June 10, 2016

Cost-conscious CU bucks the administrative myth

The common narrative in the national dialogue about why the cost of a college education is high often points to a single culprit: administrative bloat. The story goes that an overabundance of high-priced administrators has driven tuition costs through the roof.

The reality at the University of Colorado is that we are lean administratively. Many factors drive our costs, including state funding (or lack thereof), mandatory costs, technology, utilities and others. Last year we completed an in-depth study (which will be updated this summer) that shows one significant cost driver for tuition is a shift in majors from low-cost (generally liberal arts) to high-cost (STEM fields and business) programs. We are meeting our country’s needs in preparing graduates for careers in the knowledge and science sectors, but doing so costs more.

Setting aside for the moment the fact that higher education is a complex, multifaceted enterprise and that no single factor drives tuition costs, CU bucks the national narrative about administrative costs.

Our administrative overhead is 28 percent below that of national peers as measured by an apples-to-apples comparison of data presented by the National Association of College and University Business Officers.

Keeping administrative costs that low demonstrates our commitment to affordability. So does the fact that our tuition increases over the past four years have averaged below 4 percent, among the lowest in the state. At the same time, we generate more than $158 million in financial aid, up from $86 million eight years ago. We also continually look for new revenue streams and internal efficiencies to keep our costs low.

Classroom instruction, scholarships, fellowships and student services at CU account for 73 percent of the $1.28 billion we spend annually on the academic enterprise. Administrative overhead accounts for 9.3 percent. The remainder goes to research and facility operations. The most important people at the university, indeed the heart of our enterprise, are our students and faculty and that is rightly where we invest.

It would be easy to say this is just a self-serving justification for runaway administrative costs. Yet it’s important to note that at CU, we focus on keeping them low. And while we work hard to be efficient, things beyond our control also factor in.

Perhaps the biggest factor driving tuition costs is steep declines in state support. Two decades ago, the state paid about two-thirds of the cost of education and students paid the balance. Today, continual cuts to state funding flipped that equation, with the student now paying more than two-thirds of the cost. Less than 6 percent of CU’s $3.55 billion annual budget comes from state funding.

One of the effects of this continual erosion of state funding is that we have been forced to be administratively lean and efficient. I’ve always said that hard times make you do things you should do anyway to run a business, and that’s been the case for us.

While criticism of higher education is typically aimed at top administrators, I believe that is misguided. We need the best people running our complex operations and we are in a competitive market for them. There is an odd notion that it is unseemly for public higher education to pay its faculty and staff at market rates, but that is our reality.

We looked at data over time and found that the ratio of the number of employees compared to the number of students has remained constant. Average salaries have also remained at or below inflation.

We always have work to do in finding efficiencies at CU, and that work continues. But attributing the increasing cost of a CU education to an ever-growing administration doesn’t jibe with the facts.

Bruce Benson is president of the University of Colorado system. Contact his office at officeofthepresident@cu.edu

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