A Modest Proposal

I spend my business life taking over operations from bloated public agencies, so I suppose I should not be surprised at this picture (via Carpe Diem)

The PPACA has a provision that private insurance companies cannot spend less than 80% of premium on care (vs. administration) or money has to be rebated.  I am not a big fan of this provision, believing a free market is a better mechanism for enforcing price and cost discipline than some arbitrary metric like this.

But, since Congress and this Administration thinks this is such a good idea, here is my modest proposal:  Public universities may not spend less than 80% of tuition directly on teaching of students, or else they must rebate excess tuition back to their students.



  1. perlhaqr:

    I think you'd have a lot of unhappy students if that rule got passed, since you'd have to take away a lot of things students want in order to achieve it. Things like dormitory maintenance and internet access and landscaping and so forth.

  2. perlhaqr:

    Or you'll end up with tuition being $2,000 a semester, and a $10,000 student services fee on top of that.

    Which isn't to say that, as a public university employee, I don't think there's enormous room for efficiency improvement in how the school is run, but I don't think it's quite as cut and dried as "your business is teaching, so you must spend X percentage of your tuition intake on direct teaching".

  3. me:

    Free markets would take care of that. German universities are not much better (about 60% goes to professors and tas, rest is overhead), but there is no campus or university funded internet access. Students generally find their own living quarters and provider. Works just fine.

  4. GREG:

    label your axis!

  5. Hasdrubal:

    I'm curious what the ratio of administrative to customer facing personnel is in various other service industries. Back in the late 90s I worked at an IT consulting firm where sales and engineering were significantly outnumbered by admin staff. And I don't know but seriously doubt my current employer is at parity or in favor of customer facing staff.

    This is sort of a vacuum, we can compare admin to teacher ratios from the past, but even that trend might be economy wide, (think the explosion of IT,) not just a function of higher ed. How do universities compare to consulting firms or engineering firms? I'm pretty let down by the economists who have blogged about the topic for not asking that question as well.

  6. David:

    This is a modest proposal, folks, and the impact on universities would certainly be better than the eating of children...

    Personally, I think it's delicious.

  7. Sandman:

    I think the most interesting information would be how much that has changed decade by decade. My guess is that ratio for 1990 would be cut in half at least.

  8. Mark2:

    As someone mentioned above, I am sure you need janitors and landscapers, and cooks, etc to keep the university running. However
    1: Many of these could be outsourced. Do you really need state run janitorial services. Most private companies contract that stuff out. Focus on the product, not the maintenance.

    2: There are a lot of silly positions, out there. Many are for government compliance. Eg now UCSD has 22 different people dealing with Diversity on the payroll and they hired another. Are any of them necessary, maybe one, I would say. But they are there because the government is making sure the public university is representing "diversity" and the University puts all these folks in to make them look like they are trying real hard, just in case the program is 1% short on Native Americans, or something.

  9. drB:


    Landscaping requires minimal amount of people which are paid very little. Dorm maintenance also. One of the worst issues is the one raised by Mark2 which is COMPLIANCE with everything. Financial reports every few months, diversity/sensitivity trainings/state mandated other trainings, people who are supposed to help faculty get/administer grants, legions of secretaries (sorry, administrative staff) for every senior bureaucrat, HR which interferes with hiring while not understanding any of scientific details which is basis of hiring, etc. A nice picture that shows management vs faculty growth at UC system: http://www.oftwominds.com/photos10/faculty-mgt2.png. Increased tuition money is spent on management growth since these people are typically paid much more than faculty and they are picked either from career bureaucrats or scientifically failed faculty.

  10. Ted Rado:

    As an OSU alum, I was interested in this post. When I started there in the summer of 1945, the GI's were just coming back and there was ahuge influx of students. Wooden army baracks sprang up all over the campus. There was a shortage of dorms, so kids stayed in roomin houses off campus. It was primitive, but it worked. I got a superb education.

    Universities got overbuilt, and started competing for students with Taj Mahal type student facilities. To attract football players, multimillion dollar sports facilities sprang up. Is all this necessary? The purpose of a university is to educate at a price most can afford, not to see who can provide the fanciest facilities.

  11. Evil Red Scandi:

    "I think you’d have a lot of unhappy students if that rule got passed, since you’d have to take away a lot of things students want in order to achieve it. Things like dormitory maintenance and internet access and landscaping and so forth."

    As if these could not be obtained anywhere but from the university staff. At significantly less cost.

  12. Wayne:

    Not an OSU grad but live in Columbus. The OSU Medical Center employs about 17000 people and i would guess that a significant number of those would be in non teaching roles and probably skew the ratio to a large degree.

  13. DoctorT:

    Mark Perry, for unknown reasons, did not include on his chart the number of part-time faculty. Colleges and universities across the USA have been increasing administrative positions, decreasing full-time faculty positions, and hiring scads of part-time faculty (at low salaries) to lecture at (they rarely teach) the massive influx of students. College now is about empowering administrators, sucking in federal student loan dollars, and proving a place for young adults to fart around for five or six years before going back to live with their parents when they cannot get a job.

    My hope is that tomorrow's young adults rebel against the wasted years and wasted money and demand cost-effective education. We have the technology and know-how to educate at low cost: modern home schooling exemplifies this. So do some workplace training programs. Our current crop of 'educators' needs to be ousted.

  14. Craig Cowart:

    A great rule for all business, educational and government enterprise that would also have to preclude government from imposing cost/regulation on others that would force a violation of the rule-- at least 80% production, 20% administrative maximum.

  15. chuck martel:

    Everybody talks about athletics and universities but gloss over other big time stuff. How about parking? The University of Minnesota has dozens of ramps, many lots, it's as much of a parking company as it is a school. But try and find out, through the university budget, anything about the financial impact of parking on the U of M. None of that stuff is available to the public that's paying the bills. The ordinary taxpayer doesn't know how much they spend on parking facilities, employee numbers or compensation, and what the revenues are. Nobody but the financial mavens at the U even know if parking is a money-making enterprise. I would suspect that it generates huge revenue but can't prove it and don't know anyone that can.

  16. JC:

    Sadly, a large portion of that is...fundraising. Grant writers and alumni appeals positions are always in demand at universities, and at quite healthy rates of pay, too. The post of university president, which carries an outlandish paycheck, plus REALLY outlandish perks, is universally tied to fundraising ability.

    This is not to downplay the absolutely outrageous costs of keeping up with the Jonses on sport, which benefits the universities nary a jot of tittle if the numbers are broken down. My alma mater, Rice University, has every few years, a student movement to abolish the football team. Despite massive student backing, the motion always fails, fearing a fall in the alumni donations.

    OTOH, the graduate student association in existing, despite all administration attempts to close it (the GSA operates a low-rent pub on campus) because one prominent donor declares that "if Valhalla goes down, I'm cutting off my donations." N.B. Valhalla covers its costs plus, and is by-and-large a low impact presence on campus. Save for getting the university in the news (http://www.sashimitabernaclechoir.org/) and the invention of Bowling for TVs (carried out under controlled conditions), and at one time being the world's largest (by volume)(circa 1983) retailer of Shiner Bock Beer in the entire physical universe, Vahalla is a positive factor in the university.

  17. JC:

    BTW - Perlhaqr - most of the sysadmin at the universities I know are grad students paid at below current wage, in addition to teaching (but Dr Staff HATES me!!!!eleventy!!11)

    Buildings and Grounds folks at universities tend to be paid a bit less than market, due in part to perks (discount tuition, but only for the employee, no more discount for the A/C guy's kids, hah)

    Parking lots have become profit centers. Many universities now require a credit card just to enter the divine grounds, to prove ability to pay for parking. I call bullshit on this one, particularly as most of the parking management is contracted.

    The worst problem though is mission creep. Universities now suffer under the apprehension that they must expand at all costs. There are a few exceptions, mostly in the "classical studies" genre, but university administrators feel that they must offer everything - a school of medicine, a school of law, a business school - otherwise they will be passed over for another school with a bigger menu. This of course leads to the ever-growing campus, and the need for full time fund raisers, which brings me back to the start of this rant.

    (Sits back and admire his Platonic elegance)

  18. JC:

    Doctor T:

    Please make note of the percentage of grad students (as in : Dr Staff, he hates me). The recursive quality of underpaid grad TAs is elusive, and difficult to quantify.

    E.G. Research assistant carrying out all research and documentation for tenured project, minus TA's complete inability to teach, multiplied by the loss of knowledge acquired by students taught by TA when the TA is not dead on his feet from staying up all night babysitting Drosophila.

    This is not "part time faculty" as you might imagine. These are "grant funded research associates" who are not even billed to the department save as a cost on carrying out the premises on the grant. This is a free ride, and a subsidized one at that.

    I know quite a few "adjunct professors" who do it out of the love of the subject matter, and have no desire to go tenure track, as they look upon this work as a humanitarian service, and by God they love it.

    Gov Perry has declared a desire to provide BA degrees to Texans for a fee total of ten thousand dollars; tax, title, license, guts, feathers, and all.

    I have no complaint with your overall comment. Administrative costs have inflated by far greater rates than have other consumer goods, but I detect in your plaint a longing for the good old days of tenure, which I cannot support.

  19. bob sykes:

    I retired from OSU in 2007 after working for 35 years as an engineering faculty member.


    OSU is a stunningly huge world with 57,000 students enrolled on its main campus, numerous hospitals, classroom buildings, research labs and complexes, administrative buildings, farms (even in Columbus) and sports complexes. Only any given day, well more than 100,000 people are roaming the campus. On football Saturdays, it might reach 200,000. The Notre Dame game might have had more than that. And they were deliriously happy, even joyful.

    The annual budget is summarized here: http://www.osu.edu/osutoday/stuinfo.php. It amounts to $ 5B per year. $ 900 M comes from state and federal subsidies. Much of that goes towards instruction costs. $ 2B goes to salaries and benefits.

    It costs a full-time undergraduate student living on campus $24,000 per year for everything: tuition fees of $9,000 per years, board and room, books and misc. expenses.

    The actual employee head counts (not FTEs) listed at the url are: tenure track faculty (the real faculty), 2,930; clinical and research faculty (generally non-teaching, 90% at the hospital), 891; auxiliary (adjunct, mostly part-time teaching), 2,433; administrative and professional staff (NOT janitors and gardeners--real professionals), 16,710; classified civil service (the janitors, maintenance, gardeners, etc) 5,277; student workers (part-time helpers, probably includes funded grad students, don't know), 13,680.

    If there is any bloat it is likely to be in the administrative and professional staff. And much of the bloat is imposed by federal mandates. However, a department chair once told me that he didn't manage people, eg N, but their relationships, eg N^2. And that square law probably accounts for much of the administrative and professional staff. I don't think the amount of bloat is anywhere near what outsiders and faculty believe.

    There is also hidden bloat in the regular tenure track faculty, because many courses actually have very low enrollments, on the order of 10 (yes!!, 10) students or less. Many, but not all, of these courses are populated by the faculty's graduate advisees and generally support the faculty's research interests. These courses are are tolerated as the cost of doing business, especially if the faculty member has research funding that supports the students. However, quite a few are undergraduate courses that are part of degree programs the University wishes to keep. In most cases, the University wants to keep them simply because they exist--inertia rules all.

    OSU's main campus covers 1,765 acres within 3 miles of downtown Columbus. It is an easy walk to the State House, but only in broad daylight. There is another 14,000 acres or so scattered around Ohio in four regional campuses and research centers.

    Several years ago, the main campus' physical plant was valued at about $2 B. There is a very large amount of ongoing, never-ending construction going on, so the current value might be $5 B. Even more if the current market value of the land is counted.

    The hugh and spectacular and stupefying hospital complex accounts for 40% university's total budget. It is generally operated as a separate profit-making entity. Some of the tenure track faculty are MDs working as such at the hospitals.

    The Athletic Department budget is not broken out at the url cited but it is rumored to be about $ 100 M per year. It is historically self-funded by the men's football and basketball programs, but recently the University had to take over the costs of the new basketball/hockey arena, which loses money as was predicted. So, historically it has been a profit center. Except for maybe a dozen universities and colleges in the US, athletic departments are money losers. The money losers include several Big Ten, Pac whatever and Big Twelve schools and everyone else. Don't ask.


    1. Graduate Research Associates and Graduate Teaching Associates are technically University employees, with W2s, retirement accounts, contracts, etc. But really they are apprentices learning how to be professionals with specialized skills. Many of the PhDs will eventually be faculty members (if only in China) whose jobs will be research, teaching and administration. We teach them how to do these tasks the old-fashioned way by making them do it. They get a lot of one-on-one training, which is expensive. They are not being exploited by teaching a bunch of undergraduates.

    By the way, at OSU all the foreign TAs go through a screening/training process that includes actual English language instruction and teaching instruction and monitoring. They speak accented English, but they speak intelligible English. If your OSU son/daughter tells you otherwise, he/she is lying.

    2. All of the research, every damn penny, comes from external, mostly federal, sources. OSU does not fund one penny of research out of its own monies or state subsidies. It charges overhead against the research contracts.

    3. In the engineering college, the adjunct faculty are practicing engineers who do some teaching to satisfy themselves. All of them are PhDs/PEs. Many were once faculty members who found a professors life (which includes a lot of administrative work) unpleasant, but who loved the student contact.

    In the humanities, and in some other areas, most or even all of the adjuncts are people with PhDs who can't find (and mostly won't ever find) regular faculty jobs and ABDs (all but dissertation) who need a job to support themselves while they try to finish their dissertations. They have miserable lives, and their numbers are increasing as universities strive to contain costs and control the faculty.

    Almost all the horror stories about exploited adjuncts; politicized faculty, programs and courses; illiterate unteachable, unemployable and indebted students; etc etc, come from the humanities and social sciences.

    Life was pretty good, although often hectic in engineering. The students were focused and hard-working, too.

    4. If OSU is any guide, the amount of waste and bloat is much less than is normally believed. We are not a lean, mean machine, but none but small enterprises with only few levels of hierarchy are.

  20. Ted Rado:

    Bob Sykes:

    My father was an OSU professor also (chairman of the math dept). His favorite joke was that the three biggest challenges for the university administration were winning football for the alumni, parking for the faculty, and sex for the students. (We called Mirror Lake "Passion Pond" for a reason!)

  21. save_the_rustbelt:

    I believe that number includes staff at one of the largest hospital centers in the midwest.

    Not to mention feeding and housing tens of thousands of students. And security. And etc.

    Quick, snarky analysis is easy but not terribly valuable.

  22. bob sykes:

    Ted Rado:

    The math dept at OSU is very good, and your father should be proud of his association with it and his leadership of it. They have a truly excellent optional program in teaching calculus to freshmen using Mathematica, a teaching method they pioneered.

    As to his "joke," it is very much close to the truth, painfully so.

    I'm emeritus now, and what I care about is free parking and being able to buy football tickets. And very good tickets they are, 50 yard line, C-deck (looks like TV) and Row 3 (no obstructed view).