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A Brownian Cost Commotion

Brown Dartmouth logos horizontal.jpgThe answer to today’s quiz will be easy for longtime readers, but play along anyways, please. How expensive is it to run Brown University as compared to Dartmouth?

Brown now has 36% more students than Dartmouth (8,619 vs. 6,342), but in many ways it is similar to the College. Both schools have far more undergrads than grad students, and Brown and Dartmouth do a similar amount of sponsored research: $162,286,000 at Brown; $181,517,000 at Dartmouth. Neither institution has a law school; both have relatively small medical schools.

However, Brown has the misfortune of being in a city where doing business can be costly. Providence has a much higher crime rate than rural New Hampshire, and therefore Brown has 80 campus police on staff, a portion of whom are trained officers of the law carrying guns and with arrest powers; all these employees are better paid than Dartmouth’s 35 Campus Po security guards. Rhode Island has a 7% sales tax; there is none in New Hampshire. And Rhode Island has a 7% state income tax; New Hampshire has none. Real estate is more costly in Providence, as are services and labor.

Brown has a larger faculty than Dartmouth (736 tenured and tenure track professors vs. 589 at Dartmouth) and the faculty there has more members of the prestigious national academies in its ranks.

According to its 2013 audited financial accounts, Dartmouth’s total annual expenses came to $835,273,000. And Brown’s? What’s your guess? Pick one of the below:

–¡ $1,136,000,000. Good guess. With 36% more students, you might think that Brown costs 36% more to run than Dartmouth.

–¡ $1,236,000,000. A prudent guess, too. You’ve taken the 36% figure, and you’ve added a big-city cost premium because of Brown’s location in Providence.

–¡ $1,064,000,000. Clever, as well. You’ve assumed that there are economies of scale in running a school, so even though Brown has 36% more students, it only needs one President, one Provost, one Dean of the Faculty, etc., just like the College, so it is less costly to operate than Dartmouth on a per-student basis.

Fooled ya! You are wrong on all three counts, for you haven’t taken account of the elephant in the room: the bloated, overpaid Dartmouth staff. Despite Dartmouth’s smaller size, the College has 2,995 full-time and 333 partime non-faculty staff members on its payroll; Brown only has 2,574 fulltime and 653 partime non-faculty employees. And if the SEIU wage scale is typical of overall employee compensation, Dartmouth’s staff is much better paid than Brown’s, and its members have more costly benefits, even though taxes and the cost of living are much lower in New Hampshire.

So what’s the answer to the question? As a result of the College’s huge staff payroll, the cost of running Brown each year is, wait for it, not higher than running Dartmouth; in fact, it is lower by $105,491,000. Brown only costs $729,782,000 to run each year, vs. $835,273,000 for the College:

Brown 2013 Expenses.jpg

You’ll need to add depreciation to total expenses at Brown to get the sum cost of the institution in 2013: $729,782,000. In its financials, Dartmouth includes depreciation in its total expense figure of $835,273,000:

Dartmouth 2013 Expenses.jpg

How the heck does Dartmouth cost $105,491,000 more to run than Brown? It is obvious that the College should cost substantially less, don’t you think? In fact, almost all of the difference comes from the total cost of wages and benefits, which at the College is $475,574,000 and at Brown is $388,859,000 — a difference of $86,715,000.

If you feel outrage at this figure, welcome to the club. You don’t have to be a management consultant to understand that expenses at Dartmouth are still wildly out of control. The cost of running the College should probably be $105,491,000 less than running Brown, not more. By my lights, Dartmouth’s total budget is at the very least over $200 million higher than it should be.

Addendum: There is no reason to think that Brown is a well run institution. Its managers are undoubtedly motivated by the same Rawlsian ideologies that have led to Dartmouth’s near insolvency. But if Brown can be somewhat efficient, then Dartmouth can be, too. After the College reaches Brown’s level of cost management, then we can talk about how lean it really could be.


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