How much does “diversity” cost a college or university? It must be a lot.
If you think of the number of diversity deans, provosts, and other administrators who owe their positions entirely to institutional pursuit of diversity, and count their salaries, benefits, overhead, and operating budgets; add scholarships and financial aid earmarked to students whose enrollment increases “diversity;” mix in the expense of faculty positions created primarily for the purpose of enhancing diversity; and top off the bill with programmatic items such as separate identity-group-themed student and alumni events and remedial academic programs for underqualified students admitted because of diversity preferences, the total is substantial.
But no one really knows the dollar cost of diversity because colleges and universities do not aggregate, analyze, or disclose their financial data in a way that makes the figure visible. The Integrated Postsecondary Education Data System (IPEDS) maintained by the National Center for Education Statistics is silent on the topic, and while President Obama has called for the disclosure by colleges and universities of a lot of previously opaque information about student loans and college costs, the new disclosures won’t include what colleges spend on diversity.
The Art of Not Counting
I single out “diversity” because it is a highly institutionalized cost and a fairly conspicuous one. But it is hardly the only major expense that colleges and universities generally attempt to disguise in their financial disclosures and analyses. FASB and GASB rules do not require such reporting, so why bother?
We should bother because higher education is faced with a financial crisis brought on by runaway costs that no one seems to know how to rein in. You cannot, of course, rein in costs if you don’t know what you are spending.
The pursuit of diversity, however, is only one of the undisclosed cost-drivers. Among the others looms the relative newcomer “sustainability.” How much does sustainability cost?
Solyndraizing
IPEDS is as silent on sustainability as it is on diversity. But as it happens, we now have some clues about what “sustainability” costs higher education. The American College and University Presidents’ Climate Commitment (ACUPCC), Second Nature, and the National Association of College and University Business Officers (NACUBO) have teamed up to produce a report calling on the federal government to help colleges and universities pay for campus improvements that would enhance sustainability. The report, “Higher Education: Leading the Nation to a Safe and Secure Energy Future,” issued June 22, is an eye-opener. It calls for:
(1) tax-exempt bond financing to prepay power purchase agreements that require no price escalation
(2) a loan-guarantee program for energy efficiency or renewable-energy projects
(3) long-term charitable deductions and tax credits for biomass and biomethane fuel-source contributions.
And it foresees that these steps will “ultimately contribute to administrative efforts to contain college costs.” Actually it says that:
The higher-education community believes that such changes in tax policy and federal grant programs would allow colleges and universities to increase operational efficiencies, reduce long-term energy expenses, and ultimately contribute to administrative efforts to contain college costs. [Emphasis added]
The “higher education community” in this document supposedly speaks with one voice in favor of what might be called Solyndraizing. Solyndra—the solar energy panel start-up that asked the Obama administration for financial support, received a $535-million loan guarantee, and then promptly went bankrupt, leaving the American taxpayer holding the bag—is the very model of an ideologically-driven green “investment” of public funds. Solyndra had numerous problems before it went bankrupt. It had an expensive product that couldn’t compete with cheaper conventional solar panels; it over-invested in plant and equipment early on after making overly-optimistic predictions of future sales; it is under federal criminal investigation for having misrepresented its finances; and it apparently had significant difficulties actually manufacturing its product.
Solyndra wasn’t alone as a hapless beneficiary of federal aid meant to jump-start a new sector of the economy. Abound Solar of Loveland, Colo., drew a $70-million Energy Department loan guarantee and declared Chapter 7 liquidation on July 2, 2012. The Energy department offered Solar Trust a $2.1-billion loan guarantee in April 2011, which saw the company through its April 2012 Chapter 11 bankruptcy. Energy Conversion Devices got a $13.3-million tax credit as part of the stimulus. It converted to Chapter 11 in February. Ener1 turned a $118.5-million DOE grant for its electric car batteries into a Chapter 11 filing in January. The list goes on and on.
When sustainability-minded higher-ed organizations such as ACUPCC, Second Nature, and NACUBO tell us that federal funding for innovative campus energy projects will “increase operational efficiencies, reduce long-term energy expenses, and ultimately contribute to administrative efforts to contain college costs,” they echo a song we have heard before.
How Much?
According to the report, colleges and universities “own and manage more than 250,000 buildings and heat and cool more than five billion square feet of space on a daily basis.” They spend “more than $14-billion in operations and maintenance of buildings and grounds,” in addition to $6- to $7-billion in “energy and utilities, about three quarters of which is directed toward electricity generation.”
This provides a strong warrant to let ambient temperatures rise in the summer and fall in the winter. Cutting energy bills should be a priority. Of course, with a little foresight, college administrators could have avoided some of the heedless expansion that led to the enormous bills to begin with. Do we really need 250,000 buildings and five billion square feet of indoor space to accomplish the missions of American higher education? Note that most of the space is sitting empty for much of the day and is lightly used, if at all, for the summer.
I stopped by Bowdoin College a few days ago and wandered around campus looking in vain for someone to talk to. The campus was almost entirely untenanted except for the clerks in the bookstore selling Bowdoin gear to prospective students. Bowdoin is about as green as a college can get when it comes to ideology. But it doesn’t mind air-conditioning the empty buildings on hot summer days, or letting its campus sit idle for long stretches.
I don’t think Bowdoin is unusual in this respect. We just have to recognize that “sustainability” drives some forms of campus “investment” more than others. The ACUPCC/Second Nature/NACUBO idea of tax-exempt bond financing, loan guarantees for energy-efficiency projects, and long-term charitable deductions and tax credits for biomass and biomethane fuel-source contributions are just juicier ideas than adjusting the thermostat. For one thing, if these ideas were implemented, they could bring billions of dollars of new federal funding to America’s colleges and universities. Best of all, they would be in the forms of expense—tax-exempt bonds, loans guarantees, and tax credits that are relatively invisible to the taxpayers who end up footing the bill.
The report acknowledges that “the transition to renewable energy is most expensive for the first 5 to 10 years until projects begin to pay off.” In this light, it calls for allowing:
colleges and universities to prepurchase a 20-year supply of power with low-cost capital bonds and with flexibility to shape the debt (e.g., interest-only payments during the early years). The opportunity to use tax-exempt revenue bond financing for prepayment of PPAs is currently not a qualified use for the nonprofit higher-education sector, although it is available to municipal utilities.
This is clever but ought to be alarming if we think about the larger economics of American higher education. We are in the midst of what many observers (including me) recognize as a higher-education bubble. In all likelihood, quite a few colleges and universities won’t be around in twenty years to pay down those bonds. Colleges do not have the stability of municipal utilities—not that municipal utilities themselves are fail-proof.
What exactly would colleges and universities do with all this new money? The report sketches some possibilities: “build highly efficient labs and retro-commission existing labs and other campus facilities,” “more efficiently illuminate everything from classrooms to parking lots,” find ways to conserve energy for information technology and computers, and develop “thermal energy storage and distribution.”
Any or all of these ideas might be worth pursuing, but it would be a lot more convincing if colleges and universities pursued them without asking taxpayers to underwrite the expense.
This article originally appeared in the Chronicle of Higher Education's Innovations blog on July 31, 2012.
