Is Higher Education Spending Excessive? In Some Ways Maybe Yes, in Others Perhaps Not

Posted in: Education

Two months ago, I wrapped up an eight-year stint as the Dean of the University of Illinois College of Law at Urbana-Champaign and returned to “civilian” life as “just” a law professor. Prior to my service as dean at Illinois, I had for seven years been the Senior Associate Dean of Academic Affairs at the UC Davis Law School (where I have returned this summer.) I hope that being away (for now, at least) from higher education administration after 15 years of toiling in the trenches will help me gain some dispassionate perspective on the directions in which higher ed has been moving, and on the perceptions non-academics seem to have about American research universities these days.

It was thus with particular interest that I read a long article earlier this month in the Wall Street Journal entitled Colleges Spend Like There’s No Tomorrow. ‘These Places Are Just Devouring Money.’ The deck below the headline was equally disparaging: “The Students foot the bill for flagship state universities that pour money into new buildings and programs with little pushback.”

The article goes on to analyze spending data at the nation’s flagship public universities. The University of California and University of Illinois systems, where I have worked, are examples of prominent flagships, but I should point out that neither was analyzed or mentioned in the WSJ article. Yet many other well-known public institutions, such as Connecticut, Kentucky, and Penn State, were featured as places where higher ed spending per student has ballooned in the last few decades. Perhaps the most wide-ranging and notable numerical takeaway from the WSJ’s elaborate analysis of all 50 public flagship universities is this: for the median public flagship, while student headcount increased 21% between 2002 and 2022, spending (in inflation-adjusted dollars) rose by almost twice that amount, or 38%. Moreover, the article suggests, the increased spending comes not primarily from increased fundraising and grant monies, but instead from the imposition of higher tuition and fees.

The article did acknowledge that some tuition increases were undoubtedly necessary to compensate for public disinvestment in university education in recent decades:

Public university leaders often blame stingier state funding for the need to raise tuition revenue. And three-fourths of states did cut their support, undermining a longstanding principle that schools educated the populace with government backing.

Still, the article went on to conclude, “universities . . . raised prices far beyond what was needed to fill the hole [created by cuts in state funding].” In fact, the Journal’s analysis found that [“f]or every $1 lost in state support at those universities over the two decades, the median school increased tuition and fee revenue by nearly $2.40, more than covering the cuts.” Thus, the burden of the schools’ increased expenditures is falling on the backs of students (and recent graduates) who now struggle to handle increasingly burdensome debt loads.

That sounds bad. It feeds into the narrative that (public) universities are chock full of administrative bloat, waste money on useless academic departments, and spend excessively on lavish dorms, gyms, and other amenities not particularly related to the educational enterprise. All at the expense of the people universities are supposed to serve—students who look to accessible and affordable higher education as a means to better themselves and secure a brighter economic future, and taxpayers who want measurable societal value for their willingness to support public higher ed.

That higher education is significantly more expensive (in inflation-adjusted terms) today than it was two decades ago is undeniable, and is also quite troubling in many respects. But one can’t responsibly assess how troubling this reality is—and who, precisely, is to blame—without also appreciating that higher education today is a very different institution, in what students demand and what schools provide, than was higher ed at the turn of the century.

An analogy might make the point: The price of the average new car in the U.S. is somewhat higher (in inflation-adjusted terms) in recent years (even before the post-Covid runup) than it was twenty or so years ago: The average new car price in November 2019 (before the pandemic) was about $39,000, which is about 88% higher than the 1999 average price of $20,700. This even though inflation during the period from 1999-2019 was only about 53%. That disparity between car-price increases and the basic inflation rate seems quite high. And yet many folks would quickly point out that cars in 2019 were much better products—they are much smarter, more efficient, more productive, and more durable—than cars were a few decades earlier.

The same is true for higher education; it is a qualitatively different product than it used to be. Consider law schools, institutions with which I am most familiar. Compared to two decades ago, the career planning and advising services, the alumni relations activities, the mental health and student wellness services, the clinical educational and externship offerings, the diversity and inclusion programming, the IT support and security (against hacks the likes of which never existed before), the resources to facilitate scholarly productivity of the faculty, and the attention to compliance with Title IX and other regulatory mandates are all much greater than they were two decades ago.

Another part of rising costs has to do with professorial salaries that have increased (in inflation-adjusted terms) in many disciplines for reasons having nothing to do with university waste. Take, again, law professors. People who are competitive for tenure-track law teaching jobs almost always would also be sought after by innumerable high-paying law firms and other business entities. And the compensation enjoyed by private-practice lawyers has skyrocketed in recent decades. Average law-firm equity-partner compensation at many large law firms is well into the seven figures, and even entry-level associate attorney pay has outpaced inflation. For example, the starting salary for first-year associates at the nation’s large law firms essentially doubled from 1999 to 2019, even though inflation increased aggregate prices by about 50% during that period. If law schools are trying to hire the best and brightest faculty members (something that is necessary but increasingly challenging), the legal academy simply cannot be oblivious to how much money law professors could be making doing other things, especially as they reach the senior ranks of private practice. To be sure, people have never gone into law teaching for the money, but the disparity between professorial and practitioner pay over the course of one’s career has grown to levels that may be more seriously harming the talent flow into law school faculties. This might be especially true as debt loads, a factor mentioned earlier, of graduates of many top law schools (not all of which provide a ton of financial aid grants), have mushroomed. And some of these same observations likely apply to many professors who teach in other professional and technical areas, such as finance and engineering.

On top of all this, some public flagships have been forced to expend more money in recent decades to make up for historically underfunded pension systems. Again, an expense to be sure, but not one that is necessarily a sign of irresponsible or profligate habits by high-level administrators.

Buried deep in the WSJ article, but without any analysis or elaboration by the authors, is a quote by a Penn State spokesperson that, I think, tries to make the point I am making here (albeit perhaps in less explicit terms)—that colleges today are different institutions and do different things from colleges a generation ago:

We [at Penn State] acknowledge that tuition has increased quite a bit over the past 20 years, which is a large stretch of time for such a comparison when taking into account growth in student needs, services, technology, stem fields, academic support, mental health services etc. . . .

None of this is to say there isn’t room for productive debate and criticism about how colleges spend monies. Some critics might reasonably argue that some services universities provide are unnecessary, enabling, or worse. Perhaps too many resources are spent on academic support and student mental wellness services. But are colleges to blame for the undeniable fact that more students today than ever before arrive on campus with academic deficiencies that need remediation and mental-health challenges (such as anxiety, depression, schizophrenia, etc.) that require attention?

Similarly, perhaps students should be left more to their own devices in their searches for appropriate post-graduation employment. But many of the same folks who criticize universities for spending too much also argue that university graduates are not placed in jobs that take real advantage of the degrees that graduates have earned and the skills they have developed.

And there are certainly honest discussions to be had about whether universities are the best entities to be investigating and meting out punishments under Title IX, and whether Diversity, Equity, and Inclusion programs could better balance competing considerations and make more efficient use of resources at public institutions. It is also fair to wonder whether the upscale living amenities that many schools may have built to fare better in the intense competition for high rankings and high student yields is a good use of societal resources (even as I hope everyone would agree that providing more nutritional food and adequate exercise opportunities for students, many of whom suffer from food insecurity and budding chronic health problems, is a good thing).

So the point is not that we shouldn’t be scrutinizing and debating the resource allocation decision that universities—especially public universities—make. We should. The point is that we should be doing so in a much more finely grained, thoughtful fashion, rather than a blunderbuss “look at how much money is being spent” gotcha kind of way. Some reasons for increased university expenditures may actually be cause for celebration, even as others are likely cause for concern. But we need to parse each cost component separately to evaluate whether the public is getting good value for its investment.

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