Dig.ni.fy Winter Issue - January 2024 | Page 56

past three years.”21

The long and short of it is colleges and universities are having to run operations by tapping into alternative sources of funds: loans against property, sale of property, taxation (if

the institution is public), bonds and/or bond revenue, gifts, restricted grants, and endowments. Many institutions rely on the latter, particularly, highly regarded institutions with a long history of privilege and performance; but endowments cannot and should not be counted upon. A NACUBO-TIAA study found that the endowment values for a cohort of wealthiest colleges surveyed declined by an average of 3.8 percent, while the endowments of the remaining institutions declined by 9.6 percent.22

Incoming students will demand more and more services, and colleges will make them available to try and stay competitive. But this will come at a cost – particularly given the impeding cliff and what appears to be higher inflation for the near term – for those small private institutions who lack economies of scale or do not have the kind of endowment one sees in the Ivy League. A heavy reliance on tuition is simply an unsustainable model.

Administrative Bloat

Administrative bloat is defined as “what occurs when the cost and scale of a university's administrative structure either fails to contribute to the institution’s core educational mission or actually detracts from that educational mission.”23 A standard means for assessing administrative bloat is to compare expenditures for instruction against expenditures for academic support, student services, and institutional support.

According to the National Center on Education

Statistics, “the gap between what U.S. colleges

spend on teaching versus administrative

support has steadily closed over the years.”24

U.S. News and World Report, which looked at the numbers, concluded:

•At public four-year schools in 2010, 32.1 percent of expenditures were for instruction and 23.7 percent were for academic support, student services and institutional support. In 2021, instructional spending had decreased 4.7 percentage points to 27.4 percent of total expenditures while spending on academic support, student services and institutional support dropped less than 1 percentage point, to 22.9 percent.

•The change was more dramatic at private, nonprofit four-year schools. In 2010, 32.7 percent of expenditures were for instruction and 30 percent were for academic support, student services and institutional support. The dominance flipped in 2021, with instruction declining to 29 percent of expenditures while academic support, student services and institutional support accounted for 29.6 percent.25

What’s driving the change? Analysts argue multiple factors are at work. First among these is the fact colleges are spending more on student services because of demographics. More first-generation, low-income, older, and nontraditional students are entering college.

Incoming students will demand more and more services, and colleges will make them available to try and stay competitive. But this will come at a cost for those small privateinstitutions who lack economies of scale or do not have the kind of endowment one sees in the Ivy League.

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