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This has been a bad year for intercollegiate athletics what with the Penn State scandal and the unpleasant glare of publicity that has reflected onto big-time, big money sports.  In today’s commentary section of The John William Pope Center for Higher Education, I write about the ringers and rogues who help maintain the Knute Rockne All American fiction of college sports.

The interests of the academic and athletic programs in most Division I and many Division II schools are not aligned.  I propose a legislative solution: a “firewall” that separates the two:

What is needed to save intercollegiate athletics is a Glass-Steagall Act for universities… It gets universities out of the sports entertainment business—a very good idea.

The last time I checked on the financial health of colleges and universities the news was not good: in 2010 the finances at 150 private nonprofits were so fragile that they failed the Education Department’s test of financial responsibility.  The Feds provide financial aid to students who attend responsibly managed educational  institutions, so it’s not unreasonable for them to ask whether audited financial returns reflect sound management. The 2011 test results were released in late October.

What does it take to pass the test? The ability to meet current and projected debt obligations is a factor, but the heart of the test is a numerical score: DOE looks at a weighted composite of  three ratios:

  1. Primary reserves: Ratio of adjusted equity to total expenses, a basic measure of liquidity
  2. Equity: Ratio of modified equity to modified expenses, an indication of an institution’s ability to borrow (modifications include things like one-time charges, allowances and extraordinary events)
  3. Net Income: Ratio of  before-tax income to total revenues, a  basic measure of profitabilty (incongruous for a non-profit but even the purest non-profit institutions do not like to deplete their cash positions)

A composite score of 1.5-3.0 indicates healthy finances. 1.5 is a passing grade.  Anything  less than 1.5 is not a passing grade.

A  score in the range of 1.0 to 1.4 — which DOE calls the zone — indicates a need for additional oversight.  This is a sore point with colleges– many of which would howl to high heaven if a Wall Street bank raised the same objection — who decry the bureaucratic heavy-handedness of a federal agency that would want to impose a modicum of accountability.

Anything below 0.9 is a failing score, and to continue receiving Federal Student Aid, a failing institution must supply additional letters of credit.

More than 180 private non-profits scored below 1.5 and 56% of those scored below 1.0.  A complete spreadsheet can be found here. Mind you, this is not the ragtag collection of colleges of cosmetology that populate the for-profit component of the DOE report. I’ve stripped those out of the spreadsheet. They are in awful shape too, but federal student aid to a future hair stylist never made much sense to begin with.  More on this in a later post.

No, the non-profits tested by the Department of Education are mainly liberal arts colleges, schools of design, independent schools of medicine and law, and denominational institutions (many with important historical roots).  They are in many ways the same schools whose free-wheeling approach to financial management gave John D. Rockefeller and Andrew Carnegie fits when they established the first philanthropic foundations to support higher education in the early 1900s.

By FY 2010 the stock market had begun to recover and endowments had started  to regain some of their lost value. The expectation was that the DOE scores would reflect an improving fiscal outlook for the nation’s private institutions. That obviously did not occur.

In most circumstances, these numbers would need no further elaboration.  In fact, news of the dismal  2011 report appeared  in Inside Higher Education and The Chronicle of Higher Education back in October. It was a press release issued by the National Association of Independent Colleges and Universities (NAICU) that caught my eye and raised my blood pressure. It said in part:

It must be noted that the list is under increased scrutiny by accounting experts who believe [federal] financial analysts are not always using the right accounting definitions.

and

The overwhelming majority of institutions that have appeared on the list in previous years continue to provide a quality education to their students.

I other words, despite the continued price inflation needed to prop up badly managed institutional priorities — and despite the mounting evidence that a many of these institutions are simply not delivering value to their students at the inflated prices —  the NAICU position seems to be that it’s the definitions that should be blamed.  If you’ve read this blog before or if you’ve scanned my book, you know that I can’t let this pass without comment.

There is a lot of complaining in the ranks of private non-profits about the accuracy of the test, but it is hardly a secret that there is something wrong with your business model  if the only way you can continue to operate is to continually and without warning raise prices to locked-in customers who are  (1) resigned to take on crushing debt or (2) eligible for unbounded federal, state and local subsidies to offset price increases.

How different would the picture have looked if construction of a few of those new dorms or fancy student centers had been delayed or an invitation to a money-losing post-season tournament had been declined? Would fiscal health have improved if administrative offices had shed some of their bloated staff? Might instructional costs have been held in check if clusters of small institutions had merged some of their general education requirements and created cost-efficient teaching pools for introductory English, history, and math courses?

Yes, the majority of the failing institutions probably do continue to provide a quality education to their students. But at what cost?

There was a time before TSA and 9/11  when crazy people wandered freely around the nation’s airports. I was heading to the Eastern Airlines gates at O’Hare when I was stopped by  a guy in a suit wearing a sign that said there was now mathematical proof that the country was going to Hell in a hand-basket. I slowed a beat but it was enough for him to shove a magazine in my hand. “You should read this!” he said. “They don’t want you to know about it!.”  I glanced at the cover. It was Fidelio, Lyndon Larouche’s magazine of culture and science. “Great,” I thought. “NCLC propaganda.”

I was ready to bolt for the Eastern passenger lounge, when the guy tugged the magazine from my hand and flipped it open to a Larouche rant about Georg Cantor and transfinite numbers. My next mistake was to say something like, “Well, this is a load of crap.” I had taught set theory and for a brief instant I imagined that I could  waste a little time toying with the guy before pounding him to intellectual  pulp. It was the opening he was looking for.

I was hopelessly over matched. Never mind that I knew that he had no idea what he was talking about. Norbert Weiner, the Reimann Hypothesis, Plato, and  negative entropy and were all smashed together, mixed and reshaped as a serious critique of western political economy. He was getting louder and more aggressive, so I grabbed my bags and headed down the concourse at full speed with this guy and his sign chasing after me yelling in a vaguely threatening way.

I can’t stay away from encounters like that. I have had other run-ins with zealots who are shameless about misquoting, misapplying, and misappropriating stuff that I happen to know something about. I want to unmask them in public. Show them for the frauds they are. I tell you this story to prepare you for my comments about the worst abuse of a deep and very important idea that I’ve seen in a long time. It may end badly, but I can’t stay away.

My attention was drawn to a recent  CCAP post about unnecessary cost escalation in higher ed by Andrew Gillen who is inspired by Charles Babbage to suggest that there be a “division of labor” in which the job of lecturing is separated from the job of grading.  The result according to Mr. Gillen would be a 30% reduction in costs that can be passed along to students in the form of tuition reductions.

I am a computer scientist, so Charles Babbage is intellectually speaking a friend of mine, the originator of the very concept of a computer.  Nobody knew how to mechanize better than Charles Babbage. His book, On the Economy of Machinery and Manufactures, is aimed at the upwardly mobile assembly line workers of 19th century England. It is an explanation of manufacturing economics for the common man.

In 1850 London’s mills and factories were houses of horror:

Any man who has stood at twelve o’clock at the single narrow door-way, which serves as the place of exit for the hands employed in the great cotton-mills, must acknowledge, that an uglier set of men and women, of boys and girls, taking them in the mass, it would be impossible to congregate in a smaller compass.[P. Gaskell, The Manufacturing Population of England. London, 1833, pp.161-162]

I won’t recount all of Babbage’s arguments beyond saying that the mechanization of, say, the production of sewing needles–in which the dangerous and expensive alignment of parcels of metal so that the ends can be sharpened before they are separated can be done more cheaply by a primitive robot–has virtually nothing to do with the craft of being a university professor.  Yet here is what Mr. Gillen takes away from the Babbage text:

In higher ed, we need high [sic] skilled people for some aspects of the job (designing courses, creating assessments, mentoring, etc.) but many of the other tasks they perform don’t require as much skill, and could be performed much more cheaply by lower paid workers (routine grading, administrative tasks, most office hour questions, finding and dealing with cheating, even some of the teaching). And yet all tasks are performed by the most highly paid people.

Mr. Gillen is right that de-skilling is important in controlling costs.  It is a problem to be solved in healthcare, government and education, but not in the way that Mr. Gillen suggests. I’ve seen this argument enough in the last few weeks to know that there might be trouble brewing, so let me restate some points that are well-known to readers of Innovate.EDU:

  1. There is simply not that much expense tied up in grading exams. It may be a pain in the ass for professors to plough through mountains of blue books, but the productivity gains of separating lecturing and grading are negligible.  How do we know that?  The experiment is being conducted every day in departments that make heavy use of teaching assistants as graders.  If there were great productivity improvements to be had, they would have been noticed already.  They have not.
  2. Mr. Gillen’s  separation of labor concept actually makes matters worse for learning. An example of how it might be done is Salman Khan’s brilliant idea of inverting lectures and homework. Unlike Gillen’s proposal, this invests more professor time in one-one interaction with students, not less.
  3. Universities are not factories. Most of the problems facing higher education today can be traced to this false analogy.
  4. There is no conceivable educational benefit of decoupling the feedback that a professor gets from personal interactions with students.  Even if you are committed to a time-honored systems of lectures and exams,  simple questions like whether  the material is getting through cannot be answered by shipping students off to a specialized team of graders and routine question-anwerers.

In fact, Gillen has it exactly backwards.  The De-Skilling Argument is this:  let’s take the least value-laden part of teaching out of the hands of high-priced professors. The most valuable part of teaching lies in the personal interaction of students and mentors and in the peer-to-peer interactions of learning communities.  Why would anyone want to depersonalize that?

The issues raised by this notion are both legion and obvious.  How would you know in advance which office hour questions were routine? Why should delegating routine administrative tasks — whatever those might be — to unskilled labor lead to savings anyway? Don’t learning management systems/course management systems purport to do the same thing already? Why would this proposal not lead to increased costs as new, unskilled workers are added to the university workforce?

It’s not a fair fight, but the CCAP proposals are sometimes the only ones out there — and they are listened to — so someone needs to shout “Well this is a load of crap!”

Now, where’s that Eastern Airlines lounge?

The July 7th edition of The Economist features this article on “How to Make College Cheaper.”

http://www.economist.com/node/18926009?story_id=18926009.

I wrote on this subject last summer (here and here, for example), but there has been much discussion in the news this year about the $10,000 undergraduate degree, so I thought it would be good to let you know that the ideas are still in play.

It is a concern that so much of the current discussion is driven by ideology.  I will have something to say about that in a later post.