Taking Charge — Episode 3

George has been exploring how money is spent and the outcomes produced.  His latest quest has been trying to understand the benefits of subsidizing faculty members so they can pursue research.  When Marie and George operated at the department level, it never occurred to him to question this.  However, Beresford is trying to make it up the ladder as a research university and it is requiring increased expenditures that he hopes can be justified as investments.

Faculty members on the tenure track are provided 50% release time from teaching to do research, publish articles, and do the things that will earn them tenure.  George has long wondered about the merits of tenure, but that is not the issue at hand.  Can BIT afford to become a higher-ranked research university?  With help from Brad and Mary, he has performed an analysis that he shares with Marie.

“I have finished a first pass on an analysis of the costs of subsidizing faculty members to conduct research,” he opens.

“Why do you characterize it as a subsidy?” Marie asks.

“Most research universities provide tenure track faculty 50% release from teaching to pursue research.”

“Yes, that seems to be common practice.”

“So, you lose half of the tuition revenue they would have generated if teaching full time.”

“But, if everyone was teaching full time, we would not need as many faculty.”

“And that would substantially lower costs without reducing revenue.”

“It seems to me that the subsidy includes half of tenure track faculty members salaries plus benefits — and the costs of hiring other faculty members to teach the classes they are released from teaching,” Marie concluded.

“Exactly. Now consider what you get for investing in these faculty members.”

“Well, they eventually get grants and contracts that cover the 50% of their time devoted to research.”

“At best, and only in science and technology. But, let’s take your assertion as a given.”

“So, it balances out eventually.”

“Not really. Let’s assume you pay half of junior faculty members costs for the six years until they get tenure, plus summer salaries the first two years.  4.5 months times six years plus 2 months times two years equals 31 months of subsidy. Our junior faculty cost $18K per month with benefits. 31 times 18 is over $500,000 per faculty member.”

“But, don’t we get that back over the course of their careers?”

“Not at all. The time spent on unsuccessful proposals is never recouped.”

“Yes, but once they consistently win, isn’t it better?”

“The loss gets smaller because successful proposals yield resources to cover their time, which is usually summer months that you were not paying after the first two years. But, you never recoup the money spent writing the proposals.”

“Are you arguing that research is inherently a money loser and all we can do is try to manage and hopefully minimize the loss.”

“Exactly. In particular, growing the research enterprise inherently grows the losses.”

“How do universities cover these losses?”

“Tuition revenues and endowment earnings.”

“Beresford’s endowment is rather modest compared to what you and I are used to.”

“That’s an understatement.”

“The point is that tuition revenues are crucial to subsidizing the research enterprise. Right?”

“You’ve got it!”

“Therefore, to grow the research enterprise, we have to grow tuition revenues beyond the costs of delivering the education that generates the tuition revenues.”

“We lose money on PhD students, but there are not that many of them.  We try to break even on undergraduates and make money on professional degrees, for example MBAs or law degrees.  Unfortunately, professional degree programs are extremely competitive.”

“So, students, both graduate and undergraduate, have to subsidize our faculty members’ research.”

“Yes, you could argue that we are floating the research enterprise on student debt.”

“What do the students get in return?  Why should they endure years of debt, delay buying homes, and delay having children?” asked Marie.

“I only have a long answer,” replied George.

“Well, I have another commitment, as you know, so let’s take this up tomorrow.”

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