The Chronicle of Higher Education ran a fascinating story today that attempted to explain why colleges and universities are mired in a financial crisis.
Of course there are the obvious culprits — a recession and stock market meltdown — but the crisis goes far beyond that. Here are a few of the reasons:
1. Yale copycats. David Swenson, who manages Yale’s endowment, attracted tons of institutional copycats over the years thanks to his incredible investment track record. For more than two decades, Yale generated an annual return in excess of 16%, but it relied heavily on private equity and hedge funds to accomplish that feat. A quarter of Yale’s endowment has disappeared and the ivory tower money managers who mimicked Yale’s investment approach are probably in even bigger trouble.
2. Spoiled professors. Faculty unions have balked at attempts to prod tenured professors to teach more. There is tremendous resistance to greater teaching loads even though classroom duties for these profs have shrunk over the years.
3. Building arms race. To impress prospective students and faculty member, colleges have competed to erect ever more stunning buildings. In a previous post, I wrote about my own alma mater (University of Missouri), which erected a $50 million student rec center that includes 23 flat-screen televisions, palm trees, tropical plants, a spa and so many pools that I lost count.
4. Football fetish. Even though most schools lose big bucks on their football programs, they can’t resist spending ever more money to feed the pigskin habit and this includes erecting state-of-the-art football palaces.
Lynn O’Shaughnessy is the author of The College Solution.