Colleges Choking On Cash

Although the academic community continually cries poor, especially when, alternatively, raising tuitions or seeking government subsidies, some dissident professors point out that the Ivory Tower is not under- but over-funded.

Colleges and universities nationwide spend hundreds of billions of dollars a year, figures from The Chronicle of Higher Education Almanac show. Certainly, school officials have no trouble finding projects to spend budget dollars on. Duke University, for example, gives each freshman a cutting-edge high tech i-pod (the new bells-and-whistles successor to the walkman) for no particular reason.

“I’ve gone to Europe on what schools spend,” said economics professor Richard Vedder at a recent symposium here at the Cato Institute. “Universities are on a spending spree with this money.”

What do colleges and universities have to show for this largesse? “The only measurement of accomplishment they use are the U. S. News and World Report ratings,” Vedder points out, “and how do you get on them? By spending more money.”

Vedder has written for both the Missouri-based Center for the Study of American Business and the California-based Independent Institute. He teaches at Ohio University (OU) at Athens. His position at OU-Athens gives him another reason to be confident as well as candid.

“I’m tenured,” Dr. Vedder points out. “I can say what I want.”

Even the much sought college degree may not be such a great prize. Vedder points out that employers use the degree as a screening device but now more employers are using alternative certification checking.

Vedder is the author of Going Broke By Degree: Why College Costs Too Much. Spending on higher education may actually have unintended consequences. Vedder recently corresponded with Milton Friedman who originally saw a more positive spillover effect in education decades ago. Friedman has since had second thoughts.

“Since writing Capitalism and Freedom, I’ve come to see negative externalities of education,” Friedman wrote, pointing to “political correctness and riots.”

One frequently pc bastion that can prove lucrative for institutions of higher learning is the college of education. As we recently reported, David Steiner of Boston University, who is no right winger, documented the liberal bias of schools of education in a recent study.

“With good reason we look down our noses at colleges of education,” economist John Wenders said at the Cato forum. Wenders is a professor emeritus at the University of Idaho.

“You can’t get rid of the college of education because it is a cash cow for the school” Wenders told the audience. “They get money from the state.”

“The guy keeping the books doesn’t want to get rid of it because of the money and the football coach says, ‘Where am I going to hide my players?’”

With billions of dollars at their disposal, the question of the accountability of school administrators inevitably comes up. Here, too, few checks exist.

“We have boards of trustees that come in twice a year and get wined and dined by the president,” Vedder points out. Other than the boards of trustees, few other watchdogs patrol the bleeding cost overruns.

“Colleges and universities are more competitive than k-12 public schools,” Vedder concludes. Both Vedder and Wenders say that the problem of college splurging stems from government policies.

“One third of kids in college go to private school,” Vedder notes “but private schools are equally public.”

“For example, Harvard gets a third of its money from government.”

Even when not directly subsidized by the government, colleges and universities receive most of their funding through someone other than the consumer of higher education—the student.

“Colleges get their money through third party payments,” Vedder explains, “Pell grants, for example.”

“What’s the problem with higher education?,” Vedder asks rhetorically. “It’s not for profit.”

Vedder compares for-profit education, favorably, with not-for-profit education. Dividing school budgets by students, Vedder found, leaves the University of Phoenix spending $6,000 per student compared to the average state university which spends about three times that amount, or $20,000 per student.