The many faces of the university funding crisis

1 Jul 2011

A big black bag on the bookshelf serves as a constant reminder of the hot spot location of our studies at Stanford University in Silicon Valley. We’re right on the San Andreas faultline and are required to have the bag at the ready in case of an earthquake. After the March quake in Japan, it felt a good idea to double-check the contents of the bag: a small protective tent, an aluminium blanket, sterilised water, dry food, a windable torch, a LED light, tweezers for the removal of glass splinters, healing ointment, bandaging materials, matches. Not just any old first aid kit.

In California, as indeed throughout the United States, slow economic recovery from the financial crisis a couple of years ago and the swelling state budget deficit are having a greater impact on the university sector than natural catastrophes. At Stanford and other private universities, the financial crisis led to a substantial depreciation in the value of capital assets last year. At state universities, the financial gap has given rise to constant cuts in budget funding. In 2011, California State University has decided to raise its tuition fees, impose a freeze on wages and salaries, abandon all construction and renovation projects and not to fill teaching and research vacancies. Private universities have very similar savings programmes, but in their case the revival of the financial markets is already reflected in increasing donations and returns on capital investments.

Yet the recovery of the financial markets has been a slow process, and the recovery of the Californian state economy has been slower still. Both private and state universities are in dire financial straits with no end in sight. One year ago the savings target set for Stanford University, which in donation capital terms is the third biggest private university in the United States after Harvard and Yale, was to cut costs by 100 million dollars. Over the past two years, this has translated into partial, temporary or permanent reductions affecting more than 500 jobs. At Harvard the bar was set even higher. These figures are quite startling and may well affect many researchers’ career plans, especially for those who have no permanent position.

However, private universities are an exception in the sense that the biggest of them are well-managed business companies with a capital stock worth billions of dollars. These businesses are locked in constant competition for the best customers, i.e. students, a select few of whom will have the privilege of paying tens of thousands of dollars in tuition fees. (These customers will for their part require outstanding service. At Stanford, for instance, students can keep their own horses at the university’s stables for around 500 dollars a month. The stables have resident staff to look after the horses.)

How, then, is the reputation or brand of this kind of university built up? Reputation building is a key competitive asset for universities in the United States. A great reputation and the maintenance of that reputation is not based on an image created by an advertising agency or on strategies that are revised and updated every few years. The reputation of the strongest research universities is based, quite simply, on the diversity of their research and teaching as well as on lasting quality. These two cornerstones give universities a competitive edge that has been in the making for decades and centuries. It seems that external steering instruments such as narrow specialisation or simple scorecards for research outputs are rarely used at US research universities.

The reputation of Stanford University is based on the strength of its humanities, social sciences and natural sciences: 80% of all undergraduates and 40% of doctoral students at Stanford have come through the Humanities and Sciences School. Known for the breadth and diversity of its research but also for its artists-in-residence programmes, concert house, two university hospitals, interest subsidy programmes for staff mortgage loans and the SLAC National Accelerator Laboratory that is funded by the State of California, Stanford has built a solid reputation first and foremost as a research university. None of this comes cheap, and maintaining a brand that is based on a strong research culture and a unique teaching culture is certainly not going to get any cheaper in the future. The large number of teachers per student (5–7 teachers/student) might not yet represent a threat to the finances of private universities, but this is bound to change in the future. It is increasingly difficult to secure a tenured position. The short-term movements of assistant professors and associate professors back-and-forth between universities sometimes bring to mind the hectic transfer windows of the football world.

Sounds familiar? We live in a global world.

Anne Kovalainen and Seppo Poutanen

Photo: University of Turku/Communications

Academy Professor Anne Kovalainen and Senior Researcher, Adjunct Professor Seppo Poutanen are visiting research fellows at the Clayman Institute for Gender Research, Stanford University.