Public Colleges Don’t Need More of Your Money

ONE BLOATED COMPENSATION PACKAGE IS
ONLY A TINY PART OF THE PROBLEM

Late in 2013 University of South Carolina (USC) President Harris Pastides was making hat in hand entreaties to the legislature for more General Funds for the school. Pastides insisted that the University administration didn’t wish to raise tuition yet again, but they would be “forced to” in order to cover costs if lawmakers didn’t come through with more funding. The revelation last month that Pastides would be paid an additional $109,000 in compensation – that’s on top of his $286,000 state salary and $395,000 foundation salary – attracted some deserved criticisms.

Of course, the additional $109,000 will come from the “private” USC Foundation, not from state coffers, and according to defenders of the university board’s decision this fact alone makes the raise entirely non-controversial.

But hold on. Every dollar in increased compensation for the President could have gone to towards other core university services for which – according to the President himself – state general funds are needed.

A bloated presidential compensation package is hardly the only instance of questionable financial decision-making, however. As of fall 2012 (the most recent year for which the Integrated Post-Secondary Education Data System provides data), instructional staff made up only 27 percent of USC’s full-time employees at the flagship Columbia campus. By the same year, “Office and Administrative support” had risen to 21 percent of all full-time employees at USC Columbia, and “Community Service, Legal, Arts, and Media, Management” employees made up another 9 percent. And despite claims of poverty, in 2013 university representatives presented a five-year capital plan to a Senate Finance Sub-Committee that showed planned spending of $533.76 million on various university capital projects between FY 2013 and FY 2017.

There is clearly fat in the university’s budget, and a lot of it. Even if administrators remain consistent in their refusal to consider budget cuts, however, they have plenty of resources to meet costs well into the future. The Nerve reported back in November of 2013 that USC was sitting on $347.8 million in unrestricted net assets, a fund which could cover the $10.13 million annual increase that the university was requesting from the legislature for the next 34 years. On top of these funds, six affiliated foundations and an alumni association had an additional $88.6 million in unrestricted net assets.

USC has amassed this treasure chest of funds via an expanding budget driven by increased tuition costs. The USC Columbia campus budget has grown by $137.33 million over the five most recent budget years. At the same time and at the same campus, according to the Commission on Higher Education, tuition and fees have increased by 14 percent for in-state students and 16 percent for out-of-state students. These tuition increases outpaced inflation, which came in at roughly 9 percent over the same period. Evidently the administration considered the tuition charged in 2010-2011 school year unsustainably low.

None of this is to suggest that USC or any South Carolina public university (and the facts relayed here are much the same at other schools) has no value. The point, rather, is to question the idea that public subsidy can increase the value of attending these institutions. It doesn’t. These schools have it well within their capacity to raise funds without assistance from the General Fund and without raising tuition. Of the $137 million increase in USC Columbia’s budget over the last five budget years, only $7.9 million came from the General Fund. The state’s General Fund, put simply, just isn’t that essential to the university’s finances. (Which is why, incidentally, the argument that tuition hikes are a result of cuts in General Fund revenues is simply false: over the last two decades, tuition has risen when General Fund appropriations increased, and when they didn’t.)

In short: Rather than asking for more in General Fund money, USC and other public universities should be made to justify the funds they currently have. Public universities are a classic example of government bloat beyond core services, and constantly increasing public subsidies to them only encourages financial mismanagement. Higher education institutions should be financed and held accountable by their users – and no one else.

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