As students return to college this fall, parents and taxpayers are probably wondering where all of the money we give to universities actually goes. They may be disappointed to discover that administration is consuming a large and rapidly growing portion of university resources. Funds devoted to instruction, research and service — the primary functions of a university — are growing much more slowly.
In a recently released report for the Goldwater Institute, we examined data collected by the federal government from the country's leading 198 public and private universities. The results are disturbing. In 2007, nearly 39 percent of all full-time employees at these universities were engaged in administration, an increase of 39 percent from the number of administrators per 100 students in 1993. Only 29 percent of full-time employees were engaged in instruction, research and service, an increase of 18 percent since 1993.
One might think that as enrollments increase, universities would need relatively fewer administrators per student since they could spread those fixed costs over a larger base. Instead, the opposite is occurring. As universities increase their enrollment and receive more money, they expand the ranks of administrators even more rapidly.
Rather than achieving economies of scale in administration so that more resources can be redirected to core functions, America's leading universities increased administration significantly faster than enrollment and almost twice as fast as teaching, research and service.
Maryland's public universities have not escaped this problem of administrative bloat. At the University of Maryland College Park, the number of full-time administrators per 100 students grew by 68 percent between 1993 and 2007, while the number of full-time teachers, researchers and service providers only grew by 16 percent. We see the same story at the University of Maryland, Baltimore County, where administration increased by 77 percent, compared to only a 57 percent increase in teaching, research and service.
Why would universities give such priority to administration? The simple answer is that they do so because they can. As long as parents and students are willing to pay ever-increasing tuitions and taxpayers are willing to continually increase subsidies for higher education, university administrators will be able to direct those resources in the way they prefer. And not surprisingly, administrators tend to prefer hiring ever more administrators and paying those administrators ever-higher salaries.
Unfortunately, the politically attractive policy of increasing federal and state subsidies for higher education exacerbates the problem. Because policies such as direct state and federal appropriations to higher education insulate families from the full financial burden of administrative bloat, those families are less sensitive to university costs, and administrators face less pressure to economize. There is a vicious circle — universities pass along the cost of administrative bloat to consumers in the form of higher tuition, which causes families to demand higher subsidies from the government, which enables even higher administrative costs and tuition rates.
As painful as it may be at first, the only way to break this vicious circle is to reduce government subsidies of higher education. As of 2007, tuition only generated about a quarter of total university spending, the rest coming from some combination of direct government subsidies, donations and fees for services. If tuition had to cover a larger share of university expenses, families would be more cost-conscious and force administrators to trim administrative expenses while concentrating resources on their core missions of teaching, research and service.
We have an example of where this has been accomplished. At the University of Michigan, state funding dropped to less than 10 percent of total revenue. Between 1993 and 2007, the University of Michigan was one of the few leading universities that actually reduced the number of administrators, cutting the number per 100 students by 5.5 percent. Of the universities we examined, Michigan had one of the lowest increases in administrative spending.
Maryland's universities may howl that they already pinch every penny, but when faced with cuts in government subsidies, they'll discover greater efficiencies and reduce administrative bloat, just as Michigan did.
It won't be easy, but there is no other way to control runaway costs in higher education.
Jay P. Greene (email@example.com) is a Senior Fellow at the Goldwater Institute and the 21st Century Professor of Education Reform at the University of Arkansas, where Brian Kisida and Jonathan Mills are research associates.