Growing Public/Private Resource Differences US researches

 Growing Public/Private Resource Differences

One potentially important indicator of public universities’ future capacity is their position relative to private research universities.   We do not make these comparisons to argue public research universities should be funded on par with private universities; rather we point out the funding disparity.  A growing public/private research university salary, teaching load and student selectivity divide was first illustrated by the work of Thomas Kane and Peter Orszag  (Director of the Office of Management and the Budget in President Obama’s administration) in 2003.  In faculty salaries, where parity between very high public and private research universities was achieved in the decades of the 1970s, a 15 to 20 percent salary gap now exists. 

If public universities should fail to be competitive for research grants or have to shrink the size of their student bodies due to budget restrictions, private research universities are unlikely to have available capacity to replace the lost output.  Since the preponderance of enrollment growth in four-year university education has occurred among public universities in the past 50 years, there is reason to doubt whether private universities can or would expand enrollment in response to a decline in capacity to enroll students at public institutions.

Public Universities Remain Strong Competitors

We have no evidence to show the resource challenges facing public universities have caused the quality of instruction to decline, nor research quality to suffer either in absolute terms, or in comparison with private universities.     Since Council of Graduate Schools studies generally find links between adequately funded doctoral studies and time to degree, it would not be surprising to find that the funding picture we describe here is an adverse impact on doctoral students. We know that despite the growing revenue disadvantage per student, public research universities have slightly increased the proportion of federal grants they receive.  However, with their rapidly diminishing ability 

to compete head-to-head with private universities for the best faculty and students, one has to worry that some decline in the quality of teaching and/or research at public research universities may be in the offing.

The mechanism through which the effect of relatively smaller resources at public universities than at private universities is transmitted is the labor market.  Lower pay, higher teaching loads and a smaller proportion of high-ability students makes faculty positions at public universities less attractive.  On each of these dimensions, the level of competitiveness of public universities has steadily worsened over the last 20 years and the private minus public gap is now quite noticeable.  Today private universities have a competitive advantage over public universities when competing for faculty.  It would be a strange market if the employers offering the best pay and working conditions did not use that ability to hire the most productive faculty members.

 

Federal Funding Agencies are not Paying the Full Cost of Research

 

Threatening both public and private research universities is the failure of U.S.research funding agencies to cover the total cost of the research projects they sponsor.

In March, 2008, COGR released its study, Finances of Research Universities.  This detailed analysis estimated the university subsidy to all research, federal and non-federal, exceeded $2.3 billion per year, and “a majority of that subsidy can be attributed to federal programs.”[1]  Their analysis relied on data from the National Science Foundation’s (NSF) annual survey on Research and Development (R&D) Expenditures at Universities and Colleges.  The data element from that survey relevant to this matter is the ratio of university Institutional Funds used to support research to all academic R&D expenditures.  Total university R&D amounted to $51.9 billion in 2008; federally funded R&D, $31.4B billion, and university-funded R&D, $10.4 billion.  Thus, university-funded R&D was 33.4 percent of federally funded R&D in 2008. 

 

                  Institutionally Funded Research Expenditure as a Percent of All UniversityResearch and Development Expenditures

Source: Federal Funds for R&D for various years, National Science Foundation
http://www.nsf.gov/statistics/fedfunds/

 

COGR’s thorough study describes a problem facing public and private universities alike: under-funding true facilities and administration costs associated with federal grants.  Interestingly, universities receive lower indirect payments than do federal laboratories and industrial laboratories.  RAND reports a 1996 study of indirect cost payments by Arthur Andersen found, “As a fraction of total costs, universities had the lowest percentage classified as indirect (31 percent). Federal laboratories were somewhat higher at 33% and industrial laboratories were higher still at 36%.”[2]

 

The COGR report relies on the increasingproportion of total R&D that is funded by institutional funds to argue that under-funding universities to perform federal R&D is a growing problem.  They conclude “the risk is that additional financial burdens will move

Signs that Funding Problems are Producing Negative Effects

 

Thus public universities have been steadily losing real state appropriated base funding for decades.   Their weaker state funding base combined with the superior ability of private universities to raise funding through endowment giving and tuition charges have produced relative weakening of public universities ability to compete for the quality staff and resources needed for research productivity.   Both public and private research universities have experienced resource losses due to the impact of the financial market meltdown in late 2008 and 2009.   Both public and private are funding and increasing proportion of the cost of federally sponsored research.

 

Perhaps a harbinger of the first stages of research decline by public universities is the recent National Bureau of Economic Research (NBER) working paper by James Adams.[1] He found that the number of citations to published scholarly papers by faculty members at public universities in the United States is failing to keep pace with the flow from their private counterparts.  His statistical investigation revealed a slowdown in the growth of resources was closely associated with this development.  The abstract of his piece states the connection: “These developments can be traced to slower growth in tuition and state appropriations in public universities compared to revenue growth, including from endowment, in private universities.”[2] 

 

The relative decline in citations to published scholarly articles in journals that select papers after careful peer review could suggest a relative decline in the productivity of public university researchers already has occurred.  If so, this is not a positive sign for graduate education and for future competitiveness for federal research grants.

 

Any decline in the quality or output of research from U.S. public universities, could impact the nation’s global standing.  Confirming evidence of the United States’ relative decline in scholarly publications comes from a recent study reported by the Financial Times.[3]  It found China, Brazil and India led the United States in the rate of growth in scholarly publications from 1990 to 2008.  While the United Statesremains the largest producer of scholarly journal articles, China is now second and, “if it continues on its trajectory it will be the largest producer of scientific knowledge by 2020.”  Evidence of this change can be found in the rapidly multiplying international rankings of universities and the declining dominance of U.S. institutions.  While there is some disagreement

about the importance given to these rankings,[1] there is much evidence emerging that the energy and resources being invested in universities worldwide will challenge U.S. dominance in higher education in the future.  Further funding losses in the large public sector American research universities can only hasten the decline.

Efforts to Understand and Resolve the Funding Problems

 

With the assistance of five member universities A۰P۰L۰U conducted regional meetings of public research universities during April 2010 to consider the funding problem and to develop approaches that might help resolve them.     For example, participants examined whether compacts might be formed with their states to align university efforts with state needs in return for adequate funding.  The Facilities and Administration (overhead) negotiated rate setting process was examined and facets of it which might lead to underpayment of research cost were examined.   Finally, the changing relationship over time between the locus of benefit from research university activities and the geographic jurisdictions of funders of those activities was considered in some detail.   Perhaps better realignment of benefits with suppliers of funding would result in more robust funding.     The full Forging of Foundation for the Future background paper addresses these issues.   The process begun in these regional conferences should spawn serious reflection and research that will lead to innovations that will improve public (and private) research university funding.

We do not wish to be alarmist.   The U.S. university research enterprise remains healthy.   While public research universities arguably have experienced larger financial challenges than have their private counterparts, their relative success in competing for federal grants remains.   However, the competitive asset that is the U.S.research university is threatened.   To deal with this threat states must cease their steady defunding of public universities, donors must increase their philanthropic support of both public and private research universities and the federal government must begin to pay the full cost of research.   With these changes U.S.research universities can remain a key competitive asset for the country.