Show Me the Tuition

23 July 2015

College in the United States is expensive.

For all of the news about tuition increases and state cutbacks, there’s very little media coverage about how universities spend their money.

One of the best college systems in the U.S. is the University of California (“UC”) system. However, recent tuition increases are so painful they’ve led to student protests, and revealed outright contempt of students by UC leadership. Where does its money go?

The Data

The UC spends over two-thirds of its funding on staff. The rest goes to large expenses (buildings), financing (paying off debt), and miscellaneous expenses. However, those are related to the number of employees; buildings exist because people work in them.

The University of California’s official budget website does not provide a useful breakdown further than that some high-level numbers. However, the State of California does provide the amounts it pays to its employees by title, along with the number of employees in each role. Thank goodness for public data.

After cleaning up the raw public data and coming up with a cleaner data set, I was ready to do analysis.

Warning: this data is not 100% correct, because I have had to guess what some job title acronyms mean. It is largely accurate.

Show Me the Money

Most of the university’s expenses are for administration and medicine.

Only ~30% of the UC’s budget goes to teaching. Of that, almost half goes to medicine. Non-medical teaching, including professors and TAs, is only about 15% of salary costs.

Most university revenue, like student loans, doesn’t go to teachers. It goes to the huge teaching hospital and administrators in office buildings. Sure, patient fees and grants make up for a lot of that, but it’s clear that all non-teaching activities are the tail that wags the dog.

What is the UC System?

The University of California system is a collection of medical centers and large administrative staff. The teachers and researchers are there as window dressing.

Medicine vs. Not

Medicine is a huge amount of the money being spent by the UC system.

Administration vs. Not

It’s not a majority, again, but it is quite a bit.

Academic vs. Not

Most of the money doesn’t go to academics. The University of California’s own data supports this.

Give examples of titles for each category.

It’s About the Incentives

I think I can see why salaries are allocated this way: the incentives are messed up.

Administrators have no incentive to cut their own budgets, their staff, or their authority. They’d be less important, and be able to offer less ‘comprehensive’ ‘solutions’ to (Insert Issue Here) if they did.

I’ve lost count of times I’ve heard the gnashing of teeth that some college lost a couple of places and ‘prestige’ in the U.S. World & News Report, and hired administrative staff to make things better.

Colleges are focusing heavily on increasing scope and adding control, which increases costs. Anyone who has ever heard of the Iron Triangle could tell you this was going to happen.

Implications

The implications are profoundly positive. It is possible to make universities cheaper and improve the lives of faculty. There are some important but systemic changes that could be made:

• Cap the administrator:student ratio to a level seen in the 60s, 70s or 80s. Fire some administrators.
• If tuition goes up, all high-level administrators should automatically take a pay cut equivalent to the tuition rate increase.
• Appoint a university ombudsman specifically tasked at making their teaching hospitals more cost-efficient.

What has been tried so far is not working. It’s insane to do “the same thing over and over and expect different results” (Einstein).