Higher Ed, Covid-19, and the austerity shock doctrine

This is a fascinating story about what upper administration did to the budget at Johns Hopkins, of all places, in response to the COVID-19 pandemic.

Summarizing, last spring the administration announced massive cuts to the operating budget, that would be financed in part by suspending contributions to the permanent faculty’s retirement accounts for the entire coming fiscal year (this was functionally a more than 10% salary cut for JHU’s faculty).

These cuts were the brainchild of the university’s president, who was getting paid $1.7 million per year for Leading with Leadership. An extra delightful detail here is that when the university’s Senior Executive Vice President for Finance left in the middle of the budget “crisis,” his replacement was hired, totally coincidentally no doubt, from an investment management firm that had paid the president $322,500 in 2019 to serve on its board of directors.

These sorts of shenanigans were the last straw for enough of the faculty that a full-scale rebellion broke out, that manifested itself in among other things hiring one of JHU’s very own professors of finance to conduct a forensic audit of the university’s books. [ETA: Michael Berube notes in comments that the professor was probably Howard Bunsis of Eastern Michigan University, not JHU] The professor charged the faculty a grand total of $5,000 for this service, which is approximately .000001% of what it would have cost McKinsey or similar to do it, but that’s the nice thing about having actual experts inside your own institution, not that central administration ever takes advantage of that fact when there are outside “consultants” to grease, who can then send various kickbacks your way. (See above).

Anyway I don’t want to give anybody a heart attack, but the audit uncovered the fact that the financial “crisis” was largely made up, and in any case to the extent it was real it could be dealt with very easily by deploying a small portion of JH’s two billion dollars [!] in cash reserves, which the university claims it couldn’t do because those reserves are only supposed to be used for emergency situations (I’m not kidding).

The conclusion of this edifying tale is that for its $5,000 investment the faculty got $100,000,000 in retirement contributions returned to it, after the administration was forced to admit that its deployment of a classic MBB shock doctrine wasn’t based on actual facts in the world, but rather on the neoliberal corporate creed that cutting employee compensation in order to make sure that management paydays get constantly bigger should be the first resort to every crisis, real or imagined:

If the restoration of retirement contributions was a victory of sorts, the knowledge that pension benefits were so precarious in the first place was a moment of sharp clarity: The university’s leadership had been very publicly caught with its hand in the cookie jar. But there was nothing unique about Johns Hopkins. The whole saga merely highlighted how fully a Wall Street mind-set had captured the nation’s university leadership.

One needs to ask: Why would a fabulously wealthy university treat employee benefits not as a bastion of last resort, but a piggy bank to be dipped into at will? It is the sort of move undertaken by private-equity titans after a hostile acquisition. Can they really not tell the difference between a nearly 150-year-old university and, say, J. Crew?

We are talking here about a rich institution — a university, moreover, to which people around the world turned for information about the pandemic. If a university with these kinds of resources turns to reflexive austerity in uncertain times, imagine what other, less wealthy institutions will do.

Actually we don’t have to imagine: We’ve seen the results across American higher education. The academy now faces the results of such corporate thinking: the erosion of self-governance, the absence of accountability, rising executive salaries, a fixation on quantifiable metrics largely detached from the quality of scholarship, and the performance of rituals of democratic deliberation (like town halls) entirely disconnected from meaningful decision-making. Over the past decades, we’ve watched as our university system, one of the triumphs of postwar America, has become hollowed out by corporate management.

The economic-necessity framing was always implausible at Johns Hopkins — where the university forged boldly ahead with several flashy building projects, even as it slashed its employee benefits. But the experience at Hopkins highlights the ways in which such attitudes threaten to further eviscerate American universities.

The revenue shortfalls that so many universities have cited in the past decade, in their expense-reduction efforts, are not the inevitable consequence of impersonal global forces. They result from a series of decisions and priorities: putting buildings over people, athletic programs over academic programs, extravagant managerial salaries over benefits for low-paid workers.

These decision all highlight an intense focus on the short term. University leaders treat their most recent U.S. News ranking like one of Wall Street’s quarterly reports — bragging rights for the next board of trustees meeting. Wildly expensive acquisitions in real estate substitute for strategic and careful investments in research and teaching. Egged on by a compensation system that rewards flashiness over substance, administrators chase star faculty and follow the latest technological fads. (Does anyone even remember MOOCs?) Meanwhile, graduate programs are gutted, resources for junior faculty cut, and tenure-track lines replaced by contingent faculty or post-docs and redirected graduate-student labor.

In retrospect, it comes as little surprise that a university president steeped in the values of corporate America thought that eviscerating employee benefits was an appropriate response to a national emergency. Perhaps it should not be surprising, either, that careful analysis of that decision, commissioned by the faculty, helped force a U-turn.

Obviously higher education in America is a diverse place, fiscally speaking, and many institutions do face real financial crises (often created by their management class). But the larger picture here is that higher ed as a whole in this country is positively swimming in revenue, despite the constant austerity talk from upper administrators whose compensation packages still magically grow bigger every year, despite the unending fiscal crises that require all that austerity.

Some stats:

Total Revenues for Higher Education in January 2018 dollars:

Revenue per student 2018:  $35,234 (FY2018)

Expenditures per student 2018:  $31,700

Revenue per student 2008:  $28,362 in 2018 dollars

Expenditures per student 2008:  $27,139 (2018$)

Total revenue per student in 1998 in 2018 dollars:  $25,312

Total expenditure per student in 1998:  $22,065 (2018$)

Total revenue per student in 1988:  $19,690 in 2018 dollars

Total expenditures per student in 1988:  $19,094 (2018$)

Total revenue per student in 1978:  $16,628 in 2018 dollars

Total expenditures per student in 1978:  $16,155 in 2018

Total revenues per student in 1970:  $17,624 in 2018 dollars

Total expenditures per student in 1970:  $17,237 in 2018 dollars

Total revenues per student in 1960: $13,447 in 2018 dollars

Total expenditures per student in 1960:  $13,017 in 2018 dollars

Again, those are aggregate stats, and don’t capture the institution by institution picture. At many elite institutions, revenues and expenditures have gone up far faster than these aggregate data reflect. For example, here are recent stats for HYPS, in regard to revenue versus expenditure:

Princeton operating budget:  $407 million in FY1989 ($848 million in 2020 dollars).  This included a 6.39 million operating deficit (in 2020 dollars).

In FY2020 Princeton’s operating budget was $2.3 billion.  This included a massive operating surplus.

Revenue and expenditure by fiscal year for HYPS, in millions of dollars:

Princeton

FY2014.  2,279.   1,691

FY2015.   2,979.   1,803

FY2016.  2495.    1940

FY2017.  3,070.   2,086

FY2018.  2,977.   2,020

Harvard

FY2014.     6740.     4,670.        

FY2015.  6,609.      4,775.          

FY2016  4,459.     4,930.             

FY2017.   5,774.        5,174.         

FY2018.     5,752.     5,243.          

Stanford

FY2014.      5717.     4642.         

FY2015.       6,035.       5,051.     

FY2016.       6,966.       5,281.       

FY2017.       7,342.     5,797.          

FY2018.      7,229.      6,122.        

Yale.        

FY2014.    4,478.     3,424.   

FY2015.    5,462.      3,514.    

FY2016.     4,808.      3,682.   

FY2017.     4,678.      3,904.   

FY2018.     5,090.      4,121.    

Total expenses FY2014-FY2018:  $79.870 billion

Total revenues FY2014-FY2018:  $100.939 billion

These four schools generated a collective $21.069 billion surplus of revenues over expenses in these five fiscal years, or an average of $1.05 billion per school per year.  Revenues were on average 26.38% greater than expenses.

They spent an average of $261,406 in operating expenses per enrolled student, while generating revenues of $330,363 per student.

The problem here, of course, is that the hierarchical obsessions of higher education in America, reflected in the endless rankings nonsense and the like, mean that hundreds of institutions that aren’t nearly as recklessly rich as the Power Elite nevertheless aspire to join or at least imitate the Quality in every respect, and most especially this one.

This is a recipe for endless financial “crisis” in the context of ever-expanding revenues, which is what we’re getting, along with a management class whose members have far more in common, in least in their own mind, with C-suite executives than with the inhabitants of the academic world from which they have escaped.