BY JUDITH GRANT

This article continues from Part 1, available here.

Market Irrationalities

But there are other places to cut costs that could conceivably result in a balanced budget. One is administrative bloat, especially at the executive level. Another is intercollegiate athletics. Recent data shows that in 40 states, sports coaches are the highest paid public employees in the state.⁷ At Ohio University, the men’s basketball and football coaches each earn over a half a million dollars per year, and each earn more than the university president. By way of comparison, consider the fact that Ohio Governor Mike DeWine’s yearly salary is $154,248.⁸ These priorities do not support education, the hallmarks of which are teaching excellence and the production of knowledge through research. And it is not even good business practice. The NCAA’s own data is consistent in showing that athletics programs that make more than they spend are in the vast minority. In 2014, only 24 schools made money from athletics. The others, of which Ohio University is one, require that their deficits be covered by raises in tuition, student fees, or pillaging monies formerly earmarked for the academic mission. This is true across all three sports divisions in almost every state in the United States.⁹ A truly remarkable set of data, published in 2020 reported the shocking statistics that a total of $192 million in student fees and subsidies is diverted to Division I sports in ten public universities in the state of Ohio, up from $164 million five years ago. “On average, subsidies amounted to $1000 for every student on campus, regardless of whether the student plays sports or even attends a game.”¹⁰ Here is one place that universities should look for misplaced funds, and some universities are doing just that. Northeastern University, for example, recognized the damage inflicted by inflated athletics budgets, and made the bold move to eliminate its 74-year-old football program. “In the decade since, Northeastern has basked in its success, with applications nearly doubling, research funding almost tripling and the institution’s ranking in U.S. News & World Report’s best colleges list jumping to 40 from 96.” At Northeastern since 2009, applications have increased to more than 62,000 annually from 34,000. The average SAT score has risen to 1,457 from 1,288 and research funding has grown to $178.6 million from $63.9 million. According to Joseph E. Aoun, the president of Northeastern since 2006, “Honestly, I’ve never heard anyone asking to bring back football,” he said. “No one.” ¹¹

The business model has also failed to protect research. Federal funding for research has declined since 2008, and Midwestern universities are further hobbled by severe declines in state funding. A quick look at some results of this defunding demonstrates the now topsy-turvy world of the public university. Private corporations have been able to successfully outsource their research and development (“R and D”) offices at the public’s expense because declining public support has forced scientists to seek more and more of their research funding from corporate sources. To be clear, this means that the public is now indirectly funding private corporate profit through the relatively low costs of academic scientists.

The obvious solution, fundraising, ignores the reality that public universities are simply not in the same structural position as the privates in terms of fundraising and endowments.

Private universities, which have long existed without state support, have the benefit of extraordinary endowments and alumni with deep pockets who are able and accustomed to donating large sums. While universities perform more than half of all basic research in America, public schools in the Midwest are particularly vulnerable to the failed business model. As one recent article explained, “The endowments of the universities of Iowa, Wisconsin and Illinois and Ohio State which together enroll nearly 190,000 students add up to about $11 billion – less than a third of Harvard’s $37.6 billion. Together, Harvard, MIT and Stanford, which enroll about 50,000 students combined, have more than $73 billion in the bank to help during lean times.” One result is that midwestern universities are already declining based on NSF rankings as measured by total research expenditures. ¹² At Ohio University, despite an increasingly aggressive corporate model, our national ranking in places such as the U.S. News and World Report continues to decline. In 2004, we were ranked 107, in 2015-16 we were ranked 146¹³ and in 2020 we are ranked 185.¹⁴ In fact, Ohio U declined 48 ranks between 2005-2016, having one of the steepest drops in the country between 2004-2015.¹⁵

Endless Crisis

The business model has not solved the fact that Ohio University has been in a budget crisis for most of the last two decades. A brief overview of some key events suggests a long train of poor leadership. In 2006, 75% of faculty voted “no confidence,” against the then-president, and then did so again in 2007, with 77% of about 48% of faculty participating in the vote. 67% voted no confidence in the provost.¹⁶ OU students voted no confidence by a margin of 78% prior to faculty vote.¹⁷ Many of the people currently serving as executive administrators in Cutler Hall are holdovers from these previous disastrous administrations. In subsequent years, executive administrators have promoted grand schemes to promote financial health that often leave Ohio University to foot the bill. This was the case with the relatively recent, financially aggressive business-based strategy of the most recent former head of finance at Ohio University who has since left OU for a new job. The plan to leverage debt in order to address infrastructure issues across the university costs the university $27.7 million in interest annually (2018-19), the payment of which is now roughly the size of the budget cuts that the university is seeking and constitutes a key component of the budget shortfall.

Another component of the former strategy was to move the university to an entirely new budget model rooted in market principles, “Responsibility Centered Management.” This became another failed attempt to improve effective budgeting, claiming to use market principles to assess costs and revenue of various units. Its quiet abandonment in 2019 demonstrates its failure as a financial fix. In fact, its most proximate outcome is that it incurred an untold number of transaction costs in its implementation and abandonment, and the perverse financial incentives it created that continue to affect curriculum as units made grabs for high-yield courses that would inflate revenue by shifting funds from one unit to another. Colleges and schools remain saddled with inflated financial staffs hired for the sole purpose of gaming the RCM system.

Savior Consultants

Along with tuition increases, executives often look to online education as a way to raise income for struggling universities. The ostensible advantages of online education are manifold. It can reach non-residential students, can be quickly deployed for credentialing programs, and in principle it can increase labor efficiencies since a single faculty member can teach more students online than they can in person. This latter is further optimized if such faculty are hired on a course-by-course basis which can shrink labor costs to a pittance. There are several obvious problems with this strategy. First, every university is trying to increase online enrollments, and many universities are further along in this process than Ohio U. Second, delivering online education demands high levels of technological, marketing and design expertise. Enter the highly problematic practice of using paid consultants and outsourcing, such as the recently hired and ominously named marketing firm, “Truth&Consequenses.” Surely someone must have noticed that there is some redundancy involved in a highly paid administrator who needs to hire a highly paid outside consultant to do their job.

By way of illustrating the ethical and financial costs of hiring such firms, consider the business model used by Pearson, an Ohio University partner. While more online technology firms with more integrity exist, Pearson demonstrates some of the worst practices in the online world which clone the logic of the “for profit” universities such as the University of Phoenix. The British company Pearson, established in England in the 19^th century as a construction firm, entered the publishing market in the 1980s and the testing and online markets in 2000. This was a year before the “No Child Left Behind” act mandated standardized testing for public schools, prompting satirists to lampoon its slogan “Pearson: Always Learning,” to “Pearson: Always Earning.”¹⁸ Capitalizing on this K-12 market, as well as on the faculty blaming “outcomes based” or “assessment” strategy, Pearson became a forerunner in standardized testing, online learning and Common Core standards reaping a profit of $8 billion in annual sales from its North America education division.¹⁹ From this platform, it was able to launch into public higher education in a series of highly profitable no-bid contracts. A “no-bid contract” means that universities hired them without looking at alternatives. For example, the University of Florida hired Pearson in a no-bid contract worth $186 million, and the University of Texas gave Pearson a no-bid contract for its online classes.²⁰ Historically, Pearson’s cut has been up to 60% of student tuition whether or not it reaches its enrollment targets. At University of Arizona, for example, the online program was projected to bring in $69 million annually, with Pearson’s share being $38 million. The ethical problem is, as one writer put it, “Pearson’s business strategy is to turn education from a social good and essential public service into a marketable for-profit commodity.”²¹ These extremely expensive firms are often of questionable utility in terms of truly engaging the mission of public higher education.

Judith Grant is a professor of political science at Ohio University and a member of the AAUP chapter there. 

Endnotes:

[7] John Duffley, “In 40 States, Sports Coaches are the Highest-Paid Public Employees,” FanBuzz (December 31, 2019)  and “Who’s the Highest-Paid Person in Your State?,” ESPN (March 20, 2018).

[8] Andrew Tobias, “Here are the Salaries for Gov. Mike DeWine’s Top Staff–and How they Compare to John Kasich’s,” Cleveland.com (January 30, 2019; Updated September 19, 2019).

[9] Brian Burnsed, “Athletics Departments That Make More than They Spend Still a Minority,” NCAA (September 18, 2015). See also 2017-18 data.

[10] Rich Exner, “$192 Million in Student Fees, Other School Subsidies for Sports At Ohio Division I Public Universities,” Cleveland.com, February 19, 2020.

[11] Bill Pennington, “Adding Football Saved One College. Dumping it Boosted Another,” New York Times (December 27, 2019).

[12] Jon Marcus, “The Decline of the Midwest’s Public Universities Threatens to Wreck Its Most Vibrant Economies,” The Atlantic (October 15, 2017).

[13] Conor Morris, “OU’s Drop in Rankings Stirs Concern Among Trustees, Faculty,” Athens NEWS (November 6, 2016).

[14] “Ohio University,” U.S. News & World Report.

[15] Conor Morris, “OU’s Drop in Rankings Stirs Concern Among Trustees, Faculty,” Athens NEWS (November 6, 2016).

[16] Elia Powers, “Leaders Under Siege at Ohio U.” Inside Higher Ed (May 31, 2007).

[17] “Faculty Delivers No-Confidence Vote Against Ohio University President,” Columbus Dispatch (May 30, 2007; Updated May 31, 2007).

[18] Jennifer Reingold, “Everybody Hates Pearson,” Forbes (January 21, 2015; retrieved July 17, 2016).

[19] Stephanie Simon, “No Profit Left Behind,” Politico (February 10, 2015).  https://www.politico.com/story/2015/02/pearson-education-115026

[20] https://www.politico.com/story/2015/02/pearson-education-115026

[21] Alan Singer and Eustace Thompson, “Pearson and the Neo-Liberal Global Assault on Public Education,” The Huffington Post (June 1, 2007; Updated June 2, 2007).