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The Financial Carnage on Campus

Amid the destruction wrought by the global financial crisis, should American colleges and universities be seeking a bailout plan of their own?

Despite the presence in the popular imagination of the scrappy entrepreneur who makes his fortune with barely a high school education, or in the case of say Bill Gates or Kanye West, for whom being a college dropout is perceived as being an important source of their success, a university education continues to be an enduring, robust metaphor of American opportunity and upward mobility.

A college education, the logic goes, will increase your earning capacity over a lifetime and provide the humanist training to make you a reasonable, functioning citizen in a democracy.

But in the swift kick in the American gut that is the current recession, higher education is the latest sector of society that has been hit hard by hard times.

The signs of the carnage on the American university campus are numerous, which leads to an important question. Are American colleges and universities the next institution in desperate need of a stimulus package?

With the massive growth of the stock market in the last couple of decades, university endowments ballooned. Quietly, the managers of these endowments became the best-paid employees at many universities. But as it has been widely reported, many of these endowments have now plummeted in a matter of months. In 2008, the University of California endowment lost $1 billion; Harvard's endowment dropped by 22 percent, or $8 billion.

While the drop in endowments has hurt public and private institutions alike, public universities are being hit particularly hard because of budget shortfalls at the state and national levels. The cuts are felt throughout a university, from the postponing of infrastructure projects to freezing the hiring of new faculty members. In both the history and English academic job markets, there were large decreases in jobs available and increases in job searches canceled. The decrease in faculty hiring is a particularly grave problem because economic downturns have usually translated into increased student enrollment.

What does all the disappearing money and resources mean for students? Universities and the government alike recognize that they need to hold on to their primary consumers and the source of a consistent revenue stream. As it has been reported in a couple of pieces in The New York Times recently, the federal government has made sure student loans are available in the face of a credit crisis, while colleges and universities are making sure financial aid is available to students who need it.

In the case of the federal government, it has been buying up student loans to loosen up credit markets, in turn bringing into question whether private lenders will be necessary in the future. And the added weight carried by financial aid will be contingent upon student populations staying the same. While aid is being made available, other economic factors will make college education out of reach for many, particularly the economically disadvantaged. The enrollment numbers will become clearer as the new school year starts this fall.

These are some quantifiable effects of the recession. We can also speculate on what the budget cutbacks will do to the intellectual life of a university.

A decrease in full-time faculty hiring, combined with the inability to continue to pay part-time faculty, translates into a lower faculty-student ratio, shaping both student learning and faculty time away from the classroom. For faculty lucky enough to get sabbaticals, the time away is crucial in continuing their research and writing lives.

In the well-publicized case of Brandeis, the university has decided to literally sell its intellectual capital, in the form of parts of its modern art collection, in order to raise money for its budget shortfalls. The art is unavailable for students and scholars, and the Brandeis decision is a warning to art patrons who assume that their contributions will not be sold off to the highest bidder. After the uproar that followed the news, there has been some talk of a scaling back on the decision.

The Chronicle of Higher Education recently published a story that suggests that the tough economic times have led to administrators at the University of South Florida's Tampa campus and others in the Tennessee Board of Regents, which oversees six universities and 13 community colleges, to propose quick changes that "reorganize academic programs, decrease professors' roles in shaping the curriculum and jeopardize tenure applications."

Economic necessity can serve as a convenient mask for larger ideological decisions. At some level, this trend fits with Naomi Klein's popular idea of the "shock doctrine." She argues that moments of great economic, political and social upheaval allows governments and institutions to implement wholesale changes that would not pass in peaceful, calm times.

What then is to be done?

In two books and a recent working paper, John Aubrey Douglass, a senior research fellow at the Center for Studies in Higher Education at the University of California, Berkeley and an expert on American public higher education, looks back and provides some direction on how we might move forward.

In The California Idea and American Higher Education, Douglass traces the growth of higher education by examining the case of California. He suggests that in the early 20th century, Progressive ideals of reforming government corruption and political partisanship led to a rapid growth and availability of university education for Californians. A modern education system, the Progressive argument went, was one key to reforming California society.

The Great Depression pushed some of this growth even further and in different ways.

As Douglass writes, "California's evolving higher education system faced a conundrum that would accompany other periods of economic dislocation: the dichotomy of severe budget reductions and a surge in enrollment demand. The Depression elevated the importance of public institutions. In a crowded labor market, college provided both a refuge and a source of additional training. A new campus was also a source of jobs and a catalyst for local economies. Californians increasingly saw higher education as a source of social stability and eventual economic recovery."

In California, the Depression led to the rise of a regional college movement. An increase in student demand and the recognition that colleges spurred local economic growth led to the creation of new University of California campuses, in addition to the already existing Berkeley and Los Angeles campuses, and the transformation of what is now the California State University system away from strictly being teachers colleges.

While other states have a history of strong public universities, California, for Douglass, has been an exceptional case in its particular embrace of public education. The state's success in growing regional colleges can partly be traced to how California departed from national trends by coordinating its network of public institutions.

While The California Idea examines higher education through 1960, Douglass' more recent book, The Conditions of Admission, considers admission policies and practices at public universities into the 21st century. Douglass ends this second book with a warning. "After a century of leading the world in participation rates in higher education, however, there are strong indications that America's advantage is waning." Countries in the European Union and China and India are quickly catching up in the education of their young.

In a time when there is wide spread economic failure, everybody is making their own argument for how they are the key to righting the ship. The auto industry needs help because it represents great American values of work; the banks cannot fail because credit and lending structures the economy. Even Larry Flynt has asked for stimulus money for the limp pornography industry.

In a recent working paper, Douglass looks back to the post-World War II period and the successful efforts by the federal and state governments to avoid a recession. "The unprecedented investment by the federal government in providing grants for college had another important purpose: to reduce projected unemployment rolls and, at the same time, help restructure the U.S. labor market by producing a more skilled labor force."

Douglass looks back to the Depression and the post-World War II period and suggests that in both times, the American economy grew partly because of growth in higher education and the subsequent retraining of the labor force. He argues that part of President Obama's economic stimulus plan must be spent on higher education.

This is essentially the argument that Vartan Gregorian, former president of Brown University and current president of the Carnegie Corporation, along with the presidents of the major state university systems in the country, made in an open letter to Obama published in late 2008. They argued that with the budgetary cutbacks, public institutions are facing enormous problems. A stimulus of $40 billion to $50 billion would help the institutions "have the capacity to produce the people, ideas, tools, solutions, and knowledge infrastructure our economy needs to regain its momentum and to set a new trajectory."

On March 10, in his first major education speech as president, Obama said, "It is time to give all Americans a complete and competitive education from the cradle up through a career." If Americans are going to make it through new and shifting careers, universities need to do the work of figuring out the tools students need to compete in an economy whose ground is constantly shifting.

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