The Academic-Governmental Complex

Editor’s note: This is the third story in a Pope Center series designed to make higher education finances more transparent. Others can be found here and here.

The federal government spent over $69.7 billion on higher education in fiscal year 2007. To put this number into perspective, the total operating budget of the National Aeronautics and Space Administration (NASA) that year was a considerably more modest $16.7 billion.

This article will show where some of our taxpayer money is going—sometimes to the silliest of purposes. We will first paint with a broad brush and at the end will list several grants of questionable merit awarded to North Carolina universities. Our goal is to help readers understand the impact of federal funds on higher education.

Generally speaking, there are four targets of federal spending for higher education: 1) tuition assistance and access, 2) research and development, 3) training, and 4) direct funding of institutions of higher education. The vast majority of federal spending goes toward the first two categories, tuition assistance and R&D. Together, they command approximately 94 percent of all federal dollars spent on higher education.

Approximately $33.6 billion was spent in FY2007 for tuition assistance programs, which include federal Pell grants, work-study programs, the Federal Family Education Loan Program, and direct loans from the government (the Obama administration is trying to make all subsidized student loans come from the federal government). According to the Department of Education, the purpose of these programs is to promote access to postsecondary education, especially for low-income undergraduates.

A full $32.2 billion was spent in FY2007 on research-and-development projects at colleges and universities across the country.

Training programs—including the Department of Health and Human Services’ Health Professions Training Programs and the Department of the Interior’s education programs for Native Americans—cost taxpayers just over $1.9 billion. Finally, direct funding to institutions of higher education, such as the service academies and various HBCUs, totaled $1.1 billion.

Federal Expenditures by Purpose

Source: National Center for Education Statistics

Federal Expenditures by Departmental SourceSource: National Center for Education Statistics

To be sure, federal spending is only part of the total government spending on higher education—state and local governments spent over $85 billion on operating expenses alone in 2008. But the way in which the federal government invests its education dollars influences the direction of higher education at both public and private universities in a number of ways.

Tuition Assistance

One particularly costly result of government spending is over-consumption of higher education. Generous government tuition assistance—in the form of Pell grants and cheap loans—encourages unprepared students to enter college. Many waste their time (and taxpayers’ money), dropping out without getting even a two-year degree. Other tuition assistance pushes students into professions they wouldn’t otherwise choose, such as teaching, certain non-profits, and public service. That is because, under certain circumstances, the federal government will cancel all or part of an educational loan.

Economists also tell us that federal loans contribute to universities’ continually rising costs. In “Financial Aid in Theory and Practice: Why it Is Ineffective and What Can Be Done About It” Andrew Gillen, research director for the Center for College Affordability and Productivity, explains that most government financial aid contributes significantly to the upward cost spiral in college education. Because of universities’ tendency to capture all revenue above the cost of instruction, aid to students provides more cash for them to capture.


Government money in the form of research grants creates different, but equally insidious, incentives, as two North Carolina professors make clear.

Jack Sommer, Knight Distinguished Professor Emeritus at UNC Charlotte, points out in an article, “Eye on the Prize: Self-Organization in Science,” that government research grants sought by universities have “transformed their research missions.” One result is that the status quo among universities has been solidified. Federal funding has led to “the establishment and maintenance of a rigid hierarchy of research institutions, concentration of funding in certain fields of science, and concentration in certain states,” he writes.

Furthermore, says Sommer, the “instrumental and utilitarian outlook” of bureaucrats and politicians has changed the choices of scientists about what they want to study. Perhaps the most obvious illustration of the federal government’s picking “winners” and “losers” is the expansion of “green” research, especially in energy and especially in response to assumptions about global warming.

For example, the U.S. Department of Energy provided UNC-Chapel Hill with $17.5 million for the development of next-generation solar photovoltaic technology, reflecting the national “green” agenda that the  university has enthusiastically endorsed.  The grant is part of the Department of Energy’s $140 million project to create “Energy Frontier Research Centers.”

Federal funding can actually pervert the direction and outcome of scientific research. “Federal funding agents are careful not to make awards that stray from existing research paths,” writes Sommer. He points out that in some cases they want to see successful results even before making the grant. That is destructive of genuine research, in which the outcome isn’t known when the scientist starts out.

Furthermore, federal funds have largely crowded out other funding sources for research. Sommer says that in the mid-1930s, when the “entire research budget of all American universities totaled $51 million,” federal grants represented 10 percent of the total. In 2008, federal funds represent about 60 percent out of a total of $51.9 billion.

Professor John Staddon, a Duke University professor of psychology, largely agrees with this diagnosis. “The main problem with federal support,” he says, “is that it is basically a monopoly … hence, it both favors some areas over others and restricts variety even within those areas.”

Staddon points out another problem as well—the dominance of federal grant-seeking conflicts with the primary mission of a university—undergraduate education. In a review, Staddon explains that in today’s world of high-dollar grants

one, or preferably several, external grants are essential for any faculty member at a major research university. And in the biomedical area … he … will be competing with scientists in medical centers who do little or no teaching. Thus, the course load of tenured faculty in research universities is rarely more than two courses per semester—fewer if the researcher is able to “buy out” of a course or two, which he had better do if he wants to compete with workers in medical centers who do nothing but research.

Dubious Grants

The best evidence of misspent federal money is simply a list of recent projects. In North Carolina alone, we have found myriad stories of expenditures of federal money that strike us as wasting taxpayer money. Here are a few:

  • The National Science Foundation awarded NC State a $253,123 grant in 2009 to preserve an insect collection.
  • Wake Forest University received a $71,623 grant from the Department of Health and Human Services in 2009 to “study the effects of self-administering cocaine on the glutamate system on monkeys.”
  • UNC-Charlotte received a $762,372 grant in 2009 from the National Science Foundation to fund the creation of computer software that will digitally record the dance moves of performers.
  • The National Institute of Drug Abuse gave a professor of psychology at Davidson College a grant of nearly $1 million to study the effects of exercise on cocaine-addicted rats.
  • In 2008, the Center for Sustainable Life Support for Space Exploration at NC State University received $376,000 to study biological processes necessary for space exploration.