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The Next Tuition Increase: Say 2.5%-3.0%

CommonFund HEPI Comp.jpgAs we have seen, the Ivy league schools now march in lock step as they raise their tuition rates year after year at rates far higher than the growth of the Consumer Price Index (CPI). Last year six of the Ancient Eight, including Dartmouth, raised tuition in a narrow band between 3.7% and 3.9%. The index that locks their step is the Higher Education Price Index (HEPI) — calculated each year by the CommonFund.

The Commonfund Higher Education Price Index (HEPI) is an inflation index designed specifically to track the main cost drivers in higher education. It is an essential planning tool for educational managers, helping schools to understand the future budget and funding increases required to maintain real purchasing power. HEPI is issued annually by Commonfund Institute and is distributed free of charge to educational institutions.

HEPI is a more accurate indicator of changes in costs for colleges and universities than the more familiar Consumer Price Index. It measures the average relative level of prices in a fixed basket of goods and services purchased by colleges and universities each year through current fund educational and general expenditures, excluding research.

HEPI is compiled from data reported and published by government and economic agencies. The eight categories cover current operational costs of colleges and universities. These include salaries for faculty, administrative employees, clerical employees, and service employees, fringe benefits, utilities, supplies and materials, and miscellaneous services.

Forgive an ironic aside, but an index that reflects bad management serves only to institutionalize bad management: professors turned administrators of billion-dollar enterprises use it to avoid managing costs; they simply follow the HEPI, which serves as a cover for their profligacy.

After all, the great majority of a school’s employees (janitors, dining hall workers, administrative assistants, maintenance and technical workers, accountants and administrators, etc.) are doing the same work as their homologues in the private sector. And the remainder of an institution’s costs (building construction, outside services, travel, taxes, utilities and so forth) are no different from the costs of doing business that face any equivalent company. In short, if colleges and universities were well managed, there is no reason why their costs should not rise at the same rate as the Consumer Price Index — apart from the industry-specific cost of faculty and senior administrators, which Economics Professor Eric Zitzewitz calculates as only 10% of Dartmouth’s budget

My data-driven ‘18 crunched the numbers for the CPI, the HEPI and Dartmouth tuition growth over the past twenty-five years. Another ugly picture:

Tuition CPI HEPI.jpg

As you can see, in almost every year over the past quarter century, the HEPI outpaced the CPI. And in almost all of those years, Dartmouth’s tuition growth was faster than the HEPI — even though we do business in a low-cost, rural environment.

Worse still, in recent years, such growth has been in contravention of a bold assertion Phil Hanlon made when he became President. In an interview on November 30, 2012 with the New York Times, he commented, “The historic funding model for higher ed is close to unsustainable. We can’t continue superinflationary tuition increases.”

Well, Phil. What’s it going to be in 2017-2018? In the current academic year tuition went up by 3.8%, even though the HEPI rose at less than 2% and the CPI was up less than 1%. Phil’s fig leaf was that 1% of the increase was put in place to cover the cost of his new house system.

And in the coming academic year? My bet is that tuition, room and board, and fees will rise by 2.5%-3.0% — even though the HEPI and CPI were stable at less than 2% and 1% respectively. We’ll probably go from $66,174 to a figure in the area of $68,000. What do you call that, Phil? I call in unsustainable in every way.

We’ll find out the real number after this weekend’s Trustee meeting.

Addendum: The extent of the College’s poor management becomes even more evident when you consider that soaring tuition costs have taken place even as the College has been underpaying faculty and deferring maintenance on academic and residential buildings. Though, to be fair, we can’t say that the Wright/Kim/Folt/Hanlon administrations have ever shirked in hiring administrators.

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