Views From Financial Officers

Observations From Public Higher Education Financial Officers

Nearly all financial officers, regardless of whether they worked at the state level or in a specific college or university, were deeply concerned that their institutions are caught between rising expenses and a declining share of state revenue.

State appropriations are not keeping up with inflation. That’s again partly the pressure by voters and others not to increase taxes and also the competition with rising health care costs in particular and for state employees in general.

We are a state organization, so we receive a portion of our revenue from the state, and that’s one of our biggest concerns right now. As you probably have heard from other people, state appropriations around the country have been dwindling or are being cut back, and our state appropriation base has not significantly increased over the years. In fact, most recently it’s been decreased. That’s one of our biggest challenges—how we recoup moneys that we’re being shorted from the state, particularly in financing our construction projects.

Every year in higher ed, we face budget challenges, which are about us getting what the legislature considers our fair share of the general fund dollar. Then parents and students often feel the brunt of the fiscal problems with higher fees and the lack of affordability to go to school.

What’s happening, here and in most other states, is that in many different ways the state is narrowing the fraction of the pie that it’s paying. Our state has been incrementally growing its annual investment in higher education institutions at about one percentage point below inflation, and they have been doing this for the last 15 or 20 years. The institution has a choice. If I’m going to pay a 3 percent salary increase, but they’re only giving me less than 2 percent, I can either reduce that salary increase or I can ask students to pay the inflation rate on the fraction that they pay, plus the fraction that the state is not covering. That’s why students and parents are seeing their share of costs grow at higher than the inflation rate.

In that regard, the share of the state general fund budget going to higher education has dropped from like 23 percent to like 11 percent in the last 25 years, so we’re just getting a smaller and smaller piece of the pie all the time. Before you can even get started, that’s sort of issue number one that we’re fighting with.

Although college presidents often say that higher education has already done most of what it could to make its operations more efficient, financial officers were more likely to ask hard questions. At both the state and institutional levels, they often spoke about looking for greater efficiencies in administrative functions and academic operations. Many mentioned increasing teaching loads or class sizes as a first step.

If resources are available, they’re spent… not in frivolous ways, but in adding programs, adding faculty, moving more from an undergraduate to a graduate level, adding student advisers, reducing teaching loads, and, if there’s enough resources, sound investments in the academic enterprise. There’s the discipline of returning money to shareholders. The profit motive is absent in this culture, quite understandably. That’s not the kind of organization it is. That’s not a criticism, it’s just a reality.

A friend of mine has likened it to the stages of grief. When you tell the English department, for example, that it will be having significant reductions in their programs in personnel, it goes through a series of stages. Anger is by no means the shortest of them. It’s important to recognize that this is serious and painful stuff. Careers will be damaged, jobs will be lost, people will suffer, friendships will terminate. It’s important to get beyond sort of the policy level and the objective level and appreciate the genuine human drama and anguish involved in all this. It’s not a garden party, to take a quote out of context.

I think a lot of times in higher education we need to rethink what we do. I went to another university for my MBA because they had more reasonable requirements. I mean I just wanted an MBA. I didn’t need to take all the bridge courses that were kind of ridiculous in that regard. I had to take an Excel course, which I deal with every day. I’m not saying lower the standards, but I think they need to look at their curriculum and the times it is offered. When you’re trying to get your MBA, and you got to take an Excel course, even though you use it every day, it just seems so stupid to me, so I think that needs [to be] reviewed.

If teaching loads just went up by 5 percent, it would give us tremendous additional capacity on the same dollar base to teach more credit hours. I think therein lies the road.

I think that the academy needs to look at the way we schedule courses, when we schedule them, professors who want to teach every Tuesday and Thursday from noon to two. That’s not reality. There’s a lot of things we could do to get more efficient.

It’s difficult to crawl in there and say to the grumblers, “Okay, why is your teaching load what it is?” A great example would be at our institution, you might have a professor who in the early to middle years was most productive in their research. You’ve given them relief from teaching along the way because they’re in their very productive years. The problem with that has been when you get to their later years, they forget why they got that, and so you’re going back to people that are very qualified to teach and saying, “You need to teach more now, so this other new professor that came behind you, that is productive in their research years, can carry less.” That’s a very difficult transition to make, but we’ve got to get there.

Many financial officers—both state and institutional—were also skeptical of the argument that increasing productivity and efficiency in academic areas will necessarily decrease quality.

How efficient are we? Can we be more productive, and what will it cost to produce baccalaureate degrees without sacrificing quality. What methodologies do we use to determine how much it should cost for the universities and not just the universities as a whole, but some of these other kinds of innovative ideas that we may have about how to increase baccalaureate degree production?

How are you going to define productivity? You can say, “You have to teach six classes instead of four classes.” You’ll get back from a faculty member, “Oh crap, are you kidding me?” Or you can say, “You’ve got to teach four classes and I know you want to teach that graduate class with 3 kids in it, but I also want you to teach a class with 400 students in it. I want you to do it this way, so they have an amazing experience with a National Academy of Sciences professor at the front of the classroom and they’re completely engaged.” That’s huge productivity gains, so I think engaging the faculty in this conversation is the way to make it work. I just don’t know what the forum is for that. I can’t call the administrative directors and tell them what to do, but we need to find a way to get the whole faculty to say, “How are we, together, going to engage in a conversation about how to increase productivity without screwing up the pretty good thing we got going right now? Because if we don’t come up with an idea, somebody’s going to tell us how to do it and we’re probably not going to like it.”

On this quality issue, faculty members don’t want to work any more than they have to, basically. I’m just going to say it like it is. How would you reduce quality if you were teaching a class that had 15 students in it, and we said you’ve got to teach 18 students? Tell me how that reduces quality.

One of the common push-backs will be that these reductions are going to mean the diminution of academic quality. I think it’s important, and I know that’s one of your themes. I think it’s important to take that on and sort of demythologize about it. I know the system—for example, the average class size is 14. That is probably too small, if you figure a couple of people miss class, some drop out. What ought to be a good yeasty discussion with 20 or 25 people turns out to have 10. I don’t buy the argument that 10 is higher quality than 25. The argument is often made that it will be the decline of the West and the dumbing down of the curriculum. I think the response to that ought to be, “Show me evidence.” Let’s get beyond histrionics.

Many financial officers also believe that technology may be a key to increasing productivity. Distance learning, for example, is frequently mentioned. They recognize that there is a push-back against online education from faculty, but they feel that it can be overcome.

We haven’t figured out the technologies, and the mechanisms, and perhaps the right mix of human interaction versus offsite interaction through a computer terminal, or whatever. We haven’t figured out a way to replicate the informational exchange that comes with collegial, student-to-student interactions, but I think that there’s enough experimentation on our campus and other campuses that we will figure that out. Fundamentally, I think the cost—the per student cost dynamics that exist today, the structural dynamics, building monument buildings, bringing people—has to change given the volume of students that we’re going to want to provide, not just an education, but a quality education.

We’ve also seen a lot of interest in online education, to the point now that we have probably around 15 percent of our courses online. We’re not accredited yet to have full online degree programs. Although we don’t see that as necessarily our focus for the future, our students are really demanding it. It is interesting, because it allows us to open up more broadly to the larger community. Again, we haven’t really got to those steps yet, but that’s where my mind first went in your question.

We dabble in distance education, and I think that’s a market that we could really explore. We could have one professor delivering education to many different sites, but we’re getting into that market, and I think it’s a market we need to look at because it really isn’t that costly. That to me is a big thing.

I also think that we need to, and we do, engage in those experiments to figure out how do we take a Pulitzer Prize winner in history that’s one of the best instructors anybody’s ever seen, and multiply what he can do in a few sets of classes on campus, and bring that to other parts of the nation and the world. The question that I don’t know, and because I’m — in part I don’t teach, I’m not an instructor, it’s not my background — is how do you do that? Can you do it effectively, and if so, how do you do that effectively?

You know, on the academic side, there has been a push-back on the online programs—feeling as if there’s a lack of quality in those types of programs. But from the administrative side, we’re trying to give them insight into it, and we’re bringing them along slowly, but with that initial resistance. I think it’s starting to pick up some speed, and I think there’s some more buy-in from the academic side on that type of thing.

Although the financial officers from both state and institutional levels tended to agree on most issues, there was one major difference. The state system officers were often especially concerned with improving the number of graduates, which they felt would benefit both the individuals and the state economy. For many of the state financial officers, the easiest way to increase the number of graduates was to improve retention and completion rates.

Our biggest challenge is to—we need to get more people into the pipeline in getting degree attainment. Our degree attainment is not where it should be. We need to have people be prepared for this kind of economy, and we are falling behind, as you probably know well. The United States is really falling way behind, and even if we got our act together right now, it will take many years just to catch up to where we should be. That is a huge concern to become basically competitive.

We’re starting to put more focus on helping those students to graduate. The cheapest student to enroll is the one you already have on your campus, so do what you can to keep them.

I also think that there is a potential for better use of sort of best practices in serving low-income students well and getting them to persist well. Within the whole group of public and private institutions, there are some that have better luck on persistence and completion even with low-income students. We should be learning more from what they are doing.

We’ve got an issue with, one, getting them out of college with a degree; second, we’re trying to keep them here. We are trying to get the people who are here some sort of education so that they’re not a drain on the economic systems, so that they are able to contribute, to make money and pay taxes and all that kind of stuff.

As a means of increasing graduation rates, many state financial officers were especially interested in changing the financial incentive systems so that universities and colleges are rewarded for having students complete programs or courses, rather than rewarding institutions for the number of students enrolled. They are convinced that this can be done without reducing quality.

We were going to focus on making universities more laden with incentives for graduation, fewer incentives for just enrolling. Right now those enrollment counts are only after a student has been enrolled for a couple of weeks, so what we’ve been talking about with the systems is what if we made those counts as end-of-term enrollments, so that the incentive is to keep the students, try to make the students successful enough in the course to where he or she doesn’t withdraw after the second week.

By changing the formula recommendation, what you are doing is preventing these institutions from going out and heavily recruiting people that are ill prepared to succeed in getting up-front money for them, as opposed to improving your core student body and having a greater proportion of them actually graduating.

All we’re talking about is the idea that retention happens one course at a time and putting the incentive in place that you don’t get paid for that student unless they’re there at the end of the term, not just in the front. There are a host of other ways besides dumbing down the curriculum.

It is possible for you to have the goal of increasing baccalaureate degrees and ignore the quality factor and become a degree mill, and that’s the concern that those faculty are expressing. But it is also true that the more people who have a baccalaureate degree, the greater the standard of living in the state, the higher the tax base, economic development thrives, you have fewer health care costs. If it is possible for states to increase their productivity in the number of baccalaureate degrees that they produce at a lower cost without sacrificing quality, everybody wins. That’s not to say that it is easy.

In [our state], the way we’re going about it is to fund based on end of semester instead of beginning of semester, and we’re not saying that you have to pass that student. We’re saying that you have to keep them enrolled. We have found out that there was about $300 million that was paid for, courses attempted that the student withdrew from, or dropped, or whatever, so we paid about $300 million for classes that were never completed. That’s a lot of money. What we’re asking the institutions to do is to put in place some of these programs, early alert systems, and we’re not specifying which one. Pick one that works for your institution, don’t wait until they’ve totally dropped out to, “Oh, my God, what happened?” Go in there while there’s still a chance of helping them complete.

In their heart of hearts, what all university presidents want is for us to give them money and then leave them alone. They don’t want to be held accountable for any of this stuff, but they also think that it’s not their job to get students graduated from college. It’s their job to offer the opportunity. Then it’s up to [the students] to come in and take advantage of it.