Monday, September 21, 2009

 

Cash Cows

It's a commonplace of for-profit management that units can be characterized in one of three ways: rising stars, cash cows, and dogs. The savvy manager is supposed to feed the stars, milk the cows, and shoot the dogs.

Nonprofit higher ed doesn't work quite the same way. In financial terms, Nursing is a dog with fleas. We lose thousands of dollars per student, and we can't even make a serious dent in that with volume. But we support it, because it's central to our community service mission and our students usually find jobs. (It's less true this year than in the past, but the Boomers aren't getting any younger, so I like the long-term prospects.) The same is true of capital-intensive majors with clinical placements (radiography, respiratory therapy) and niche programs with lots of required classes with tiny enrollments (engineering).

(Before the inevitable "but the local for-profit offers Nursing!" objection, I'll just note that we charge community college tuition. Let us quintuple our tuition, and yeah, we could break even. But that's not why we're here.)

We stay afloat through a series of internal cross-subsidies. By turning a profit on Psychology, we can absorb heavy losses in Nursing. We milk the cows precisely so we don't have to shoot the dogs.

(For the record, and contrary to what most of the academic blogosphere seems to believe, English isn't a cash cow. It pretty much breaks even. The smaller class sizes offset the lack of equipment costs. The social sciences are where we really clean up, since those are chalk-and-talk classes with much larger sizes. Naturally, with different course caps in different places, your mileage may vary.)

Some parts of the college can only be accounted for as cost centers, since they don't bring in direct revenue, but we have to keep them anyway. The library is like that. We don't charge a separate library fee, but it incurs its own non-trivial personnel and materials costs. Those have to come from somewhere.

As the fiscal crisis has started to feel like the new normal, and as we've become more transparent as a way of dealing with it, some of the folks in the cash cow areas are getting crabby. They're getting exploited, as they see it, and the entire enterprise is built on their backs. It's time for justice!

Well, no. At least, not by that definition of 'justice.'

Colleges have always -- always -- had internal cross-subsidies. That isn't new, and it isn't bad. The only way to try new programs, run expensive programs, and support libraries and financial aid offices and disabilities offices and electric bills is to cross-subsidize. The optimal degree of cross-subsidy is debatable, and there are times when it goes too far one way or the other. (On my campus, that's prompting a discussion of more aggressive lab fees.) But the existence of the concept is neither avoidable nor, frankly, objectionable.

As online courses become more widespread, I could imagine some traditional four-year colleges losing some of their cash cows to community colleges. This could be a serious issue for the four-year schools, and I'd be surprised if they didn't try to head it off with the usual transfer-blocking. But the force of economic gravity is strong.

(At Proprietary U, the entire 'academics' area was considered a single cost unit. The only 'profit center' in their accounting was Admissions. Internal power and salaries reflected that. It was never clear to me what Admissions was supposed to 'sell' in the absence of actual programs, but that was how they did it.)

To me, part of the point of a non-profit is precisely that it doesn't necessarily base every decision on revenues. Ultimately, it has a budget that it needs to meet, but optimizing the budget for the sake of optimizing the budget is missing the point. The point is to fulfill its mission as best it can, within very real constraints. Even when that leads to some parts of the college largely subsidizing others, it's still different from straightforward business management. We shoot very few dogs.

Comments:
First, in the interest of full disclosure, let me say that I teach English, which puts me at least partially in the "cash cow" category (and at my college, English does better than "break even"--maybe we don't pay as much, or maybe our classes are larger, who knows?). And while I generally support every point you've made here, and while I do not mind supporting the fiscal dogs, there is the question of balance to consider. In my experience, programs like Nursing are often the darlings of the college administration, since they offer good press and demonstrate our college's mission in a way that members of the community can easily understand. As a result, there is often so much support for this dog program, that it feels as if the college is not only milking the cows but is actually taking feed away from the cows to give to the dogs (sorry for extending the metaphor so absurdly). It's true that we cows don't need much to live on, but there is level at which subsistence is an issue.

In other words, you can't just forget about the cash cows and focus all energies on supporting the dogs. And we should at least be clear about the relative costs of each program. I guess what I'm really asking is that the farmer occasionally throw us cows a bone.

Sorry. I couldn't resist.
 
At our community college, we also make money on the backs of the English Department. They teach six classes (20 students in teh composition and 26 in literature) then work three more hours in the Writing Center. Normally, a Writing Center would add cost, but here it is sharing space in the Developmental Studies academic support lab and instructors are working there for "free".
We also need to get some of the "feed" but since we started as a technical school, we are looked upon as support for everyone else even though we generate 40% of the college FTE.
Our Engineering and Applied Sciences division keeps shrinking in enrollment, but never loses positions or space while we lose space to the Allied Health division.
We grow 10% every year and the rest of the college has not grown over the past five years.
They dun cut us off of feed, water, and booted us into the snow.
Argh!
 
If the farmer would throw us cows a few whiteboard markers here in cowville, I'd be happy. WE NEVER HAVE WORKING MARKERS in social sciences. EVER. It drives me crazy. And since that's the only consumable cost to our "chalk-and-talks" unless I get real crazy and print some stuff out, I would like to have some markers that work. That is all.
 
Hear, hear to Eyebrow's comment on the marker situation! My department doesn't even try to keep them in the classrooms--we have to pick them up in the English office and bring them to each class. What's irksome is when I go to one of the science or engineering buildings, and all of the classrooms have a dozen markers just hanging out partying. There are days when I miss chalk dust...
 
Four year colleges also have grants as a source of income, which changes which fields are cash cows. With overhead rates that take half or more of the grant funds, grants can be a larger source of income than tuition if the university does enough research. At the biggest local four-year school, overheads from the medical school are what support the humanities and social sciences, rather than the other way around.
 
Cash cows vs. dogs:

One way you can figure this out is to look at the break-even point for a given class section.

Out here in CA, we're funded on the basis of FTES (Full-Time Equivalent Students). Two students attending half-time for a year count the same as one student attending full-time.

Break-even points for classes taught by adjunct faculty are absurdly low: eight to ten to twelve students. Break-even points for expensive geezers like me are somewhere around 22 students.

In other words, just about every class generates a profit.

Finally, if the lack of white board markers is your biggest problem in life, please shut the fuck up and consider yourself lucky.

--Philip
 
To support Prof. de Breeze's comment, we also tout our nursing program to the community. So much so that the nursing faculty decided they should get paid more (as they would make more working as nurses than teaching). And the board gave it to them! Yeah, our step-pay scale doesn't apply to the DOGS! Meanwhile, I would easily make three times as much money in industry and I am stuck teaching two or three hours labs for one hour of pay. I say shoot the dogs. Or at least put them on a leash!
 
So have we gone from "chalk & talk" to "mark & bark?"

(But we can't mark because the markers are either not there or are dried out. So, we find ourselves barking more...)
 
You said: Some parts of the college can only be accounted for as cost centers, since they don't bring in direct revenue, but we have to keep them anyway. The library is like that. We don't charge a separate library fee, but it incurs its own non-trivial personnel and materials costs. Those have to come from somewhere.

Thank you for the vote of confidence. However, my crystal ball says we will only have to supply sufficient information sources and the 'ol business office says google will do that just fine.
 
I'm glad that Philip brought up the fact that figuring out which programs are "cash cows" isn't so simple as figuring out the student:faculty ratio. The reliance on adjunct labor does skew the data, in that yes, it is true that English courses (and I'm thinking you're talking mostly about comp here? Because typically lit courses at the lower level can have very large enrollments, depending on the institution) may enroll smaller numbers of students per instructor, but most of those instructors are not full time faculty with benefits and a living wage. At my institution, very few sections of soc./beh. sci. courses are taught by adjuncts (we don't have TAs, so that's a non-starter, though I realize that f-t faculty teaching lower-level courses in the soc./beh. sciences may not be common elsewhere), whereas the majority of comp and lower level English courses are taught by adjuncts. That's got to factor into the calculation of which programs "make money" and which programs lose money or break even.

Whatever the calculations, I can say with certainty that English generates the most FTE hours of any unit in my university. Perhaps we're not making money, but we are serving the entire institution. If that's not valuable, then why have all of those English courses?

I suppose my question is, if a dog is serving very few students, and thus only serving the college/university's mission in a limited way for a limited number of people, in comparison with other programs, why not shoot it? I'm not objecting to the idea of cross-subsidizing. I'm just wondering how one decides the difference between an Old Yeller of a program and a Lassie of a program. It often seems like Old Yeller is trotted out as Lassie while programs that are just regular pound dogs, nice family pets but not much else(to torture the metaphor) are expected to do the same or more with much, much less.
 
Nursing is expensive, true. On the other hand, American society seems to need nurses more than it does English majors — certainly a nurse can fairly easily get a green card, while an English major had better have some other skill that's in short supply if they want to immigrate…

So, if part of the mission of a community college is serving the needs of society, then graduating people with the skills society needs should definitely be done.
 
. . . and everyone, including nurses, needs to know how to write. The classes we're disucssing aren't for English majors; they're the bread-and-butter comp classes that everyone has to take to graduate.
 
So many things to react to in this discussion thread....

The fundamental flaw in the whole discussion is the assumption that just because you are paid a certain amount per student, that amount should cover the whole student's education. This creates the illusion of cash cows and “dogs”. In fact, schools are funded to achieve a certain educational mission - not to produce only the cheapest and most “cost effective” graduates. Certainly a community college that taught only sociology courses would be very profitable. It would also be totally useless. I guess I object to the cow / dog dichotomy but I haven’t been able to come up with another analogy. Pastry chef v. short order cook?

On another wholly unconnected note, I work in science and always bring my own pens with me when I teach. It costs $10 and is worth the serenity that comes with knowing that when you need to draw a green plant on the board, it will be the right color.

Last but not least, I’ll say to y’all what I say to my students when they complain that they don’t like that nurses get paid more than them. If you want to make what a nurse makes, become one. It only takes two years.
 
The "cash cow" view is too narrow.

Just as you don't have a CC that only teaches English comp and Psychology, students don't usually take only classes in the cash-cow category. The cross subsidy is the way an engineering student pays for that small lab class when taking english. The tuition money is for the total education of the student, not the property of some department.

Where it gets messy is when an entire major consists of classes that don't pay for themselves, even when state dollars are included. Law schools and grad schools have differential tuition for that, but we have never gone that route at a CC. So far.
 
OK, with that rational comment out of the way, time to talk about white-board markers.

The reason you don't have working white-board markers in the social sciences is that your faculty don't know that volatile organic chemicals evaporate when you leave the cap off while lecturing or between classes. ;-)

But, like Ivory, I solve that problem by bringing my own.
 
Very curious what you think of this article on StraighterLine ($99/month for unlimited Internet classwork) at Washinton Monthly: http://www.washingtonmonthly.com/college_guide/feature/college_for_99_a_month.php?page=1
 
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