Higher Education Reforms: Big Savings Only Possible Through Big Changes

by Mark ‘Jay’ Williams, Economics Fellow

Efforts to reform New Jersey’s higher education system are finally gaining momentum in Trenton. However, while several well-intentioned pieces of legislation have been introduced with the goal of reducing tuition rates at our state colleges and universities through tenure and civil service reform, their savings would take too long to materialize. New Jersey’s current and future students need aggressive, systemic action, and they need it quickly.

New Jersey’s nine public state colleges are by far the most expensive in the nation, and our three research universities (Rutgers, NJIT and UMDNJ) are in the top quartile for tuition and fee expense. New Jersey’s nine public state colleges are more expensive than 2nd place Illinois by more than 22%, and exceed the national average by 50%.

The reasoning from the college presidents has been the “state’s disinvestment” in higher education. However, New Jersey taxpayers invest more per full-time equivalent student than their peers in most states.

In FY2010, the state appropriated $1.48 billion to the 12 senior colleges, which was a state subsidy of $361 per credit hour for the 4.1 million undergraduate and graduate credit hours attempted. Another way of looking at this is on a per pupil basis. The $1.48 billion divided by 141,000 full-time equivalent undergraduate and graduate students equals nearly $10,500 per student in subsidies. This is one of the highest per-student subsidies in the nation.

Furthermore, if disinvestment is real, why do the 12 colleges and universities continue to receive more in state appropriations than necessary after tuition and fees for operating costs, resulting in the accumulation of more than $1.2 billion in combined unrestricted cash reserves?

Misplaced Priorities: Just 34% of College Budgets Dedicated to Instruction

According to the 2010 independent audits of our state public colleges, an astounding 66% of total expenditures are dedicated to non-instructional activities. Approximately 16% is spent on administrative expenses, and the nine state colleges alone pay $125 million annually on their highest-in-the-nation, $2.3 billion long-term debt.

Although civil service and tenure reform is on the table, they alone will not make our public state college system more affordable, accessible or successful on outcomes. New Jersey students, parents and taxpayers need structural reform to make the archaic public state colleges competitive in today’s higher education marketplace.

Yes, tenure reform will have an impact on faculty, but not as much conventional wisdom dictates. Out of 31,000 employees, there are only 7,900 full-time faculty in our 12 public state colleges. On average, our full-time faculty accounts for 60% of all classes taught. The balance is addressed by the growing trend to adjunct part-time faculty, who typically receive no pension or healthcare benefits.

Greater opportunities for savings exist in the Executive and Professional staff levels. The nine public colleges continue to be top heavy. They have 695 executives for 8,780 full-time employees. By comparison, Rutgers has 223 executives for 9,654 full-time employees. This suggests that a “centralized” administrative function does have significant span-of-control advantages.

Significant Savings through Consolidation, Elimination and Privatization

CSI-NJ’s platform for higher education reform would result in up to 25% savings in expenditures. The estimates and recommendations are based upon the research of the leading think-tanks on higher education productivity. The strategy is simple and straightforward: focus resources on instructional activities at the state college level, incentivize institutional and student success, and eliminate non-instructional costs through consolidation and privatization.

• Consolidate System-wide administrative and institutional support functions, such as:
Human Resources, Controller, Facility, information Systems, and Purchasing;

• Consolidate System-wide student support services such as Advising, Admissions, Advancement, Financial Aid, Institutional Research, and Communications.

• Restructure Campus-based academic support and student services, including significant restructuring of Provost and Dean system.

• Privatize Auxiliary services, such as Housing, Bookstore, Development, Dining, Printing, and Security;

• Privatize Sport and Recreation management, such as Athletics programs, Clubs, and Newspaper.

• Eliminate Legal and Government/Community Relations positions, which are already paid for Attorney General and New Jersey Association of State Colleges and Universities dues;

• Eliminate ‘Special Assistants’;

• Eliminate Duplicative in-progress and planned capital expenditures - share campus resources;

• Eliminate Program for employee bonus, housing, automobiles, personal communication devices;

• Eliminate Social memberships and internal/foundations payments for social events.

• Establish Internal Audit function at each institution reporting to State Comptroller and State Auditor.

CSI-NJ’s research indicates that the above recommendations would amount to$225 million in immediate savings, in addition to long-term pension and health care savings. That level of savings would equate to a reduction of tuition and fees from the current cost of $11,200 to the national average of $7,500 annually.

Conclusion

New Jerseyans should be encouraged by legislation intended to constrain wasteful and inefficient spending at any public agency, and our state colleges certainly have a long-history of critical reports from the State Auditor and State Commission on Investigation.

However, the state will never address the root of this problem through incremental legislation and executive order. Policymakers must design a higher education system that is not only affordable, accessible and outcomes successful, but also economically sustainable.

To accomplish that, only major changes will do.

About the Author

Mark ‘Jay’ Williams is an Economics Fellow at the Common Sense Institute of New Jersey, a non-profit organization dedicated to bringing free-market solutions to the public policy challenges facing New Jersey.

This article was first published on www.InTheLobby.net