Planning the upcoming budget, college grapples with costs to students

A month after the College Board released nationwide data on tuition increases, Lafayette is preparing to go before the board of trustees with budget plan for the 2016-17 year.

President Alison Byerly and the cabinet will submit their budget proposal this month to the board and next year’s tuition will be finalized by February.

As they analyze last year’s budget and experiment with cost projections, members of the team begin to pinpoint how many tens of thousands of dollars students will pay to attend Lafayette.

“It’s more of an art than a science,” Vice President of Finance and Administration Roger Demareski said. Demareski works closely with the cabinet to allocate funds from tuition, which he says accounts for 80 percent of all revenue for the college. The remaining 20 percent is funded through the endowment and gifts to the college.

Last year, tuition rose by three percent from the previous year, when it had risen 3.69 percent from the year before. According to Byerly, the budget planning committee is experimenting with increasing tuition between three and five percent.

According to data provided by the CollegeBoard and US Census Bureau, college tuition prices are rising more quickly than median income after adjusting for inflation. Economics Professor Christopher Ruebeck said that this could be due to a theory in economics called Baumol’s Cost Disease.

The theory says that it is more difficult to make services more efficient and cost less because they naturally entail certain labor hours. According to the theory Ruebeck cited, quickly rising tuition may be an indication that a college education is becoming more valuable relative to goods that can be produced more efficiently.

“There are some goods and services, particularly services, where decreasing the number of hours it takes to produce that – a haircut, medicine, education – is more difficult,” said Ruebeck, who also chairs the Faculty Compensation Committee. “People are innately involved in producing these things.”

“It means that the price of a computer will fall relative to the price of an education,” he added. “The price of a desk [for example] is going to fall relative to the price of a haircut.”

Some of the main forces behind quickly rising tuition costs are these labor costs, according to Byerly.

“Everyone recognizes the college costs have gone up at a pace slightly higher than the pace of inflation,” Byerly said. “Many people recognize that most of the costs associated with the providing education are salaries and human costs.”

“Music can’t be made less expensive. It will always take four people to play in a quartet,” Byerly added. According to Demareski, other people may want to pay to listen to that quartet.

“When you’re looking for very talented faculty, you want to be able to have a compensation package that attracts them to Lafayette,” Demareski said. “Then when you have very talented people in your organization…you want to retain those people, because those people become attractive to other organizations.”

Professor Jeffrey Helm, who chairs the Faculty Academic Policy Committee, said that the decision to pay faculty more is due to more internal reasons than competition between schools.

“We’re always aware of what other [colleges] are doing, but most of the decisions about what we’re doing is much more internal,” said Helm, who is also a mechanical engineering professor. “Are we giving the best education that we can? Are we giving the most fulfilling experience that we can?”

Helm said that the financial aid budget is an important factor that allows the college to recruit a more diverse student body.

“We want to bring in a more diverse student body, and to do that, we need to have additional funds for financial aid,” said Helm. On average, a Lafayette student pays 35 percent less than the published tuition due to this discount rate, according to Helm.

According to Helm, those who pay the full tuition in a way offset the cost of allowing other students to pay tuition at a discounted rate. He also said that students coming to Lafayette are also the ones who request a more diverse environment.

Administrators like Demareski and Byerly said, however, that the expected mission of the college has also changed in the last 10 or 15 years. The change in mission includes staffing jobs like the Title IX Coordinator, financial compliance and data collection required by the NCAA.

“If you think about what’s changed in the face of higher education in the last ten years, technology has become more of the norm, but that requires essentially an infrastructure that we didn’t have 10 to 15 years ago,” Demareski said, using ubiquitous Wi-Fi on campus as an example.

Maintenance for the old buildings is also adding to rising tuition, according to Demareski.

“If you look at the trend of how campuses were constructed, most campus were built in the 50s and 60s,” he said. “So those buildings are now all 50-plus years old…The upkeep requires more and more funds every year.”

In recent years, the popularity of online courses and degrees has challenged colleges’ education model and influenced decisions in a college’s finance, according to Demareski. According to Ruebeck, online courses may be an indication that higher education can in fact become more efficient.

“Sometimes when costs fall, quality might also fall. But if costs fall precipitously, and quality only falls a little bit, maybe we’ve improved things,” Ruebeck said. “Maybe its harder to learn from Khan Academy [an online course provider], maybe you learn a little bit less, but if it costs vastly less, maybe its the right thing.”

As a result, Demareski said, colleges are being evaluated as if they are a commodity.

“Schools now are being tracked and are using return on investment, in a way that corporate has been talking about return on investment for a long time,” Demareski said. “So now they’re saying if you’re a full pay student and you’re going to pay $240,000 over four years, but your Lafayette education gives you the opportunity to get a better job…then your return on your investment is well worth it.”