Time for a hiatus

The Itinerant Professor blog is going on a hiatus until after the first of the year.  I've recently accepted a position as Dean of the College of Education at Michigan State University, beginning January 1.  I'm going to be spending the next six months finishing up work here at Penn State, and working on the transition to MSU.

Look for the blog to return after I begin the new position, possibly with the assistance of my colleagues at MSU.  In the meantime, if you have ideas for a new name for the blog (something more creative than "The Itinerant Dean"), please send them my way.

It's not about excessive executive compensation, it's about tax rates

This past Sunday's New York Times  business section had a story about how executive compensation at large corporations has returned to pre-recession levels.  Here's the total compensation (salary, bonuses, perquisites, and stock options) of the top 5 CEOs in 2010 (change from 2009 compensation in parentheses):

1. Philippe Dauman, Viacom: $84.5M (+149%)
2. Ray Irani, Occidental Petroleum: $76.1M (+142%)
3. Lawrence Ellison, Oracle: $70.1M (-17%)
4. Michael White, DirecTV: $32.9M (n/a - new in 2010)
5. John Lundgren, Stanley Black & Decker: $32.6M (+253%)

Poor Larry Ellison, who had to take a pay cut this year.  Don't feel too badly for him, however - the article notes that his holdings of Oracle Stock are worth over $26 billion.

The Times  article discusses shareholder concerns over rising compensation, and whether companies are truly getting value for what CEOs and other executives are paid.  But as much as the federal government has tried to control compensation through regulation, i.e., Sarbanes-Oxley, passed in 2002, it has had little impact.

The real issue is not how to control executive compensation, but the fact that tax rates on these mega-millionaires are as low as they are.  Each one of these CEOs paid the same marginal tax rate last year - 35% - as anyone who made over $373,650.  And they paid only 10 percentage points above the rate paid by someone with an income as low as $68,000.

The chart below shows the marginal tax rates for married couples with the mean income in each quintile, the top 5% of all earners, and the top marginal tax rate, from 1969 through today (click the chart to see a larger version of it).  The largest reductions have come for the top rate, dropping from 77% to 35%.  In contrast, the bottom rate has decreased only five percentage points.  For families in the middle, there has been a nine point drop.

The fix to this problem is far simpler than crafting legislation to try to control how much corporations pay their executives.  All Congress (and the president) needs to do is to have the fortitude and political courage to increase the top tax rate.  I am not arguing to return the top marginal tax rate to the 1960s level of 90% or even the 1970s level of 72%.  But can anyone convince me that any of these CEOs would work any less hard if the top marginal tax rate was increased to the pre-Bush tax cuts level of 39.6%?  Or even a ten percentage point increase to 45%?  I'm ready to listen to your arguments.

What does this have to do with educational policy?  The debate about controlling federal government spending - much of which of focuses on discretionary spending, including spending for education at all levels -  could be made easier if upper-income Americans paid a fairer share of taxes.

More on bogus rankings - "The Best Colleges"

Last year, I wrote about what I described as "embarrassingly bad" rankings published by Bloomberg Businessweek.  Those rankings were based on the return on investment earned by students attending various colleges, and in the post I described why they were suspect.

Last week, Penn State issued a press release touting its World Campus' selection as the "the No. 1 online institution for 2011."  This designation was conferred by the website, TheBestColleges.org, which I had never heard of before - and I've seen lots of different rankings over the years.  So I spent a little bit of time going through the website, and after about 30 minutes or so, I sent this message to Penn State's Director of Public Information:

I read your press release, and not having heard of “Best Colleges,” took a look at the website.  Unless you have some information establishing the validity and/or reputation of the website, I’d be a little cautious about how much you want to promote the WC and other rankings from this site.  While they say “We do not accept paid placements for our school rankings,” it appears to me that this is a site supported entirely by advertising fees from universities.  When you do a search for any of the degrees they show there (not the rankings, but a degree search), no matter what the degree, you get a list of for the most part for-profit and online universities, and very few of what most of us would consider more traditional universities whose quality and rankings are more universally recognized.

Here are the “criteria” they say they use to calculate the rankings for the 25 best online universities:

“We’ve relied on the following criteria to generate our online colleges and universities rankings: student satisfaction (as measured by graduation and retention rates), peer and instructional quality (as measured by acceptance rate and student-teacher ratio), affordability (as measured by tuition costs and availability of financial aid), and credibility (as measured by years of accreditation, reputation and awards).”

To be blunt, this is garbage.  Graduation and retention rates are not measures of student satisfaction, any more than acceptance rates and student-teacher ratios are measures of peer and instructional quality.

We can all agree there are problems with the U.S. News & World Report rankings, but they are at least considered reputable by most parties.  I would be cautious about trumpeting rankings from “Best Colleges” externally unless you know more about this organization (which I’d be interested in hearing).

Don Heller

There may be more substance to this website and their purported "rankings," but I certainly couldn't see it.  If you click on the "About" page for the website, this is all it says:

The Best Colleges reviews publicly available data and then produces independent ranking assessments of colleges in various disciplines. Our goal is to produce resources that are useful to prospective students. We recognize that no ranking system is perfect, and for this reason we recommend that our ratings be used only as a general guide when choosing a quality school.

We do not accept paid placements for our school rankings as this would defeat our primary goal of creating resources that students find useful.

They may not "accept paid placements" for their school rankings, but it appears that they do have quite a bit of advertising from many of the schools that do end up being ranked. And I'm guessing that they get click-through fees for students who go from their website to these schools.

I'd be happy to hear from anyone who has more information about this website.

Is it possible to make Georgia HOPE even worse?

The answer evidently is, "Yes."  The state of Georgia has managed to find a way to make the HOPE Scholarship Program even more inequitable than it already was (see two Civil Rights Project reports I co-edited with Patricia Marin in 2002 and 2004 for more on this).  NPR had a story this afternoon about the changes to HOPE, with a sound bite from me.  The state has upped the GPA requirement - to 3.7 - to receive a full tuition scholarship, and added the requirement of achieving at least a 1,200 on the SAT (or 26 on the ACT).  These changes are likely to mean that lower-income and minority students will receive less money, and upper-income and white students will be more likely to retain the full scholarship.  Not exactly a step in the right direction for a state that still has large gaps in college access and attainment between white and minority students.

When Tennessee was considering implementing its lottery-funded scholarship program back in 2004 - which, not coincidentally, was modeled on Georgia HOPE - it ran some simulations based on high school GPA and ACT scores.  The data showed that white students were approximately 10 times more likely than black students to have a GPA of 3.76 or greater and an ACT score of 26 or more.  Similarly, students from families with incomes of $100,000 and above were about 5 times more likely to have this level of achievement than were students from families with incomes below $36,000 (which was about the median income in the state at the time).  It is likely that the results in Georgia would be very similar.

Governor Corbett's spring break surprise

It's spring break at PSU, so things have been pretty quiet here in Happy Valley.  At least they were until Tuesday, when Tom Corbett released his first budget as governor of Pennsylvania.  Governor Corbett ran on a "no tax increase" pledge, and since the Commonwealth was facing a roughly $4 billion budget deficit, and Corbett was not seen as a friend of public higher education, everyone expected that this first budget would likely not be very favorable to Penn State.  Discussions I had had with senior leaders of the university pointed to an absolute worst-case scenario of perhaps a 25 percent cut in Penn State's appropriation.

So nobody was prepared for the 52 percent, or $182 million, cut in Penn State's appropriation contained in the governor's FY 2012 budget.  Penn State was not singled out; overall, appropriations to Pennsylvania's state-related (Penn State, Pitt, Temple, and Lincoln) and state-owned (Pennsylvania State System of Higher Education) institutions were cut by 50 percent, or $660 million.  This is most likely the largest proportional cut in appropriations to higher education in the history of any single state, though the $660 million is dwarfed by Governor Jerry Brown's budget for next year, which cut $1.4 billion in total from the appropriations to the U. of California, California State U. system, and the California Community Colleges.

Penn State's response was swift and critical.  Al Horvath, Penn State's chief financial officer, said, "A reduction of this magnitude would necessitate massive budget cuts, layoffs and tuition increases, with a devastating effect on many students, employees and their families."  If the governor convinces the legislature to go along with such a large cut, Penn State will likely face some of the draconian responses other public systems have implemented during the current recession, including larger-than-normal tuition increases, layoffs, and furloughs.  President Graham Spanier, in a press conference the next day, even admitted that the possibility of closing one or more of the university's 24 campuses may be on the table, a measure that had not been considered in recent memory.

In the press conference, Spanier made the point that Penn State and the other public universities in the state were not responsible for the budget deficit the Commonwealth faced.  He showed the chart at the top of this post (you can click it for a larger version), which shows that the appropriations to the university have been largely flat over the last decade.  He also showed the chart on the right, which shows that while overall spending in the Commonwealth grew approximately 40 percent over the last decade, appropriations to the four state-related universities increased by only 5 percent (through the current year).

It is still unknown whether the legislature will go along with cuts of this magnitude.  Even though Republicans (who control both houses of the legislature) will want to support the new governor, they will face intense lobbying to restore some of the cuts.  State Senator Jake Corman, who represents the local district and is chair of the Senate Appropriations Committee, said, “It will be important for all institutions ... to come in and tell us what the ramifications of such cuts would be," a position that may be signalling an open door to restoring some funding for the universities.

I've been serving for the last year on a university-wide committee, chaired by Provost Rod Erickson, that has been charged with identifying ways of cutting the university's budget by $10 million per year over the next few years.  I can attest to the challenge of the effort, as this committee has been reviewing data on every single academic program and administrative unit in the university.  A number of programs and departments have already been slated for closure or merger, including some in the College of Education.  Even with these moves, however, finding $10 million of savings has been difficult.  As I said in an article this week in The Chronicle of Higher Education, the $10 million now "looks like a rounding error after the governor's announcement."

Are college costs a major problem?

David Leonhardt, economic columnist of The New York Times, published a post in his Economix blog last month stating that "College Costs Aren't the Main Problem" facing higher education.  While we could all have a nice debate about what the major problem facing American higher education is, I took issue with one thing Leonhardt said.  His post implied that there was plenty of financial aid out there, the problem was just that poor students didn't know how to apply for it.

I wrote to him, taking issue with that statement, and pointing to some research I have done with my Penn State colleague John Cheslock and our graduate assistants Rodney Hughes and Rachel Frick Cardelle.  That research demonstrates that students from low- and moderate-income families face large amounts of unmet need, i.e., the gap between their resources and grants they receive, and what it costs them to attend college.  You can read a summary of what I wrote to Leonhardt, along with his response.

Making progress on more hockey bucks

Right on the heels of my post about hockey money at Penn State, the university announced that it has received a donation of $1 million toward the $10 million still needed to be raised to bring hockey to Penn State. Bring on the puck!

More blockbuster gifts - but not for hockey

Back in September I wrote about the $88 million donation Penn State received - the largest in its history - from alumnus Terry Pegula and his wife, with the total amount dedicated to hockey.  Well, truthfully it's not all for hockey; some of the money is going to build a 6,000 seat arena directly across the street from the Bryce Jordan Center, Penn State's 15-year old, 15,000 seat multipurpose arena.  Interestingly enough, nobody has clearly articulated why the BJC could not have been adapted for hockey use; I have been in there for the circus, and it appears to have more than enough space for an NCAA Division I-caliber hockey rink.  One explanation given for building the new arena is that it will provide two rinks.  But this ignores the fact that Penn State already has one rink in the Greenberg Ice Pavillion where its current club-level hockey team plays.

One sad aspect of this story is that the $88 million is not even enough to build the rink and support the creation of Division I men's and women's teams.  In the latest issue of Town and Gown magazine, Joe Battista - long-time head coach of the men's club team, and now in charge of development of the new rink and programs - was quoted as saying that he has to raise an additional $10 million, bringing the overall cost to almost $100 million.

An unnamed source (yes, The Itinerant Professor has unnamed sources) informed me that before announcement of the Pegula's gift, the Penn State fund raising apparatus worked hard with them to try to earmark some of the money, or an additional amount, for academic purposes.  The Penn State leadership was most assuredly aware of what kind of impact the announcement of the Pegula's gift would make, with the sum total dedicated to athletics.  These efforts were apparently for naught, and while I'm sure there is still ongoing cultivation of the Pegulas for more money, we have yet to hear anything.

This largesse for athletics is in sharp contrast to two other recently-announced gifts of similar scale to public, flagship universities.  Last month, UCLA announced a $100 million donation from an alumnus, with the money earmarked for

"...academic programs and capital improvements that bolster UCLA's efforts to harness intellectual capital, engage the public and serve as a resource in addressing leading civic and societal challenges, particularly in the Los Angeles region. It will be equally divided between the UCLA School of Public Affairs — the campus home for scholarship and teaching in public policy, urban planning and social welfare — and a planned residential conference center that promises to expand dialogue between scholars, government and business leaders, and the public at large."

"Addressing leading civic and societal challenges" - quite a contrast with the similar sum of money to be spent by Penn State, unless you consider the leading challenge in our region to be the lack of Division I hockey and a dedicated rink in which to play it.

Our Big 10 competitor Ohio State just announced its own $100 million donation from alumnus Lesley Wexner (founder of The Limited chain of women's clothing stores) and his foundation.  The press release states

"The gift will primarily benefit The Ohio State University Medical Center and The Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. It will also benefit Ohio State’s Wexner Center for the Arts and select other university initiatives."

Again, quite a contrast with Penn State's big-ticket donation.

In all fairness, Penn State hasn't been without large donations for other than athletics.  Almost fifteen years ago, alumnus Bill Schreyer (who recently passed away) and his wife donated $30 million to endow an honors college at the University Park campus, later giving an additional $25 million to the college that now bears their name.  But there have been few blockbuster gifts of this type in contrast to our competitors, even those in the public sector.  And with very few exceptions - including Phil Knight (founder of Nike) at the University of Oregon, and oil magnate T. Boone Pickens at Oklahoma State - gifts in the range of $100 million rarely are purely for athletics.  Even Pickens followed up his large donation to OSU athletics with a $100 million donation for endowed chairs and professorships.

Last April, Penn State announced the kickoff of its $2 billion "For the Future: The Campaign for Penn State Students." The campaign priorities are listed as:

• Scholarships: Ensuring Student Opportunity
• Enhancing Honors Education
• Student Life: Enriching the Student Experience
• Building Faculty Strength and Capacity
• Research: Fostering Discovery and Creativity
• Colleges, Campuses, & Programs: Sustaining a Tradition of Quality

If Penn State is going to achieve its goals of supporting these areas, it is going to have to work hard to find large-capacity donors who are willing to support something other than athletics.

Perish or publish?

Well folks, The Itinerant Professor has not disappeared from the face of the earth. He's just been swamped with work and other responsibilities that have kept him away from his blogging.  But I promise you'll be hearing from him very soon, with a post about the college admissions frenzy.