Below the Fold: Forget the Sheepskin, and Follow the Money, or Please Don’t Ask What a University is For…

Garbed in cap and gown and subjected probably for the first time in their lives to quaint Latin orations, three quarters of a million students, sheepskin in hand, will bound forth into the national economy, hungry for jobs, economic security, and social advancement. They exit a higher education economy that looks and works more and more like the national economy they now enter. The ivory tower has become the office block, and its professors highly paid workers in an $317 billion dollar business.

Some of this is, of course, old news. From the Berkeley 1964 Free Speech movement onward, the corporate vision of American universities as factories of knowledge production and consumption bureaucratically organized as the late Clark Kerr’s “multiversities,” has been contested, but has largely come to pass.

But even to this insider (confession of interest: I am now completing my 20th year before the university masthead), there are new lows to which my world is sinking. They amount to the transformation of American universities into entrepreneurial firms, and in some cases, multinational corporations.

Most of you by now are used to the fact that universities are big business. The press never stops talking about the $26 billion Harvard endowment, or how the rest of the Ivy League and Stanford are scheming to be nipping at old John Harvard’s much-touched toes. But many non-elite schools are joining the race for big money and to become big businesses. Twenty-two universities now have billion dollar fund-raising campaigns underway. After talking with a colleague from the University of Iowa on another matter, I went to the university web page to discover that Iowa has raised over a billion dollars in a major campaign since 1999 – not bad when you recall that the state itself only has 3 million residents. Even my university, the City University of New York, the ur-urban ladder to social mobility for generations of immigrants and poor, has announced that it is embarking on a billion-dollar crusade.

In addition to billion-dollar endowments, there is revenue to consider. You might be surprised at all of the billion dollar universities in neighborhoods near you. All it really takes to put a university over the billion-dollar revenue mark is a hospital. Iowa, for instance, is a half billion a year all-purpose education shop; add its medical school and hospital system, and its revenue quadruples. A big enrollment urban school like Temple does a billion dollars of health care business in Philadelphia, easily surpassing its educational budget of 660 million. These university budgets often depend as much on the rates of Medicare and Medicaid reimbursement as they do tuitions from their various educational activities.

Tuitions are no small matter, of course, for those who pay them. The elite schools have recently crossed the $40,000 a year threshold, but the perhaps more important and less noticed change in higher education finances is that states are passing more of the burden for public college and university education directly onto the students themselves. The publics enroll three quarters of the nation’s students. As late as the 1980s, according to Katharine Lyall in a January, 2006 article in Change, states paid about half of the cost of their education; now the proportion has dropped to 30%. For instance, only 18% of the University of Michigan’s bills are paid by the state; for the University of Virginia, state support drops to 8%. Baby-boomers on that six-year plan at “old state” where they paid in the hundreds for their semester drinking and drug privileges find themselves now paying an average yearly tuition of $5,500 a year for their kids. When you add in room and board, a year at “old state” now costs an average of $15,500 a year, a figure that is 35% of the median income for a U.S. family of four.

So under-funded are important state universities that they are resorting to tax-like surcharges to make up for chronic state neglect. The University of Illinois, for example, is adding an annual $500 “assessment” on student bills for what the university president Joseph White, as quoted by Dave Newbart in the April 7 Chicago Sun-Times, describes as deferred maintenance. “The roofs are leaking and the caulking is crumbling and the concrete is disintegrating,” President White says. Next year it will cost $17,650 to go to Champaign-Urbana. The state will cover only 25% of Illinois’ costs.

Illinois’ President Newbart may be a bit old-school, and perhaps has lagged back of the pack of higher education industrial leaders. He should get smart. Instead of milking the kids on a per capita basis and incurring undying consumer wrath (after all the plaster was cracked way before I got there, I can hear a student voice or two saying), Newbart should join his peers in a little financial manipulation. What do big firms with billions in assets and large revenue flows do? They sell bonds! So much money, so little interest. And with principal due after a succession of presidents has become so many oil portraits in the board room, so little personal and professional exposure. With the increasingly short tenure of university presidents, even Groucho Marx’s Quincy Adams Wagstaff could get out in time.

American universities have made a very big bet on their future prosperity. They have issued over $33 billion in bonds, according to the May 18 Economist. For the multinationals like Harvard, this is sound money management. To raise working capital, rather than sell some of their stock portfolio at a less than optimal moment or sell the 265-acre arboretum near my house which would diminish the university endowment, Harvard can use its assets as guarantees. The university’s credit is AAA, interest rates are still historically fairly low, and their tax-exempt status makes them attractive investment choices. Harvard can deploy the money in new projects, or re-invest it in higher-yielding instruments and pocket the difference tax-free.

The entrepreneurial universities, that is, those not internationally branded and not elite, are trying to gain a competitive edge. They borrow through bonds to build dormitories, student unions, and to beautify their campuses. Many are borrowing money they don’t have or can’t easily repay. As the saying goes, they are becoming “highly leveraged.” A turn around a town with more than a few universities will likely reveal how it’s raining dorm rooms locally. Here in Boston, it has afflicted universities on both sides of the Charles. Even an avowedly commuter campus like the University of Massachusetts-Boston is building dorms to create that market-defined “campus” feel. Bonds pay for the dorms, and the students through higher rents, pay them off.

The educative value of dorm living, smart remarks aside, is rather problematic. Talking with an old friend who heads an academic department at a Boston university, I have begun to understand, however, the business logic at work. His bosses have explained the situation thus: the last of the baby boomer progeny are passing through the system, and a trough lies behind them. The children of baby-boomers, alas, prefer the reproductive freedoms of their parents, and are having children late as well. International students, full-tuition payers and once the source of great profit, are choosing increasingly non-American universities, for a variety of reasons, some related to our closed-door policy after 9/11. Add income difficulties among the American middle class, and the entrepreneurial universities calculate that they must improve their marketability and take business from others. Expand market share, create new markets (new diplomas, new student populations), or fight to keep even, they reason. Or face decline, now perhaps even a bit more steep since they are into hock for millions of dollars in bond repayments. The “high yield” customer is the traditional customer, a late adolescent of parents with deepish pockets. So dorms, fitness gyms, and student unions it is, and the faculty is mum.

In the great expand-or-die moment occurring among America’s entrepreneurial universities, you would think faculty would be making out, but they aren’t. Let us set aside for another time comment on the highly limited American Idol, star search quests among the elite schools and the entrepreneurs’ somewhat desperate casting about for rainmakers and high-profile individuals who can help in creating a distinctive brand for their paymasters. College and university faculty salaries as a whole since 1970 have stagnated, the U.S. Department of Education reports. Part of the reason is that although the number of faculty has risen 88% since 1975, the actual number of tenured faculty has increased by only 24%, and their proportion of the total has dropped from 37% in 1975 to 24% in 2003. Full-time, non-tenure track and part-time faculty are being used to meet increased demand. Universities are succeeding in gradually eliminating tenure as a condition of future faculty employment.

Forty-three years after Kerr presented his concept of the “multiversity,” the facts conform in many respects to his vision. American universities are massive producers of knowledge commanded by technocrats who guide their experts toward new domains of experiment and scientific discovery. They possess a virtual monopoly on postsecondary education, having adapted over the past half century to provide even the majority share of the nation’s technical and applied professional training.

But swimming with instead of against the stream of American capitalism over the past half century has cost American universities what few degrees of freedom they possessed. They have become captives of corporate capitalism and have adopted its business model. They are reducing faculty to itinerant instructors. Bloated with marketeers, fund-raisers, finance experts, and layers of customer service representatives, they are complicated and expensive to run, and risky to maintain when the demographic clock winds down or competition intensifies. Moreover, as Harry Lewis, a Harvard College dean pushed out by the outgoing President Larry Summers, put rather archly in the May 27 Boston Globe, students whose parents paying more than $40,000 a year “expect the university to treat them customers, not like acolytes in some temple they are privileged to enter.”

As a priest in the temple, it hurts to note how much further down the road we have gone in reducing teaching and learning to a simple commodity. However, in demanding to be treated as customers, students and their parents are simply revealing the huckster we have put behind the veil. Their demands cannot change the course of American universities for the better, but they tell those of us still inside where we stand, and where we must begin anew our struggle.