Thursday, May 3, 2012

A Little More Data on Tuition Inflation

One of my previous posts speculated on the relationship between the availability of student loans and the rising cost of higher education.  Inflation of tuition is a complicated issue, but let me share two more pieces of data on the subject. Both are specific to the University of Colorado, but I feel are at least somewhat representative of the larger picture.

First, state support for higher education has dropped dramatically.  In effect, this transfers the actual cost of higher education from the taxpayers to the students.  You can see the fraction of the state budget devoted to higher ed in Colorado below (click to embiggen). 
In the same time period the average cost of a state-school increased by almost a factor of 4 and the state funding in Colorado dropped by about a factor of 4.

The second piece of data concerns another idea I've heard batted around which is that tuition inflation is being driven by excessive pay for administrators and/or faculty.  CU's provost (the head of the Boulder campus) was paid $389,000 last year, which is a lot of money, but it also comes out to 0.03% of the university's operating expenses for 2012.  You can argue that administrative pay is too high, but it's just not a big enough chunk of the budget to be the cause of tuition hikes.  As for faculty pay, a very unscientific study of the faculty in my department shows that they work on average 55 hours per week and make about 85% of what someone with a comparable level of education and experience makes in the private sector according to

Again, I don't claim to have all the answers, but I do think it's important to get as much data into this debate as possible.  Thoughts?


  1. I'm happy to see this extra data and it is interesting the state is dropping support for higher education percentage wise.  

    I honestly don't know what to think.  It is sad to see states pay less on higher education but, at the same time, it is too easy to point at the state and say "pay more".  How can they?  Can they actually pull off raising taxes?  And if not what are you going to take away to fund higher education?  And is it even the state's job to fund higher education? And if so, where is a line to be crossed where more education is nice but isn't the state's job to fund?  And to compound things more states are required to have a balanced budget!

    Anyways, complicated questions.  I think if educators want more money pumping into schools they need to get a detailed understanding how the state's budget is allocated and start "lobbying" to take funds from X and put into schools.  Barring that, I don't know what can work.  Politicians can only grant so many wishes before they remember they have to balance the budget.

    So I think with state funding of schools it has to be a game of: If schools should get more justify what should be getting less so that this can happen while the budget stays balanced.

  2.  For me at least the issue is simply that I feel there are some things government can do better than private organizations - and providing accessible higher education is one of them.  I think a lot of the frustration that is commonly directed at "big government" is a manifestation of a belief that the government is trying to do things that could better be done by private groups or individuals.  I think it's worthwhile to supply state tax dollars to keep tuition low and therefore allow public universities to act as agents of social mobility and economic growth, but that's a case we need to make more effectively to the public.  If we cannot justify the funding, it will just keep being reduced and diverted to groups that can justify their own existence.

  3. Well it is a good idea to make a more effective use of the public.  At some point the democracy has to give and the squeaky wheel gets the oil.

    But I have a different question for you Nick: beyond spending more money, is there anything the state can do that you think could make a difference?

  4.  Not really.  Bottom line: if you want something you have to be willing to pay for it.  If we want a population with 21st Century education levels, we're either going to have to saddle people with increasing levels of debt or raise state funding for higher ed.

  5.  I suppose that's not entirely fair - I do think there are some solutions other than simply money.  For one states can puch university programs that result in higher employment rates, thus providing additional economic benefit to the state itself.  One way that Colorado has done this is with the School of Mines, which is something akin to CalTech on a less prestigious scale.  Mines has arts, humanities, and social sciences programs, but they heavily emphasize STEM programs.  Those kinds of programs help states get more bang for their educational buck.

  6. Nick,

    Is this the total compensation (salary + all the fringes)?   It would be interesting to compare the rate of growth in time for admin salary similar to tution. 

    You obviously know that computing percentages and showing it to be insignificant is a trick employed in the government and finance mostly by the 1%ers.  Example: you pay 1%+ of market value of your invested assets per year to the mutual fund manager whether they perform or not, and most do not perform.  No matter, most all get hefty salary and bonuses in six and seven figures and fringe benefits beyond one can imagine.  The mutual fund reports these expenses as a fraction of 1% of the market value of the fund.

    By taking percentages, we can make billions and billions of dollars disappear.

    Under the House budget, education funding will be cut heavily, tutions will go up, scholarships, fellowships, grants and assitance will drop, worker bees will be cut, class sizes will increase (from 500+ students in Freshman Physics class to what?), and many will not be able to afford while politicians will go on bullhornn either asklng for more funding for teachers and facilities or decrying waste seeking more cuts.  All the time knowing full well that it is cheaper to import an educated fellow from the world then educate a poor native.

  7.  As far as the benefits, the only one our department's little unscientific survey looked at was health insurance (which appears to the biggest in terms of cost to the university by far).  CU's professors have good health insurance, but nothing extravagant.  One professor in our department came from working at Lockheed-Martin and he said the insurance at Lockheed was better than what he has here.  So I think the bottom line is that they have good, but not remarkably better insurance than our average upper-middle class worker.

  8.  The other one that people may care about is retirement benefits.  We didn't look into in our little survey but you can find the data online.  Professors at CU who got tenure prior to 1979 are on a fairly generous pension plan.  After that they switched to a 401k-type plan that appears, from my limited knowledge, to be fairly unremarkable (2-to-1 employer matching up to 5% of salary).

  9. Nick,

    The following from Barron's:

    Let’s put that annual income level in perspective. The presidents of august educational institutions like Mountain State University of West Virginia and Chapman University of California make $1.8 million and $1.5 million a year respectively.

    Here is the link if embedded link does not work.

    Here is the link to Barron's article:

  10.  That is a great graphic in your first link - thanks for sharing!  It does show that in some cases the presidents of universities are being paid ridiculous amounts - for Mountain State the president makes 3.5% of the university's total budget - however on average the numbers are much lower and it should be noted that the data in those graphs is only for private schools.  If you look at the public school data (unfortunately there isn't a cool graph), the numbers are considerably lower.

  11.  And even in the extreme cases like those you mentioned, 3.5% is simply not a big enough share of the budget to drive the types of tuition increases that have occurred in the last couple decades.

  12. Nick,

    Take a look a thiis.

    UVA is a state college.  This is plain salary, benefits are additional, and many negotiate benefit packages.  These are 2010 data.

    FYI.  Chicago School Board (guys and gals that work at high school and below) pensions are comparable to salaries listed at UVA.



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