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Where the Money Really Goes

In yesterday’s post, we made the following point about the College’s spending:

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.

Let’s look a little more closely at where the administration spent money last year:

Dartmouth Expense Allocation1.jpg

First off, 59.42% of the College’s $918,111,000 in expenses went to personnel costs: salaries, wages and benefits. That leaves 40.58% for spending on items that are no different from the usual items that American businesses buy every day. How can the cost of these items rise faster at Dartmouth than the CPI?

The College, by virtue of its size, can borrow money more cheaply than the average business, and the same rule should apply to travel, construction, supplies, and utilities.

In fact, one could make the argument that because residential housing — the largest element of the CPI (42.24% of the index) and the second fastest growing one after medical care — is not an important component of schools’ cost structure, college costs should rise more slowly that the CPI.

But in the final analysis, the wages of average Americans are hardly rising faster than the Consumer Price Index, so every time schools follow or exceed the bloated HEPI, they place higher learning ever further out of reach for average American families. Think about that the next time someone in the administration gasses on about social justice.

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