Colleges and universities cannot be all things to all people

There has been considerable controversy over the newly mandated faculty and staff salary increases at New Mexico’s public institutions of higher education and the tuition increases announced shortly thereafter. The governor wrote of her frustration with this situation in a My View published recently (“Congratulations to university regents — some of them, anyway,” April 28).

Both the salary and tuition increases seem to be symptomatic of the William Baumol-William Bowen “cost disease,” a structural financial problem that impacts many labor-driven enterprises that compete on the basis of quality among their personnel.

Originally identified for nonprofit arts organizations like symphonies and ballets, the cost disease idea has been widely applied to higher education as well. All of these are organizations for

which compensation is the primary element of cost and also a controlling element of quality. In many ways, the abilities of its faculty and staff define the quality of an academic institution, just as the caliber of its musicians defines the quality of a great symphony. Competition for high-quality personnel inevitably drives costs upward, requiring higher revenues to balance the equation. For a symphony, that means substantially higher ticket prices, a substantially greater number of audience numbers or limiting access, likely reducing the quality of the listening experience. In higher education, competition for high-quality faculty and staff requires higher salaries that in turn require higher tuition costs for each student, larger numbers of students or limiting access, increasing the student-to-faculty ratio and diminishing the quality of the student experience.

The growth of personnel costs over many years ultimately overwhelms the possibility of new revenues from price/ tuition increases or growth in audience/student numbers, and the system crashes. Recent years have seen numerous bankruptcies among well-known arts organizations, and closures of private colleges have begun to occur, particularly among smaller liberal arts colleges. Among nonprofit private colleges and universities, the only institutions immune to the most negative impacts of the cost disease are those with substantial endowments that mitigate dependence on tuition.

Public institutions used to have some immunity as well, with funding from the state playing the same role as endowment releases in private institutions. State funding has declined precipitously in recent decades, though, and is often no longer a substantial source of revenue relative to tuition.

This phenomenon is not limited to New Mexico, and it is simply a fact of life for most public colleges and universities in the United States. Many public institutions have begun to operate as quasi-privates, with increases in meritbased financial aid, vigorous competition for out-of-state and international students (who pay higher tuition), and major efforts to build private fundraising to help sustain operations and develop endowments.

To the extent that these trends continue, public institutions also become susceptible to the cost disease. There are ways to respond to this dilemma, but cosmetic budget cutting is not among them. The main problem is a structural one, an element of the fundamental model for excellence in higher education. Technology may yet provide an answer, with the advance of adaptive learning technologies that hold the promise of good learning outcomes even with substantially higher studentto-faculty ratios. This is not yet the case, though, and moving in this direction requires determination and an openminded approach that holds educational excellence as the paramount measure of success.

In the meantime, it seems certain colleges and universities cannot continue to be all things to all people. Institutions must operate with a laser focus on what it is they do well and the people for whom they do it. They must know their strengths, abandon their weaknesses, amplify their resources through partnerships, and work to once again become engines of socioeconomic mobility and cultural and economic growth.