Presidents, Pay & Student Debt

Picture of Gordon Gee, president of Ohio State...

Picture of Gordon Gee, president of Ohio State University (Photo credit: Wikipedia)

Since I received my doctorate from the Ohio State University, I usually feel a tiny bit of unjustified pride when I hear that OSU is #1 in some area. However, I recently found out that OSU is #1 in that the school is the most unequal public university in America. The basis for this claim is that between 2010 and 2012 Gordon Gee, the president of OSU, was paid almost $6 million. At the same time, OSU raised tuition and fees to a degree that resulted in student debt increasing 23% more than the national average (which is itself rather bad).

Like many schools, OSU also pursued what I call the A&A Strategy: the majority of those hired by the school were Adjuncts and Administrators. To be specific, OSU hired 498 adjunct instructors and 670 administrators. 45 full-time, permanent faculty were hired.

While adjunct salaries vary, the typical adjunct makes $20,000-25,000 while the average professor makes about $84,000. University presidents make much, much more (the average is $478,896) and the number of presidents making $1 million or more a year is increasing. Such a president would make at least as much as 40 or more adjuncts (teaching 8 or more classes an academic year).

Given that the cost of higher education has increased dramatically, thus resulting in a corresponding increase in student debt, it is well worth considering the cause of this increase and what could be done to reduced costs without reducing the quality of education.

One seemingly obvious approach is to consider whether or not presidents are worth the money spent on them. For the million dollar pay to be fair, the president of a university would need to contribute the equivalent of these 40+ adjuncts in terms of value created. It could, of course, be argued that the public university presidents do just that—they bring in money from other rich people, provide prestige and engage in the politics needed to keep money flowing from the state. If so, a million dollar president is worth 40+ adjuncts. If not, it would seem that either the adjuncts should be paid more or the president paid less (or both) in order to ensure that money is not being wasted—and thus needlessly driving up the cost of education.

At this point, a rather obvious reply is that for big public universities, even a million dollar president is but a tiny part of the overall budget. As such, cutting the presidential salary would not result in a significant saving for the school or the students (assuming savings would be passed on to students). However, something is obviously driving up the cost of education—and it is rather clearly not faculty salary, since the majority of faculty at most public universities is composed of low paid adjuncts.

One major contribution to the increasing costs has been the increase in the size and cost of the administrative aspect of universities. A recent study found that the public universities that have the highest administrative pay spend half as much on scholarships as they do on administration. This creates a scenario in which students go into debt being taught by adjuncts while supporting a large and often well paid administration. This is not surprising given the example of OSU (hiring 543 instructors and 670 administrators).

It is, of course, easy enough to demonize administrators as useless parasites growing fat on the students, adjuncts and taxpayers. However, a university (like any organization) requires administration. Applications need to be processed, equipment needs to be purchased, programs need to be directed, forms from the state need to be completed, and the payroll has to be handled and so on. As such, there is a clear and legitimate need for administrators. However, this does not entail that all the administrators are needed or that all the high salaries are warranted. As such, one potential way to lower the cost of education is to reduce administrative positions and lower salaries. That is, to take a standard approach used in the business model so often beloved by certain administrators.

Since a public university is not a for-profit institution, the reason for the reduction should be to get the costs in line with the legitimate needs, rather than to make a profit. As such, the reductions could be more just (or merciful) than in the for-profit sector.

In terms of reducing personal, the focus should be on determining which positions are actually needed in terms of what they do in terms of advancing the core mission of the university (which should be education). In terms of reducing salary, the focus should be on determining the value generated by the person and the salary should match that. Since administrators seem exceptionally skilled at judging what faculty (especially adjuncts) should be paid, presumably there is a comparable skill for judging what administrators should be paid.

Interestingly enough, a great deal of the administrative work that directly relates to students and education is already handled by faculty. For example, on top of my paid duties as a professor, I have a stack of unpaid administrative duties that are apparently essential for me to do, yet not important enough to properly count as part of my workload. In this I am not unusual. Not surprisingly, many faculty wonder what some administrators actually do, given that so many administrative tasks are handled by faculty and staff. Presumably the extra administrative work done by faculty (usually effectively for free) is already helping schools save money, although perhaps more could be offloaded to faculty for additional savings.

One rather obvious problem is that the people who make the decisions about the administration positions and salaries are typically administrators. While some people are noble and honest enough to report on the true value of their position, self-interest clearly makes an objective assessment problematic. As such, it seems unlikely that the administration would want to act to reduce the administration merely to reduce the cost of education. This is, of course, not impossible—and some administrators would not doubt be quite willing to fire or cut the salaries of other administrators.

Since many state governments have been willing to engage in close management of state universities, one option is for these governments to impose a thorough examination of administrative costs and implement solutions to the high cost of education. Unfortunately, there are sometimes strong political ties between top administrators and the state government and there is the general worry that any cuts will be more political or ill-informed than rationally based.

Despite these challenges, it is clear that the administrative costs need to be addressed head on and that action must be taken—the alternative is ever increasing costs in return for less actual education.

It has also been suggested that the interest rates of student loans be lowered and that more grants be awarded to students. These are both good ideas—those who graduate from college generally have significantly better incomes and end up paying back what they received many times over in taxes and other contributions. However, providing students with more money from the taxpayers does not directly address the cost of education—it shifts it.

Some states, such as my adopted state of Florida, have endeavored to keep costs lower by refusing to increase tuition. While this seems reasonable, one obvious problem is that keeping tuition low without addressing the causes of increased costs does not actually solve the problem—what usually ends up happening is that the university has to cut expenses in response and these cuts tend to be in areas that actually serve the core mission of the university. For example, the university president’s high salary, guaranteed bonuses and perks are not cut—instead faculty are not hired and class sizes are increased. While the tuition does not increase, it does so at the cost of the quality of education. Unless, of course, the guaranteed bonuses of the president are key to education quality.

As such, the primary focus should be on lowering costs in a way that does not sacrifice the quality of education rather than simply lowering costs.

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  1. s. wallerstein

    Here’s one of the ways that the university-business functions in Chile and maybe in the U.S.

    University presidents are invited to participate on the board of a non-profit organization called Universia, which is funded due to the generosity of the Banco Santander-Santiago, a Spanish bank.

    The university presidents are paid a thousand dollars for each board meeting that they attend, not bad pay for an hour or so of one’s time. Distinguished board members include the president of the state-run Universidad de Chile and the prestigious Universidad Católica.

    Coincidentally (what a world of coincidences we live in), the Banco Santander-Santander has a contract for providing the student I.D. cards for all the universities whose presidents generously participate in the above-mentioned boards.

    I.D. cards can be used in automatic tellers as well as for campus I.D., but, small detail, in providing the I.D. cards, the bank has access to a complete data base for all students, employees and academics in the universities involved, thus allowing them to push and peddle bank products to future professionals.

    Here’s an article in Spanish explaining the deal in more detail:
    http://www.elmostrador.cl/pais/2014/05/29/el-bono-que-santander-paga-a-diez-rectores-de-universidades-en-chile/

  2. s.wallerstein,

    If we don’t already do that in the US, I’m sure that we will be doing it soon. Having academics attend “events” with corporate support (bribes?) is common practice here-no doubt it also occurs around the world. For example, McDonald’s was a major sponsor at a nutrition convention. Some were dismayed by that.

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