Austerity in the USA

Savings needed at US Universities

University World News. carries a piece by William Patrick Leonard, vice dean of SolBridge International School of Business in Daejeon, Republic of Korea, suggesting that US Higher education institutions need to rein in their costs. The traditional approaches to meeting financial shortfalls, raising tuition fees or increasing student numbers, are, it is suggested no longer justifiable:

The third internal budget balancing tool, cutting costs, has been the least favoured. It can negatively influence programmes and hence careers. I suggest that many institutions, large and small, have found it politically easier to increase revenue rather than control costs.

They have tended to resist seriously questioning the viability of ineffective or inefficient programmes and services. Simultaneously, many have increased their continuing cost burden by enhancing existing programmes and services as well as adding new ones.

This reflects perhaps the different structural set up and culture of US higher education but the contrasts with the position in the UK do seem rather stark. In particular, after several years of significant financial challenges in this country and in anticipation of many more to come, all institutions have had to make savings. Fees are capped and increasing enrolment is only realistically possible through growing international student recruitment which in itself is more challenging than ever because of visa regulations. So, in the UK we have been dealing with the need for reducing spend for some time.

 

Simplistically, institutional costs may be crudely subdivided into two categories – external and internal.

The external costs are composed of purchased goods and services. Unless the institution has the power to negotiate price, its utility, insurance, contracted services and consumable costs are largely beyond its control. External costs are strongly influenced by the internal costs that institutions should have more control over.

The place to start is internal costs. In American higher education internal costs are governed as much by unquestioned culture as by contractual obligations. Institutions have tended to regard the traditional mix of faculty, curriculum, calendar and infrastructure as immutable. This has been accompanied by an exaggerated sense of entitlement to external support.

The majority of US higher education institutions can no longer rely on the historic levels of government support or philanthropic largesse. Nor can they depend on the continued utility of tuition fees and enrolment increases to align revenue with their immutable culture-driven costs.

I suspect this is a reasonably accurate assessment of the position. Whilst we are now used to the challenges of savings needs in the UK (and indeed are not experiencing them for the first time), it will be a bit harder if there is no prior knowledge of how to respond. Having said that, after many years of growth there is likely to be significant scope for savings.

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