“Colleges Spend Like There’s No Tomorrow” — But On What?

GOLODRYGA, HOST: Well, back here in the U.S., public universities are spending hundreds of thousands of dollars a day in getting students to foot the bill. College costs have soared, outpacing the inflation rate while the nation’s student loan debt is over $1.7 trillion. Higher education reporter at “The Wall Street Journal” Melissa Korn investigated the spending of 50 flagship universities. And she joins Walter Isaacson to discuss her findings.

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WALTER ISAACSON, HOST: Thank you. And, Melissa Korn, welcome to the show per.

MELISSA KORN, REPORTER, THE WALL STREET JOURNAL: Thanks for having me.

ISAACSON: You have this great piece titled “Colleges are Spending Like There’s No Tomorrow.” You wrote it in “The Wall Street Journal.” Tell me exactly what’s happening. Why are they spending so much money? You’re talking mainly about public and state universities.

KORN: Right. We focused our investigation on 50 flagship universities. So, one in each state. They are generally kind of the best known and oldest public university in each state. And we wanted to see where all that tuition money goes and whatever other revenue they are bringing in. So, we looked at, you know, accounting for inflation, adjusting for inflation, adjusting for enrollment increases, how much these schools were really spending and where it was going in terms of construction, shiny new buildings, amenities on campuses, faculty and staff. Salary and benefits are a huge part of where all those dollars go. And kind of growth in every direction. So, think we saw a lot of increases in programming and hiring and, you know, every which way, just the sprawl of the university.

ISAACSON: Well, wait, wait, wait. Isn’t this a good thing?

KORN: It can be. Growth isn’t bad thing, right? We thrive on — we reward ambition here in this country, right? We like things to get bigger and better. But often times that has to be done in context of what kind of resources you have to do that growth, right? So, if state funding is falling but your plans continue to expand, you have to look somewhere else for that money, and we found that the schools were getting more and more in tuition revenue more than offsetting any losses they had in state appropriations. So, that extra tuition revenue wasn’t just filling a hole, it was being used then to have this expansion, have this 10-year of grand strategic plan of we want to become the best not just in our state, not just in our region, but in the world.

ISAACSON: Ones that jumped out at me in your piece was that the University of Kentucky upgraded its campus to the tune of $805,000 a day, a day, for more than a decade. That’s almost a million dollars a day. Where did all that money go and why?

KORN: Right. So, that number I definitely did a double take when I came across that off the school’s website. And they are really proud of this number, right? They are investing in their campus, in their operation. So, it went to new homes for the law school and business school and school of visual arts and it went to a new student center, upgraded facilities, it went to, you know, infrastructure, roads and utilities, things like that. It went to a ton of new dormitories, which were done in public, private partnerships. So, that takes a bit of the cost away from the university itself.

These are very nice dorms with things like granite countertops and in-unit washer, dryers and full-sized Tempur-Pedic beds, which I certainly, again, did not have in college. They also spent a lot of money on their healthcare facilities. And, you know, the healthcare operations funded a lot of that. The school says that less than half of the cost of this was paid for by university funds. However, they also detailed that another 20 plus percent is covered by bonds, they took out debt. The university pays that debt. And that debt is, in some cases, covered by tuition dollars. So, ultimately, it all still comes back, not all, but a huge portion of it still comes back to the students being on the hook for these sorts of things. The school says they did it because they wanted to provide students with an environment that they had become accustomed — to which they become accustomed, but they are expecting. You know, these dorms are what families expect. They need to be competing with other universities, public and private, and this is the way to do it.

ISAACSON: Kentucky is one of the poorest states in the country. I think 20 percent of kids live below the poverty line. What did this affect — how do this affect students?

KORN: Yes. Kentucky is, like as you said, one of the poorest states in the country. Yet, their costs for students to attend the flagship university are in the top half of all flagships. This is an expensive school to go to, even for in-state students. Even after they get scholarships, they are on the hook for upwards of $18,000 a year. And the school does provide a lot of financial aid, but that increased in aid hasn’t kept up necessarily with the increase in sticker price and published rates. So, attending Kentucky as a Kentucky student is now really out of reach for a lot of students at this point.

ISAACSON: I once wrote a book about the women who did the ENIAC computer in World War II. And one of them, Jean Jennings, went to Northwest Missouri Community College and studied math. And she did it for $76. Now, a school like that is $14,000 and people — we’re not going to get the — you know, people from small towns. She was from Alanthus Grove, Missouri, who become great contributors to our economy. Is that you’re driving it?

KORN: Absolutely. I think we wanted to focus on public universities for the story. You know, private schools, it’s a great if they are affordable, but that is not part of their mission. They can charge whatever they want and appeal to whichever students they want. But these public universities they — you know, their kind of core is to educate local residents, and if they’re chasing after students from out of state, if they’re chasing after high-profile and high-priced faculty and administrators and lazy rivers and climbing walls and all those other amenities that we like to make fun of, they are losing something in the process.

ISAACSON: Well, let’s talk about amenities like great dormitories and climbing walls and that sort of thing. Is that driving the cost? Is that the main driver here?

KORN: That is not the main driver. I think we can say it is a driver. It is a symptom of the issue here, right? It — the schools are building is beautiful, stunning campuses. I mean, I’d like to go on vacation at some of these places. They are building these campuses to appeal to students from out of state oor full pay students who don’t necessarily need financial aid who are from within the state. So, they are chasing after these wealthier students who they think have a higher expectation of a quality of life and all the bells and whistles of college — the college experience, but they’re putting that bill on everybody, including those students who maybe don’t care as much about the sorts of things.

ISAACSON: So, tell me what is really driving this? I mean, there’s got to be a reason that they have all this money coming in.

KORN: Well, they have all this money coming in because they’ve chosen to have all this money coming in. They are fundraising like mad. They are raising tuition, increasing enrollment, and those two things combined increase their tuition revenue. They are taking in more out-of-state students who tend to pay more than in-state students. They are bringing money in every which way they can to feel this ambition and this growth, this we want to be the best is a very competitive environment to be attempting.

ISAACSON: So, it’s like the free market at work. It’s kind of inspiring, isn’t it?

KORN: It could be. It depends on who’s paying the bill for it though.

ISAACSON: Well, who is paying the bill?

KORN: Students and, in many ways, the taxpayers, right? Students are borrowing, their families are borrowing. They are taking in student debt to attend these schools. And as we see this massive, you know, student loan crisis nationwide, we are seeing this kind of play out to a pretty dangerous end.

ISAACSON: So, you think the real problem here is that we have a student loan crisis that’s been caused by this, because students have to pay so much to get all these new amenities? And now, the Supreme Court said that the Biden program can’t go through. Is that at the core of the problem you’re talking about?

KORN: I think that’s a big part of the problem. I think the core is ultimately what are these schools want to be and who are they going after and why, right? Are they being true to that mission of educating local students in an accessible way, right, as affordably as possible, or are they trying to compete with private universities from across the country who have a different mission? And I think there’s this bit of an identity crisis in higher education and public higher education right now as some of these flagships in particular try to chase after the same students, the same donors, the same faculty. And in some cases, are losing sight of who they were meant to be.

ISAACSON: So, what should they be cutting back on?

KORN: That is a tough question. And I don’t know that there is one answer for every school. It really depends on the institution on what their own finances are and how far beyond their means they had been spending, right? So, we have some schools that are in pretty dire financial situations right now, facing massive multibillion-dollar, hundred-million-dollar deficits because they spend more than they had and outsized Rosie forecasts for the growth and things like that, and they need to make some pretty tough decisions and, you know, pretty brutal cuts, whether that means you just eliminate entire departments or trim faculty across the board or kind of rethink what is — you know, what’s bringing in money, what needs to be bringing in money. It really varies by school. I would say that the first step for a lot of the schools is getting ahead on their budget and figuring out where they’re spending their money, because I think one of the most shocking things from our reporting was how little administrators and trustees know about their own budgets.

ISAACSON: Well, let me take an example of the budget, which wasn’t for buildings and grand programs, but it’s something people talk about a lot now, which the increase of administrators. I think the University of Florida had more than 50 employees with titles of director and associate director or deans of this or deans of that, this is from your article, of course. And more than 160 deans doing various new things like diversity, equity, inclusion or mental health. Is that part of the problem or is that a good thing happening?

KORN: I think the expectation of what a university provides has changed a lot over time, even since I was in college in the early 2000s, right? It is not just you go and you sit in a plane room and you study and you work on your typewriter, right? There’s an expectation of high-speed internet of, in some cases, air conditioning, which, you know, I certainly didn’t have and would have loved. There is an expectation of providing support for students both in terms of academics and in terms of health, and that includes mental health. Where I think you start to have some question marks is, when is it enough? When is it coddling versus supporting, you know, what is necessary? And — s

ISAACSON: Well, let’s take a specific example. Lots of new deans of diversity, equity, inclusion. Necessary or not necessary?

KORN: Think student population has become a lot more diverse and they’re preparing for a workplace in a world that is more diverse. So, making sure that they are prepared for that is a really important thing.

ISAACSON: And deans of mental health, necessary or not necessary?

KORN: I’ve written about schools trying really hard to find ways to provide low-cost mental health support services. They’re really struggling at this. Students are having — there’s a major mental health crisis going on in high schools, at colleges, and I think the pandemic only exacerbated that. So, spending money on making sure that your students are physically and mentally healthy enough to pursue their studies, that makes sense to me. I’m also not the one writing the checks though.

ISAACSON: One of the drivers of cost — maybe I’m talking about LSU and some of the places down here, of course, is sports. Not only football, but all the team sports, and I’ve always been somewhat confused. Your article sort of delves into it. Are these things that help the university raise money or are these things that cost student more fees?

KORN: So, very few Division 1 athletic programs make money for their schools. Very, very few. And they are, you know — they’re considered auxiliary enterprises. They’re supposed to be self-sustaining, but they almost never are. There’s really just a couple that the athletic operation gives money back to the academic side. Rather for most of these, the university itself provides annual subsidies to the athletic program and students often pay fees that are targeted directly for athletic programs. So, it could be, you know, to the tune of $15, $30, $50 million a year that the university is paying to help support their athletic program. Now, that is — can be a money pit or it that could, as some schools say in defensive of this, it is the front porch of the university, right? It is the way that the world learns about their school. It is great for morale and for alumni engagement and all sorts of things. And a lot of that may be true, but it comes at a very high price.

ISAACSON: We just had Drew Faust, former president of Harvard University, and she’s talking about public universities, not just private ones, and she says there’s been a major shift in this country in believing that higher education is a public good, that we should all support as taxpayers even if our kids are not going into institutes of higher education versus being just an individual good that the individual should pay for him or herself. Do you see that shift? And do you even worry that stories like this might promote that shift so that people would say, well, that’s ridiculous, spending this much, it’s not a public good, we don’t care if the rest of the population gets educated as well?

KORN: You know, we did think, my colleagues and I, as we were working on this story, you know, what impact it could have on state legislators, the holders of the per strings, right? Their state funding has already declined, maybe this will make them more likely to cut further and say, you guys are wasting our money. But there’s also an accountability element here, right? If a state does continue to provide funding, they may be able to have some oversight of where that money goes. And we started to see in the past few years some states offer — you know, provide more funding again to their universities, to their public institutions but say, were going to give you this only if you hold tuition flat or you invest in this particular area.

So, you know, some of those — some of that investment can come with an oversight responsibility and an opportunity there to kind of help shape what kind of schools these become.

ISAACSON: That sounds both good and maybe bad. Meaning, do I want the state legislature here to be telling the chancellors of the university, here’s the way you should do higher education?

KORN: Presumably there’s some sort of a conversation going on. It’s not a unilateral, you know, you shall put money here. But it’s — you know, the state is putting money toward it, presumably the state has a say in where it goes, to some extent. A board — the board of governors, board of trustees also has an oversight responsibility here, they’re fiduciaries of the university. So, they should be keeping a very close eye on where this money is going and where it should be going.

ISAACSON: And tell me, when you did this piece, you helped the transparency of all this, is that the solution we really should be looking for, is let all of us understand where these dollars are going and why?

KORN: I think that’s a huge part and I think, my colleagues and I, we hope to just rely on some federal data that’s out there regarding university spending. We realized it just wasn’t rich enough, it wasn’t reliable enough. And this is information that’s through the Department of Education. So, we went and we collected these numbers ourselves.

Looking back 20 years, we pulled audited financial reports for 50 schools, and that was a ton of manual labor, a ton of data entry. And after the story published, I think we were shocked to see messages from current and former trustees of flagships, from state legislators, from leaders of higher education commissions in various states saying, hey, do you have the numbers on our school too? We’re kind of curious are creditors what they say. And, right, to see a trustee of a flagship say, I don’t really know where my school’s money goes. I should probably look into that, suggested that transparency and information could be a good first step here.

ISAACSON: Melissa Korn, thank you so much and thanks for your story.

KORN: Thank you.

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