Unexpectedly Intriguing!
May 28, 2009

Cap and Diploma There's a peculiar kind of greed being unleashed among the top administrators of many of today's top academic institutions, especially the ones that have become financially challenged as a result of gambling too much endowment money on too many poorly considered investments. Rather than cut costs by cutting their academically and financially non-performing departments and staff, who none-the-less have become politically entrenched within their institutions, they're instead going after the departments who have been doing the best job of attracting high quality students to their universities by offering high quality academic programs. Programs whose graduates are highly demanded outside of the universities.

John Palmer touched on this situation back in April in venting his frustration at how the senior administrators at the University of Western Ontario would appear to perceive its economics department, once ranked among the top tier of the world's academic economics departments, and what appears to be driving their decision-making:

Provincial budget cuts, coupled with some poorly managed destructive in-fighting, led to serious deterioration of the department's prestige and ranking in the early 1990s. We struggled, but recently people here have been working to rebuild the department. Nevertheless, a recent ranking has our department at 64th in the world. That is big drop from our glory days [h/t to co-blogger, Gabriel].

And very likely things will get worse.

The financial folks here gambled with our rent money: they invested huge chunks of the university's operating revenues AND endowment funds in equities. They looked like geniuses when stock prices were rising, but who is suffering now? Not them. In fact, they blame the market, not their own injudicious investment strategies.

Instead, the admin types here are reneging even on re-negotiated agreements. As a result, our department is losing a very dynamic and energetic chair and will likely lose other very creative economists.

There is a report that some of the senior admins here think that even having a ranking of 64 is too high for a university whose overall ranking in the world is somewhere between 100 and 150. They think this department is too good and commands too many of the university's resources. They see that top new PhDs in economics draw big salaries at top schools, and so they want us to hire lesser people and fall in the rankings.

But that's only on the cost side of the situation. What about the revenue side? What might the university administrators be considering to make up the shortfalls caused by their "injudicious" investing strategies and overly-ambitious yet poorly-executed expansion plans?

As we're about to reveal, there's some "new thinking" at work in determining how much to make students pay for their education:

Now, more than ever, the price you pay for a college degree is linked with what you choose to study.

Universities are increasingly charging more tuition and fees for certain majors in an effort to cover costs for programs that are more expensive to offer.

The trend is a departure from the one-price tradition that universities have followed for students earning their bachelor's degrees. For years, it made no difference if students majored in literature or engineering, nursing or education. They paid the same amount.

The new thinking among university officials in Arizona and elsewhere is that students who enroll in programs that are more expensive to offer should pick up more of the tab. The extra charges, which are often called "differential tuition" or "program fees," can add several hundred dollars to tuition bills. The higher fees are most common at the graduate level, but they have filtered to the undergraduate level in the past two years.

But which programs' students will be affected you ask? The article identifies the programs that might be impacted with higher charges for tuition or fees at Arizona State University:

Arizona State University already charges hundreds of dollars more for several graduate programs and for juniors and seniors in business and journalism. Next year, officials are proposing an extra charge for juniors and seniors in three colleges: the College of Design, the Ira A. Fulton School of Engineering and the College of Nursing and Healthcare Innovation.

[...]

Nursing students working toward bachelor's degrees will likely pay $750 more a semester, while engineering students may pay $300 more per semester. College of Design students likely will pay $300 more per semester. The charges are on top of a proposed 5 percent increase in base tuition for all current ASU students.

But why these programs? Are they really more costly than other academic programs? And if so, why are they more costly to provide?

Fortunately, the article goes on to explain all:

Several factors can make a major more expensive. Engineering and business colleges must pay higher salaries for faculty often in demand in the corporate world.

Journalism schools use expensive, high-tech digital equipment. Other majors, such as nursing, are governed by state requirements that mandate one faculty member for every 10 students in clinical settings.

So we confirm that in the case of the business and engineering programs, the higher costs would seem to be a direct result of these disciplines higher demand in the world - they have to pay professors in these programs more in order to retain them. Meanwhile, for nursing, we find that a government mandate for a specific teacher-student ratio is behind that department's considerably higher cost differential (combined with an acute nursing shortage in the state, which would suggest that nurses are also in high demand, which would also suggest higher pay is also needed to attract such a large number of qualified instructors.)

And then there's the school's journalism department, which is accused of consuming a great deal of expensive capital equipment. As it would happen though, ASU's J-school just opened a brand new "spaceship" facility in downtown Phoenix far away from its main ASU campus in Tempe, Arizona within the last year as part of the school's plans to greatly expand its presence there. Perhaps there are other expenses the university's administrators are looking to recoup from the venture. Expenses that might have originally been planned to be paid from investment accounts that have since turned south.

By and large however, the common theme we see at both UWO and ASU is one of "milking the cash cow." At these institutions, the senior administrators would rather squeeze as much money as they can out of their most highly-regarded disciplines, as measured by the demand for their graduates outside of the university, to support all their other operations rather than focus on expanding the parts of their operations that are truly doing well and cutting back on their more poorly performing departments.

But are the university administrators aware of any potential unintended consequences to their "revenue-enhancement" plans?

Why, yes:

Nationally, the trend of charging extra for certain majors is on the rise at public universities, said Barmack Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. Iowa State, University of Wisconsin-Milwaukee, University of Utah and Southern Illinois University-Carbondale are just a few that charge extra fees for some majors. No data are available, though, on the percentage of schools that have gone this route.

Nassirian said he can see the students' and the schools' sides, adding that there is not one right way to price tuition.

A good argument exists that philosophy majors, who are less expensive to educate, should pay less than engineering students, Nassirian said. But a higher price tag also could steer students away from certain majors if they feel they cannot afford the cost, he said.

"In some ways, that would almost defeat the whole point of (college) access," Nassirian said.

No one ever said that helping provide access to college was the purpose of college administrators.

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