My View from South Hill
Monday, December 10, 2012
Our focus at Ithaca College is on increasing our VALUE to students. Given IC’s standing as one of the best student-centered learning environments in the country but also as a relatively expensive higher education option, it is my opinion that we must be focused on both parts of the value equation at this time: increasing quality while also controlling cost.
Having discussed last week what constitutes quality and how we are seeking to go from good to great in quality at IC, I would like this week to focus on the matter of cost.
As Professor Elia Kacapyr pointed out in a comment posted on my blog two weeks ago, the cost of attendance at Ithaca College has increased at 3.58 times the rate of inflation since 1983. His calculation does not take into account financial aid that is provided through the college; when you consider such aid our final cost to students has risen at “only” a bit more than twice the rate of inflation. Cumulated over decades, though, that is still a big disparity! Even more relevant is the comparison of the net cost of attending Ithaca College to growth in family incomes. The net cost of IC after financial aid has grown at twice the pace of growth in the median family income over the last decades, a trend that is causing stress among prospective students and their families. Obviously, this trend is not sustainable from the perspective of affordability.
In order to reverse the cost spiral – which is general in higher education and not unique to IC – we must reduce our expenses in order to allocate funds to quality improvement. We must also reduce the current reliance on annual cost increases that are approximately twice the rate of inflation. It is this latter task, of reducing the annual increase in student cost, that has commanded the most attention in society. President Obama, for example, has stated the goal that colleges must cut their rate of cost increase in half (to approximately the rate of inflation), and pledged in his campaign that he would seek to withhold federal financial aid dollars from colleges that do not do so. If we are to move in the direction of meeting this challenge, we will need to find on-going operating efficiencies. If you think of our costs over time as a line with an upward slope, cutting expenditures shifts the line down while finding operating efficiencies lowers the slope of the line in the future.
In the 46 years from 1962 to 2008, annual gross tuition cost increases at Ithaca College averaged 7.3% per year, including a 6.9% per year average from 2000-2008. Some of those years were high inflation years and there was also a significant increase in financial aid during that period of time. Even so, the numbers bear out the fact that IC fully participated in the general trend of an unsustainable cost spiral. From 2008 to the present – since the global economic crisis – gross tuition at IC cost has gone up by 4.9% per year. This is significantly less than our long term rate of cost increase. But if we were to meet President Obama’s goal (to name just one possible objective), the rate of increase would need to come down still further to about 3.5% per year. How can such efficiencies be achieved?
Broadly speaking, there are two strategies for cost control. One is an across-the-board belt tightening. We could freeze salaries or keep salary increases minimal. We could keep all controllable budgets flat, recognizing that some of our expenses – such as for energy and for employee health care benefits – are likely to grow by much more than 3.5% from one year to the next.
The other strategy is targeted, based on a careful review of all expenditures with the aim of reducing or eliminating expenses that are not closely aligned with the quality of our core educational mission. Under a targeted approach, we would reduce expenditures in some areas in order to have the funds to maintain quality in others and even to increase our commitments in areas that significantly advance our educational quality and our vision for the future.
There is no one right answer for all situations when it comes to the choice between across-the-board and targeted cost reduction strategies. Which strategy is best at a given time depends on context and on what one is trying to achieve. In the global economic recession of 2008-2010, for example, IC adopted a one year salary freeze and every division took proportionate cuts to their operating funds. Those are classic across-the-board strategies, appropriate to a situation where the goal is to work through a temporary financial gap.
In our current situation, we are not seeking to weather a temporary economic crisis but instead to end a cost spiral that has gone on for decades. We are challenged not just to reduce our rate of tuition increase for one year, but on an ongoing basis. To adopt across-the-board strategies under these circumstances would be to paralyze the college with no financial capacity to adopt new ideas. Over time, this strategy would surely condemn IC to a slow decline. We would be able to afford only minimal salary increases year after year, leading to a loss of morale and an increase in attrition. It would not be possible to invest in further advancing quality, opening us up to the possibility of a long term erosion in both quality and reputation. In short, across-the-board strategies are not a good response when the goal is long term change.
Unlike 2008-2010, IC is now embarked on a strategic and targeted cost reduction strategy. With the help of Huron Education Consulting, we are now reviewing every aspect of our administrative organization and processes. The IC campus will review Huron recommendations early in the spring semester and offer input into the development of a plan that in future years will produce savings and generate new revenue. With the participation of the faculty, and recognizing their primacy as the experts in academic instruction, we will take parallel steps in considering how to reduce the future rate of annual growth in the cost of our academic programs.
The commitment to cost control at Ithaca College is not primarily directed at weathering a temporary budget gap or getting us through to the next period of expansive economic growth. We are seeking to find a permanent footing that will enable us to offer a world class education at a price that keeps Ithaca College accessible to students of talent from the widest possible range of economic circumstances.
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