Budgeting Issues

Deferred Maintenance

In the mid-1980s the public began to hear about the impact of deferred maintenance on college campuses. For example, an article in the July 21, 1987, edition of USA Today¹ cited a study conducted on 213 college campuses by New York architect David Helpern that found that 52 percent of the colleges surveyed described new construction as being “extremely urgent.” At least 50 percent of the colleges in the survey placed  “necessity for repairs” in the same category. These repairs were classified as “deferred maintenance.”

In recent years few colleges have been exempt from the need to allocate large sums to correct deferred maintenance deficiencies brought on in large part by the college’s refusal to acknowledge and recognize in years past the importance and value of their physical assets. The value of a college’s facilities often exceeds the value of the college’s endowment. Setting aside sufficient funds to address deferred maintenance limits the funds available for other budget needs.

“The Lattice and the Ratchet”

The June 1990 issue of Policy Perspectives,² a publication issued under the Pew Higher Education Research Program, sponsored by The Pew Charitable Trusts, contained an article entitled “The Lattice and the Ratchet.” The article, written by a broad cross-section of leaders of higher education, attempted to describe the reasons why the cost of education was skyrocketing and what might be done to develop a “framework of redesign.”

The Administrative Lattice

The Policy Perspectives article attributed a portion of the higher cost of education to the “administrative lattice,” described as the growth in the administrative functions of colleges during the preceding decade. Data cited in the report indicated that administrative positions at colleges and universities grew by more than 60 percent between 1975 and 1985. This was ten times the rate of growth of faculty during the same period.

This growth in administration was attributed to three factors: administrative entrepreneurism, governmental regulations, and consensus management. These three factors combined to produce brisk increases in the cost of the administration of colleges, which in turn largely contributed to the rapidly rising costs of education.

Administrative Entrepreneurism

Creative, conscientious administrators had expanded their organizations to perform more tasks and improve services provided to students, faculty, and the college or university administration. Examples include adding staff to better manage financial resources of the college or university and adding departments for computer information systems.

In other words, administrators wanted to do their jobs well. As Derek Bok, president of Harvard University, said at the time, he came to admire the college administration’s effort to provide the very best administrative services. However, this excellence carried a huge price tag. Some of the growth in administration occurred as a direct result of functions no longer performed by faculty as part of their normal work routine.

Governmental Regulations

Increased regulation under new federal and state legislation required the addition of administrative staff to properly address the complex requirements of numerous new laws. The Occupational Safety and Health Administration (OSHA), the Environmental Protection Agency (EPA), the Americans with Disabilities Act of 1992 (ADA), and the Equal Employment Opportunity Commission (EEOC) all added extensive reporting requirements in addition to often requiring physical changes to facilities. Although these regulations have been of considerable benefit in the process of correcting deficiencies, they have added significant costs to facilities operating budgets.

Consensus Management

Colleges and universities typically have operated on the basis of consensus management. Committees decide most major and many minor issues. However, this era also has seen increasing involvement in the decision-making process on the part of boards of trustees, legislators, and others. Delays and the need for increased staff to meet the increased demands for accountability have been evident.

The Academic Ratchet

As the article also explained, members of the faculty were some of the principal beneficiaries of the growth in administration. Concepts that had marked the traditional role of the faculty were changing rapidly. As the role of faculty changed, it had a ratcheting effect, that is, it kept increasing the buildup of the administrative functions of a college or university.

The academic effects on growth have been attributed to academic tasks, professional pursuits, and personal pursuits.

Academic Tasks

Clearly the role of the faculty at many colleges and universities has changed from one of all-purpose teacher, advisor, counselor, and job placement specialist to one of teacher-researcher/consultant. The other, more traditional duties were dropped, as in many cases they had become too complex, requiring a disproportionate amount of the faculty’s time.

Currently colleges have full-time staff available to counsel students about financial aid, career services, job placement, health services, and so forth. Although there is no question these services benefit the student, they add significantly to the college budget.

Professional Pursuits

According to the article, today’s faculty want to teach their specialty at a time when it is most convenient for themselves. They prefer to teach one subject and do not want to teach more hours than any other member of their department. As a result, class hours are condensed to the middle of the day, increasing the demand for teaching space, which results in a need for additional buildings. Unwarranted as they might be, the new buildings add to the budget crisis.

Personal Pursuits

More faculty than ever before are pursuing individual research projects and performing consulting services. These pursuits take them away from the classroom and reduce the time available to teach and counsel students. In fact, research has become such a major part of some institutions’ normal modus operandi that they could not exist without the revenues resulting from that research.

Framework for Redesign

In the article the panel suggested that “change will not come easily, or even purposefully, as long as higher education as an industry perceives itself to require neither greater efficiency nor a heightened sense of accountability. Absent a commitment to redesign, colleges and universities will likely presume that the process of incremental growth can be reversed, leading to decremental and largely across-the-board budget reductions.”

The article went on to describe several measures that might be undertaken by the faculty and the administration to rein in costs. Among them were the following:

• Administrative growth. First, one must ask where and why has there been administrative growth in the organization during the preceding 5 to 10 years. Each position must be identified and examined to see if it is still justified.
• Simplify procedures. Review and analyze all of the procedures and processes that have become the everyday way of life on the campus, and either simplify or eliminate those that are no longer warranted.
• Redefine administrative organizations. Examine the organizational structure of the administrative function and redefine the authority and tasks to be performed.
• Focus on faculty. The article suggested several ways in which faculty structure could be simplified, but because this manual is focused on the management of facilities, we will leave a discussion of these recommendations for another time and place.

Continued Pressures

As the 1990s began, there was continued growing dissatisfaction over the cost of education on the part of students, parents, trustees, and state and federal administrators. The press was alert to the issue.

A Call for Change

In the August 7, 1991, issue of USA Today,³ Charles Sykes, whose book, Hollow Men: Politics and Corruption in Higher Education, was cited as the source of comments on the “decay of the university education system” (not just the decay of its buildings), called colleges and universities “vast empires of waste.”

“American higher education doesn’t need more money,” he wrote. “[I]t needs better values, better priorities, and it needs to provide better quality.” He went on to cite high salaries for faculty “stars,” poor curricula, and the need for better administrators (“University management is an oxymoron . . .”), better leadership at the top, and better teachers. This is harsh criticism, but is it warranted? Perhaps.

The Squeeze

In the same issue of USA Today,⁴ there appeared another article citing James B. Appleberry, then president of the American Association of State Colleges and Universities and former president of Northern Michigan University. Speaking about the cutbacks in state funding to college and university budgets, Appleberry stated that “states are indeed hemorrhaging in red” as a result of the recession then facing the country. He noted that the lack of funding was causing “faculty layoffs, it’s causing reduction in purchasing and keeping up to date with technology and purchasing, and it is having an impact on our ability to deliver quality education to the students.”

Financial Prospects for Higher Education

In an article from Policy Perspectives,⁵ Robert H. Atwell, then president of the American Council on Education, said, “higher education is in its most dire financial condition since World War II.” He cited states’ revenue shortfalls, declining federal funds, reduced appreciation of endowment holdings, and the uncertainty of continued full enrollment as factors contributing to his prediction that he did “not think things will get better until sometime after the year 2010.”

The Corporate Model

At the same time that colleges and universities were waking up to their crisis, business corporations began their efforts to “downsize,” “rightsize,” and make themselves more profitable. “Lean and mean” became the hallmark of firms who wanted to do business in the global environment of the 1990s.

These corporate efforts, although profitable to the individual companies, took their toll on company personnel. Many valued and experienced employees found themselves out of work.

Perhaps the 1990 article “The Lattice and The Ratchet,” referred to earlier, was the first to sound a similar call to colleges and universities. According to the article, “What is clear is that the challenge facing higher education is no different than that facing most American enterprises. The nation’s colleges and universities need to become more competitive-leaner, perhaps meaner, certainly more focused, with simpler organizations and a greater ability to make collective investments in targeted programs and projects.”