“The nation’s best-known public universities have been on an unfettered spending spree. Over the past two decades, they erected new skylines comprising snazzy academic buildings and dorms…Then they passed the bill along to students.”
This provocative quote is from a recent Wall Street Journal article, but the reality is more nuanced and it varies considerably among the states. True, the financing for the laughable “lazy rivers,” the upscale dorms with DreamCloud mattresses, the polemical DEI enterprises, and the “play areas” in libraries has probably been enabled by student fees, donations, and internal redistribution of funds.
But the “snazzy” academic buildings at public universities are typically not underwritten by tuition or student fees. Instead, they’re financed largely from capital appropriations separately allocated by state legislatures and by donors who want their names on buildings.
So are the best-known public universities really on a spending spree or is this journalistic spin? And, to digress a little bit, why is it a spending spree at UCLA but not at Southern Cal when both institutions may be using similar (non-state) funding methods? Two factors seem relevant: 1) the perception and reality of university wealth and 2) the spiral of tuition and fee hikes and budget cuts on public campuses.
Great university wealth?
Big-time sports spending and burgeoning university endowments are the most probable culprits behind a perception of wealth. First, when people read about coaches’ salaries and when they see the aptly labeled “world class” facilities, arenas, and practice fields, universities seem like the epitome of prosperity.
However, because of an interminable “arms race,” including lunacies like Stanford or Cal-Berkeley joining the Atlantic Coast Conference, most athletic programs routinely operate at a deficit. This is the case especially if mandatory intercollegiate athletics student fees and other institutional and governmental subsidies, totaling $3.1 billion in 2022, are excluded from revenues. According to the excellent Knight-Newhouse college athletics database, only 18 of some 229 public Division I athletic programs made more than they spent in 2019-2020 (pre-COVID), excluding institutional and governmental subsidies and student fees. There appears to be little money flowing from college sports programs to the math departments.
Any financial overlap between athletic programs and the rest of the university goes the other way, from the university to the sports programs. Student fees and institutional subsidies are crucial to the survival of college sports, which consume all they make, and more.
For the smaller, regional colleges, schools without access to rich boosters or large ticket sales, funding intercollegiate sports without subsidies or fees is impossible. A sampling of regional universities, within and outside North Carolina, including among others Cal State-Long Beach, Eastern Kentucky, Florida International, Norfolk State, NC A&T, UNC-Asheville, UNC-Wilmington, and Western Carolina, indicates about 70 to 80% of total athletics budgets at these campuses are funded by institutional subsidies and student athletic fees.
And of the four UNC system campuses where the state recently lowered tuition to $1,000, presumably to make them more affordable and boost lagging enrollments, two have athletic fees above $800 and two are above $900 annually. All four rely chiefly on athletic fees and institutional subsidies to finance their intercollegiate sports activities.
A pertinent question occurs: how many students would choose to pay these mandatory athletic fees? It’s all about money, as editorialists are wont to say. But it’s actually all about money that disappears into the money pit of college sports.
Second, the major public universities increasingly depend on non-state funds and donations. Their endowments have consequently grown rapidly. Critics often suggest that universities should use their billion-dollar endowments to defray expenses. Today, Carolina’s and NC State’s endowments are $5.5 and $2.0 billion, respectively, the second and third largest in North Carolina, behind Duke’s at $12.1 billion. A university’s endowment, however, is the sum of hundreds of smaller endowments. Most come with strict donor-specified guidelines on how to spend the proceeds; they cannot be spent for anything else. A small fraction have no strings attached, to be spent essentially as the university wishes.
Let’s put endowments in context: Carolina’s total annual operational budget is about $4 billion annually and its endowment in 2022 stood at $5.5 billion. If one assumed that one-third, or $1.8 billion, of Carolina’s endowment is unrestricted, to be spent as the university saw fit, about $75 million would be generated each year for current unrestricted spending, depending on stock market vagaries.
This is real money, as US Senator Everett Dirksen famously observed. But even with this generous one-third assumption, $75 million in unrestricted money would amount to 1.9% of UNC’s all-funds annual budget or to one-sixth of all its tuition and fees each year, not counting other costs of attendance.
Large endowments and athletic extravagance, while impressive, are of little consequence to public university operational finances.
“Flexibility” in the spending of public funds
Historically, most revenue for the major public campuses came from state coffers. By the 1990s, with the growth in athletics, medical and hospital operations, and private donations, state funding constituted less than half of the totals. Campus appeals for greater “flexibility” in the use of public funds began then. In asking for greater independence from state budgetary guidelines, the large public universities observed that only a fraction—between 20 and 40% for most—of their budgets came from state funds.
Administrative flexibility implied, among other things, an ability to move funds around among different budgetary lines. For example, funds from a vacant teaching position could be redistributed to buy equipment for campus police or to fund travel expenses for administrators. Under the umbrella of managerial efficacy, trustees embraced the flexibility proposition.
Legislators were foxier. They bestowed flexibility in return for yet more reductions in state funding, a tit-for-tat condition that universities accepted.
The spiral of tuition and fees
Before tuition started climbing in the 1990s, a prevailing view at the major public universities was that tuition was too low, even as their states’ constitutions highlighted the principle of low tuition (e.g., Arizona, California, North Carolina). Well-to-do trustees asserted they could easily afford higher tuition for their children–“I have shirts that cost more than the tuition,” said one. Higher tuition and higher fees would also provide additional revenue. Business school deans, looking to their private peers, were captivated by the allure of higher tuition. Many professors joined the choir.
The growing affluence of students also contributed to a belief that “rich kids” could afford higher tuitions–and the higher tuitions went, the richer students became. A corollary argument was made: Society didn’t benefit from their college attendance; a university education benefitted those who had one so they should be the ones paying for it.
Unit-level administrators, such as those in student health centers or intramurals departments or IT, generally support user fees, because fees tend to remain within their own operations. They encourage student committees to vote for the higher fees and then checkmated supervisors and administrators propose them to trustees. The fees, ironically, are inflicted by long-gone students, administrators, and trustees upon future cohorts of students obligated to pay for them.
Flexibility also allowed provosts and deans to move money around and support smaller academic units without much enrollment, such as foreign languages or women’s studies. All of it worked smoothly with conservative legislators inclined to reduce public support for state universities.
Here’s the upshot: What had long been held to be a public good was privatized—the public highway now charged a major toll and the national parks now had a substantial user fee. Rather than an infusion of new dollars, the result has been an historic transference of public university costs from the state to students and to their families.
Below are the dollar changes in per student state funding and in tuition for selected states, adjusted for inflation but excluding mandatory students fees, from 2008 to 2018:
Inflation-adjusted changes in per student state funding and tuition, 2008-2018
| State funding per student | Tuition per student | |
| Alabama | -$4466 | +$4489 |
| Arizona | -$3669 | +$5384 |
| South Carolina | -$2836 | +$2765 |
| Pennsylvania | -$2541 | +$3006 |
| North Carolina | -$2186 | +$2321 |
| Texas | -$2149 | +$2302 |
| Georgia | -$1363 | +$3668 |
| Florida | -$1306 | +$2382 |
| Virginia | -$1218 | +$4587 |
| New York | +$39 | +$1966 |
| California | +$250 | +$3983 |
University administrators–coaxed by trustees who already felt tuition was too low–defended tuition hikes because the legislatures were cutting their budgets. It’s evidently easier to raise tuition and fees than it is to eliminate inessential spending. Legislatures slashed budgets because they felt universities were capable of charging more and because they saw higher education as a private, not a societal, benefit. Which one came first—the tuition hikes or the funding cuts—doesn’t matter; public universities and legislatures are locked together in a dissonant partnership.
Some impacts and consequences
The cycle of tuition and fee hikes and budget reductions, coupled with administrative “flexibility,” has had differing consequences. Some of the increased fees have been captured by or reallocated to non-academic departments and used to build or renovate facilities, start new programs, and expand others. Luxurious gyms, funded by fees and staffed by bureaucratic armies, replete with saunas, suspended jogging tracks, and weight-lifting equipment the envy of a neighborhood YMCA, are not uncommon.
The academic winners have been high demand areas like engineering, business, and health disciplines and losers have been education and the arts and humanities. This has been reflected in widening professorial salary differentials among the disciplines. It has also resulted in the hiring of more non-tenured, adjunct instructors.
In addition, the pay gap between public and private university professors (e.g., UNC-CH vs. Duke or Georgia vs. Emory or UC-Berkeley vs. Stanford), which not long ago favored the public institutions, has widened dramatically in favor of private universities. Within states, the major public universities have also done better than the smaller regional public campuses, both because wealthier students at the larger universities are less sensitive to tuition and fee hikes and because raising money from wealthy alumni and boosters is easier.
Meanwhile, administrator salaries and bureaucratic bloat, especially in non-academic areas, have spiraled.
The responsibility of boards
Where are the public university regents and trustees in this “spending spree?” This is a complicated topic, especially in states like North Carolina, which has unusual campus-level trustee boards with limited authority and where an intrusive legislature forcefully controls the systemwide Board of Governors and its staff. Rather than a spending spree, however, what has happened seems more of redistribution of costs, opportunities, and spending at the larger public universities.
Ultimately, university boards—which perforce take their cues from chancellors and presidents—share in the blame for failing to act on the important things and for acting on the unimportant ones.
Board trustee service, though vital, can be transitory, self-serving, or tediously rubber-stamping. Trustees might be well advised to aim pointedly at mechanisms that dilute teaching and research and contribute to fee escalation and bureaucratic growth. Intelligent board guidance by presidents and chancellors is an antecedent of trustee effectiveness.
In turn, presidents and other administrators should be evaluated by boards on how well they focus on central educational issues and how effectively they combat rising costs and challenge institutional nonessentials. Instead, they are paid bonuses for achieving contractual benchmarks over which they have little or no control, such as higher graduation rates or going to a bowl game or for raising money that would have been donated anyway or, in short, for doing the jobs for which they are already being paid.
What universities do exceptionally well is to teach and to conduct scholarly research. This is what all board members should support overwhelmingly and above all else.
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