Growing Public/Private Resource Differences US researches

 Growing Public/Private Resource Differences

One potentially important indicator of public universities’ future capacity is their position relative to private research universities.   We do not make these comparisons to argue public research universities should be funded on par with private universities; rather we point out the funding disparity.  A growing public/private research university salary, teaching load and student selectivity divide was first illustrated by the work of Thomas Kane and Peter Orszag  (Director of the Office of Management and the Budget in President Obama’s administration) in 2003.  In faculty salaries, where parity between very high public and private research universities was achieved in the decades of the 1970s, a 15 to 20 percent salary gap now exists. 

If public universities should fail to be competitive for research grants or have to shrink the size of their student bodies due to budget restrictions, private research universities are unlikely to have available capacity to replace the lost output.  Since the preponderance of enrollment growth in four-year university education has occurred among public universities in the past 50 years, there is reason to doubt whether private universities can or would expand enrollment in response to a decline in capacity to enroll students at public institutions.

Public Universities Remain Strong Competitors

We have no evidence to show the resource challenges facing public universities have caused the quality of instruction to decline, nor research quality to suffer either in absolute terms, or in comparison with private universities.     Since Council of Graduate Schools studies generally find links between adequately funded doctoral studies and time to degree, it would not be surprising to find that the funding picture we describe here is an adverse impact on doctoral students. We know that despite the growing revenue disadvantage per student, public research universities have slightly increased the proportion of federal grants they receive.  However, with their rapidly diminishing ability 

to compete head-to-head with private
universities for the best faculty and students, one has to worry that some
decline in the quality of teaching and/or research at public research
universities may be in the offing.

The mechanism through which the effect of relatively smaller
resources at public universities than at private universities is transmitted is
the labor market.  Lower pay, higher
teaching loads and a smaller proportion of high-ability students makes faculty
positions at public universities less attractive.  On each of these dimensions, the level of
competitiveness of public universities has steadily worsened over the last 20
years and the private minus public gap is now quite noticeable.  Today private universities have a competitive
advantage over public universities when competing for faculty.  It would be a strange market if the employers
offering the best pay and working conditions did not use that ability to hire
the most productive faculty members.


Federal Funding Agencies are not Paying the Full Cost of


Threatening both public and private research universities is
the failure of U.S.
research funding agencies to cover the total cost of the research projects they

In March, 2008, COGR released its study, Finances of Research Universities.  This detailed analysis estimated the
university subsidy to all research, federal and non-federal, exceeded $2.3
billion per year, and “a majority of that subsidy can be attributed to federal
programs.”[1]  Their analysis relied on data from the
National Science Foundation’s (NSF) annual survey on Research and Development
(R&D) Expenditures at Universities and Colleges.  The data element from that survey relevant to
this matter is the ratio of university Institutional Funds used to support
research to all academic R&D expenditures. 
Total university R&D amounted to $51.9 billion in 2008; federally
funded R&D, $31.4B billion, and university-funded R&D, $10.4
billion.  Thus, university-funded R&D
was 33.4 percent of federally funded R&D in 2008. 


Funded Research Expenditure as a Percent of All University
Research and Development Expenditures

Federal Funds for R&D for various
years, National Science Foundation


COGR’s thorough study describes a problem facing public and
private universities alike: under-funding true facilities and administration costs
associated with federal grants. 
Interestingly, universities receive lower indirect payments than do
federal laboratories and industrial laboratories.  RAND reports
a 1996 study of indirect cost payments by Arthur Andersen found, “As a fraction
of total costs, universities had the lowest percentage classified as indirect
(31 percent). Federal laboratories were somewhat higher at 33% and industrial
laboratories were higher still at 36%.”[2]


COGR report relies on the increasing
proportion of total R&D that is funded by institutional funds to argue that
under-funding universities to perform federal R&D is a growing
problem.  They conclude “the
risk is that additional financial burdens will move

Signs that Funding Problems are Producing Negative


Thus public universities have been steadily losing real
state appropriated base funding for decades.  
Their weaker state funding base combined with the superior ability of
private universities to raise funding through endowment giving and tuition
charges have produced relative weakening of public universities ability to
compete for the quality staff and resources needed for research
productivity.   Both public and private
research universities have experienced resource losses due to the impact of the
financial market meltdown in late 2008 and 2009.   Both public and private are funding and
increasing proportion of the cost of federally sponsored research.


Perhaps a harbinger of the first stages of research decline
by public universities is the recent National Bureau of Economic Research
(NBER) working paper by James Adams.[1] He found
that the number of citations to published scholarly papers by faculty members
at public universities in the United
is failing to keep pace with the flow
from their private counterparts.  His
statistical investigation revealed a slowdown in the growth of resources was
closely associated with this development. 
The abstract of his piece states the connection: “These developments can
be traced to slower growth in tuition and state appropriations in public
universities compared to revenue growth, including from endowment, in private


The relative decline in citations to published scholarly
articles in journals that select papers after careful peer review could suggest
a relative decline in the productivity of public university researchers already
has occurred.  If so, this is not a
positive sign for graduate education and for future competitiveness for federal
research grants.


decline in the quality or output of research from U.S. public universities, could
impact the nation’s global standing. 
Confirming evidence of the United States’ relative decline in
scholarly publications comes from a recent study reported by the Financial Times.[3]  It found China,
Brazil and India led the United States in the rate of growth
in scholarly publications from 1990 to 2008. 
While the United States
remains the largest producer of scholarly journal articles, China is now second and, “if it
continues on its trajectory it will be the largest producer of scientific
knowledge by 2020.”  Evidence of this
change can be found in the rapidly multiplying international rankings of
universities and the declining dominance of U.S. institutions.  While there is some disagreement

about the importance given to these rankings,[1] there is
much evidence emerging that the energy and resources being invested in
universities worldwide will challenge U.S. dominance in higher education
in the future.  Further funding losses in
the large public sector American research universities can only hasten the

Efforts to
Understand and Resolve the Funding Problems


With the assistance
of five member universities A
۰P۰L۰U conducted regional meetings of public research universities
during April 2010 to consider the funding problem and to develop approaches
that might help resolve them.     For
example, participants examined whether compacts might be formed with their
states to align university efforts with state needs in return for adequate
funding.  The Facilities and
Administration (overhead) negotiated rate setting process was examined and
facets of it which might lead to underpayment of research cost were
examined.   Finally, the changing
relationship over time between the locus of benefit from research university
activities and the geographic jurisdictions of funders of those activities was
considered in some detail.   Perhaps
better realignment of benefits with suppliers of funding would result in more
robust funding.     The full Forging
of Foundation for the Future
background paper addresses these issues.   The process begun in these regional
conferences should spawn serious reflection and research that will lead to
innovations that will improve public (and private) research university funding.

We do not wish to be
alarmist.   The U.S. university research enterprise
remains healthy.   While public research
universities arguably have experienced larger financial challenges than have
their private counterparts, their relative success in competing for federal
grants remains.   However, the
competitive asset that is the U.S.
research university is threatened.   To
deal with this threat states must cease their steady defunding of public
universities, donors must increase their philanthropic support of both public
and private research universities and the federal government must begin to pay
the full cost of research.   With these
changes U.S.
research universities can remain a key competitive asset for the country.

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