Op-Ed

Ky. Voices: UK should reduce overhead costs, not raise tuition

Bob Martin is emeritus Boles Professor of Economics at Centre College in Danville.
Bob Martin is emeritus Boles Professor of Economics at Centre College in Danville.

The University of Kentucky plans to increase tuition and fees by 6 percent in response to a $46 million budget deficit.

The Herald-Leader reports that UK has lost $50 million in state support since 2007.

Median household income in Kentucky decreased by 3.3 percent from 2009 to 2010. Hence, the proposed tuition increase imposes a significant burden on Kentucky households struggling to stay afloat.

Is it a bit unseemly to be raising prices in the face of this level of unemployment?

The following analysis — based on data from the National Center for Education Statistics' Web site, which is available to anyone to download — suggests changes that could lower cost per student substantially without laying off teachers, increasing class sizes or restricting course offerings.

The budget problems at UK originate with excess overhead, and changes could be achieved by bringing its staffing patterns in line with other Carnegie I public research universities.

Like UK, the 63 Carnegie I public research universities are flagship schools.

From 1987 to 2008, the average flagship university's total cost per student increased by $19,866. Academic cost per student increased by $7,501, and overhead cost increased by $12,364. Overhead cost increases accounted for 62 percent of the total cost increase.

For the same period, UK's total cost per student increased by $38,008, academic cost per student increasing by $9,540, and overhead cost increasing by $28,467.

Overhead cost increases accounted for 75 percent of the total cost increase at UK. These are all in constant 2008 dollars.

In 1987, the average flagship university spent 51 percent of its total budget on academics (instruction, research, and public service), and in 2008 it spent 49 percent on academics. In 1987, UK spent 49 percent of its budget on academics and in 2008 it spent 37 percent.

UK had the 10th-highest increase in overhead cost per student and the 13th-highest increase in total cost per student among the 63 institutions. Further, UK's reduction in the budget share going to academics was the 10th-largest decrease among the 63 institutions.

Higher education is a labor-intensive industry whose costs are driven by staff-student ratios in each activity. UK's administrator-student, tenure-track faculty-student, and full-time equivalent faculty-student ratios are all higher than the comparable ratios at the average flagship institution.

The full-time equivalent non-professional staff-student ratios declined significantly at UK and the average flagship institution. On balance, UK is more labor intensive than the average flagship.

In 2008, average salaries for full and assistant professors at UK were less than the corresponding salaries at the average flagship institution. The increases in full professor and assistant professor salaries from 1987 to 2008 at UK were consistent with increases at the average flagship institution.

In 1987, benefits per full-time staff member at UK were about half what they were at the average flagship; in 2008 the benefit costs were about the same. Faculty salaries at UK do not explain exceptionally high costs at UK.

The overhead cost problem is related directly to full-time professional staff members, not non-professional staff members. Therefore, imposing higher costs on Kentucky households is inappropriate, particularly under the current economic conditions.

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