives a misleading answer to
the simple question, What do we spend on undergraduate education and
what do we spend on other missions? First, some background.
Every professor at a research university knows
why we are here. We are good at research; we love doing research;
we are hired and promoted by the university because of our research
abilities and accomplishments; we gain the respect of our peers through
our research work. And we believe that our research work is valuable to
all of human society.
We also have a belief that other people – the
general public and their elected representatives in government – do not
appreciate our research very much. They are mostly concerned with
the education of undergraduate students (their kids), something that
our excellent university also provides.
We are happy with the bargain: we will provide
a first rate undergraduate education that they want and they will
provide the support we need to carry on our research and the closely
related graduate education programs.
Sometime, long ago, this bargain was sealed in
the budget arrangement that was worked out between university
administrators and the state government. It is called the I&R
budget. I&R stands for Instruction and Research. It covers the
entire academic year salaries of the faculty and supporting staff in
the departments; and along with this comes the necessary institutional
infrastructure and overhead. It is one big bundle of
appropriation, which allows us to carry out the undergraduate education
and the graduate education and the faculty members’ own research
activities throughout the academic year (that is called Departmental
Research as separated from Sponsored Research.).
It is common to take that whole bundle of
expenditures, divide it by the number of students we enroll, and call
that the Average Cost of Education or the Average Cost of Instruction –
so many dollars per student per year. For example, the official
pronouncement at UC is that the Average Cost of Education is
about $17,000 per student and student fees cover only about 30%
of that cost.
If you detect a slight lack of candor in that
arrangement, it could easily be excused by saying that no harm is done:
teaching and research are both “public goods” and they are both paid
for by public money; how that money gets divided between those two
missions is not worth fussing about. That is The Old Thinking.
Something changed in the early 1990s. A severe
state budget crunch led to the introduction of tuition charges at our
public universities. Called “student fees” they were specifically
intended to supplement the basic I&R budget when state funding was
cut. These student fees have been rising a lot more in recent years.
A new rationale was adopted for this major
change in financing for our public universities. It goes like this:
Since students attending the university would go on to better paying
careers, this higher education provides a “private good” and they, the
students, should pay for it, at least in part, rather than passing the
entire cost on to the taxpaying public. That is The New Thinking.
This new rationale and the new reality of the
rising cost to university students and their families ought to require
that we reassess The Old Thinking. This is challenging.
There is the issue of telling the truth about
which money pays for what. If undergraduate education is now seen
as a private good, then it ought to be separated out of that big
bundle, the I&R budget. The research mission of the
university is certainly important as a public good; and it would seem
quite improper to blithely dump some of that cost on undergraduate
What are the actual numbers? Anyone who
has experience at a research university would have to admit that
undergraduate teaching is going to be a rather small portion of that
whole I&R bundle of costs. My own calculations, based on a detailed
study of UC accounting records, as well as an official faculty time-use
study, come out with the shocking result that undergraduate fees at UC
are now just about 100% (not 30%) of the amount that this institution
spends, averaged per-student, on undergraduate education. (For more
details, see http://ocf.berkeley.edu/~schwrtz/Part_11.html
The following table shows my estimates of the
actual undergraduate cost-per-student for several leading research
universities, both public and private. These results were obtained by
extrapolating the detailed calculations for UC. This data is for the
academic year 2004-2005 and the numbers are rounded to the nearest
Institutional Cost-per-Student for
|Tuition & Fees
|M. I. T.
These results are rejected by academic
administrators and by my faculty colleagues – although not for any
objective fault that they can identify. Some rely upon a 2002
study by the National Association of College and University Business
Officers (NACUBO), which baldly says that all of the cost of
Departmental Research should be loaded upon the accounting for
undergraduate instruction. Clearly, the implications of my analysis are
just too threatening. It brings back the fears behind that Old
Thinking: “Who is going to pay for the research component of faculty
Returning my focus to the public research
universities, we need to Think Again.
Let’s connect the dots and understand the logic that appears to be
driving state officials, and their taxpaying constituents, in not
wanting to give the University all the money we say we need. It
is that same rationale, mentioned above, that individual students get
the benefit of this education and so they, not the taxpayers, should
pay for it.
Look again at the official numbers: UC says that students are now
paying only 30% of that cost. Thus, they can very reasonably
say, when state budgets are tight, that more of the cost of running UC
should be passed on as higher student fees.
Oops! The funny math of that old game,
the I&R budget, has now come around to bite us, speeding our
universities on the path of privatization. Perhaps we ought to clean up
our financial story.
The opinion piece above has been rejected for publication by the
Chronicle of Higher Education, insidehighered.com and the Wall Street
Journal; a shorter version was also rejected by the Los Angeles Times,
New York Times, Sacramento Bee and San Jose Mercury News.