Bruce's Blog

March 31, 2010

Will areas of the university outside of academics be making "vertical cuts?"

I was asked that question yesterday by a dean who reported that his faculty were asking that question of him. And, I have been asked that before. It was not until the dean pursued the matter that I better understood the origins of the very legitimate question.

I initially replied as I have in the past. Something like,

Those areas really do not have the option of making vertical cuts. Because we still have to maintain basic services: heating buildings, cleaning offices, providing counseling services... their only option is to further water down services.

But, as the dean pursued the question, it became clear that it was not cutting the service entirely that was at question but, rather, whether the service might be provided through less expensive out sourcing. So, now I better understood what folks have been getting at. And, I can share more germane thoughts.

Yes, outsourcing has always been on the table, and was forcefully so in my first months here as we were looking at auxiliaries that were losing money. (Auxilliary is the jargon we use for those parts of the university that are required to generate revenues equal to costs.)

I learned a lot as we looked at those auxiliaries in those early days. Mainly I learned that Washington law makes outsourcing almost impossible if union jobs are involved. I could go into details but, effectively, law and the historic strength of unions in our state, something many of us laud in other contexts, take significant outsourcing off the table.

So, what did we do? Reduced some positions and reassigned others while engaging employees in a restructuring targeted at eliminating the losses. Losses are less but still there, so we are currently seeking ways to partner with other entities in the area that have similar challenges in order to create an efficient, shared, regional solution.

I want to offer another thought on outsourcing. Earlier in my career, I watched a large university I was a part of outsource 100% of its custodial services. Savings were significant, although we all felt declines in the quality of service. But, there were other concerns to weigh.

How did the private provider achieve the savings that were passed on to the university while making a profit? By hiring back a percentage of the custodians who the university laid off but at lower wages and with heavily reduced benefits.

As a university community, that is one of the non-pecuniary costs of outsourcing that needs to be considered. It is not determinative. But, the way in which we treat those co-workers who already have among the lowest compensation on campus says something about each of us as well as about our shared values.

By the way, as many are involved in preparing bottom-up budget reduction proposals, I have reached an analogous conclusion as regards academic programs: basically, vertical cuts there are, effectively, off the table. I will share my current understandings so that you may challenge them.

As people across the university have been looking at what we are doing and what we might stop doing, about a dozen academic programs have been identified. Now, do not panic. These programs identified as no longer necessary all share one feature in common: none has more than one or two students currently enrolled; most have none.

There really is good news here. It means that, as should be the case in any strong university and whether budget times are good or bad, we are making choices about what we need to be doing and what we need to not be doing. Other universities have touted their commitment to shift resources from lower priority to higher priority uses. It is clear that that has long been the case at Western. We do not attempt to do everything. But, that which we choose to do is done very well and is kept at the leading edge.

How does that happen? Not through some edict from Old Main. It happens because top caliber professionals understand that, as job openings occur, we do not ask: What is that position supporting today? Rather, we ask: What are our students going to need tomorrow? That keeps us at or ahead of the cutting edge: academically, certainly, but also in academic and student support services as well as all other aspects of the university.

The bad news? There are no easy vertical cuts. Those dozen programs that can be taken off the books? Resources once associated with them have been redirected to those emerging needs that keep us and our students at the forefront.

This is so misunderstood outside of academia that I am going to digress with an example. Universities worthy of the name do not develop their curricula through some sort of Soviet-style, top down, set of 5-year plans. Rather, it happens bottom up and because we depend upon recruiting the best faculty in the world and, almost course by course, they propel our curriculum forward.

We are, I have heard, close to announcing a new undergraduate major in Renewable Energy. Stanford is the only other university on the West Coast that offers that undergraduate major. How did it come to pass? And in these budget times, no less? Not by going to Olympia and asking for funding. Rather, over some years, many departments in response to student demand and faculty understanding of where their fields were going started adding courses. And, selecting faculty with relevant expertise. Then, looking around, faculty realized we now have the courses already on the books to support this new major. New curricula emerge as older commitments go by the wayside. It is the other side of that housekeeping we will be doing with the academic programs that no longer have students.

As I have noted, there are no easy vertical cuts on the academic side. Generally, none seem practical. To understand this requires attending to some changes in our financing. And, to several concepts taken from my Econ 101 days.

First is to realize that, now, tuition covers most of the costs of instruction at Western. More than the state covers, by far. And, while our average cost for educating a full-time student for one year is about $9,000, the marginal cost is now about equal to full-time resident undergraduate tuition (projected $5,575 next year). That marginal cost is the cost of providing education to that next student we admit at the same student/faculty ratio and current level of student and academic support services but does not include the costs of things like heating and maintaining buildings and other overhead or fixed costs.

So, lets take the example I always hear in Olympia: you need to reduce liberal arts programs and expand programs in areas of critical state need.

Two immediate responses: the liberal arts are areas of critical state need; the employment records and successes of our alums demonstrate that; and leaders of high tech industries in the state second the assertion. And, as we depend upon tuition primarily, it is the areas of critical student interest to which we are increasingly driven. And, students, voting with their feet (or rear ends in class seats) want strong liberal arts.

In Olympia, as passionately as I believe in and advocate those points, sometimes I only get yawns in response. So, think through the economics. At the margin, and because tuition has risen while the state has reduced support, costs of educating our students equals the tuition they pay. That means, for the average academic program, reductions or program elimination creates no savings. Reduced costs equal tuition we lose.

For lower cost programs, reductions exacerbate the budget situation. We would eliminate lower cost programs and then find that our budget situation, because of the tuition lost, was actually worse. These lower cost programs are, of course, disproportionately the liberal arts programs people would have us reduce. Because everybody pays the same tuition, it is these liberal arts programs and the students they attract that allow us to afford the more expensive programs. Those more expensive programs are, of course, usually the same ones those in Olympia do not want us to cut and have, in recent years, built such directives into our budgets.

And, thats how I come to the conclusion that vertical cuts in academics are, also, unrealistic. The only way to realize savings by vertical cuts to academic programs would be to target cuts exclusively at the more expensive programs.

We are always evolving, changing, making reallocations. That has been obvious in looking over possible vertical cuts. And, the kinds of program eliminations people would have us make do more than simply damage us and the programs our students demand: they also dont solve the budget problem.

It is really hard for me to write about these subjects in such a cold, analytic way. I bet it is hard for you to read such analyses. We know these are not marginal costs, and high demand areas, and such. These are us: colleagues and students, livelihoods on which families depend, and programs to which we have given our professional lives. But, further away from our campus, it is the more coldly analytical that is primarily the way people are looking at us. So, in representing our situation to broader audiences, please understand that it is a way I am required to speak. And a way I am required to think. It is not the way I (or you) are required to feel.

Bruce

 

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