College and university spending across the nation continues to exceed reasonable expectations. And North Carolina institutions are no exception. In the Tar Heel State and beyond, campuses continue to expand, and there’s always some enticing new amenity to add.
The Wall Street Journal recently compared spending data from some of the top universities in the country in an effort to highlight the surprising number of zeros on many institutions’ expense reports. “Over the past two decades,” the report reads, “[institutions] erected new skylines comprising snazzy academic buildings and dorms. They poured money into big-time sports programs and hired layers of administrators. Then they passed the bill along to students.”
Enrollment growth in North Carolina has not kept up with the pace of institutional spending.WSJ’s findings sparked the Martin Center’s curiosity. What would the data reveal about North Carolina’s institutions? Using a combination of financial statements and IPEDS data, we replicated WSJ’s findings for the 16 UNC-System institutions, as well as Duke University, Davidson College, and Wake Forest University.
The data, collected for the past 20 years, included operating expenses, state appropriations, tuition revenue, and fall enrollment (FTE) for each institution (enrollment numbers are from IPEDS, which has data from 2003-2021 only).
As shown, 2022 spending for nearly every institution studied was at least 200 percent of 2002 spending.
By contrast, enrollment growth at each institution was comparatively modest, with every institution surveyed showing spending increases that were nearly twice as high as enrollment changes. In short, it appears that enrollment has not kept up with the pace of institutional spending.
When comparing the average operating expenses of the selected institutions from 2002-2022, the schools topping the charts were not surprising. Duke University, UNC-Chapel Hill, North Carolina State University, and Wake Forest University (respectively) had the highest averages for expenses over the last 20 years.
However, Duke’s average annual spending of $4.6 billion paled in comparison with the number on their most recent financial statement. In fiscal year 2022, Duke University’s operating expenses exceeded $7.7 billion. Meanwhile, UNC-Chapel Hill’s average of $2.5 billion was much nearer to its ’22 spending of $3.4 billion.
University funding comes from the people of North Carolina, either in their capacity as students or as taxpayers.These findings are not altogether surprising. In most cases, university expenses can be gauged by the size of the institution. Duke and Chapel Hill probably should have larger expenses than Elizabeth City State University and UNC School of the Arts.
Concerns arise, however, when an institution’s spending far outweighs its income, a sum made up of tuition revenue, state funding, and grants. While there is surely an argument to be made that institutions were not designed to turn profits, the real issue here is that schools’ funding comes from the people of North Carolina, either in their capacity as students or as taxpayers. With spending and state appropriations trending upwards over the past two decades, citizens should question the necessity of multi-billion-dollar annual budgets.
These institutions aren’t just spending money on professors and education; instead, they are tricking out their campuses with the latest student attractions. Why does Davidson need a ropes course and a bouldering wall? Perhaps to compete with Duke’s indoor climbing wall? NCSU’s basketball dorms “cost roughly four times as much per bed than other campus living quarters.” From lazy rivers to movie theaters, institutions now aim to meet students’ every desire on campus.
Colleges are tricking out their campuses with the latest student attractions.Of course, the institutions above had large variances in expenses; however, the key point is that their expenses only increased.
While WSJ’s data found that many institutions’ tuition had increased more than state funding (thus resulting in greater solvency), our data showed quite the opposite, as the next chart reveals. (Note: For the three private institutions under consideration, state funding consisted of state grants and contracts.)
Every institution considered by the Martin Center, with the exception of the three private schools, saw an increase in average state funding that far exceeded any increase in average tuition revenue. This was certainly due in part to the tuition freeze that has been instituted within the UNC System, a great benefit to North Carolina citizens and students. But perhaps a similar freeze should be instituted on state funding, also to the benefit of North Carolinians. Given its spending habits, the UNC System could surely make do with less.
Among WSJ’s findings is the unsurprising discovery that tuition increases have been competing with, and exceeding, growth in many household expenses. Though gas prices have gotten higher faster, tuition growth has surpassed growth in home prices, healthcare spending, and standard car purchases.
Another revelation from WSJ’s reportage has to do with the concerning number of university financial statements that have required restatement. The vast majority of the financial statements for each public institution considered by WSJ have been restated (i.e., corrected) over the past 20 years. These errors make data collection more cumbersome than it already is. Education professor Robert Kelchen of the University of Tennessee put it well, stating, “[Universities view audits] more as a requirement than a tool for the public.”
Let’s stop demanding the latest amenities and instead demand the best in academics.WSJ found similarly that “Colleges have faced little accountability over their budgets in part because they aren’t required to track expenses in a uniform way. [They] use their own discretion to categorize spending on audited financial statements, making precise comparisons at a single school over time, or among different schools, extremely difficult.”
Yet a clear picture does emerge. Holden Thorp, UNC-Chapel Hill chancellor from 2008 to 2013, sums up the matter: “These places are just devouring money. Universities need to focus on what their true priorities are and what they were created to do.”
The Martin Center often expresses a similar sentiment: that expecting universities to cater to society’s every whim is unrealistic. Institutions of higher learning were designed to be educational powerhouses and to be renowned for educational achievements rather than financial largesse. As students, as parents of students, and especially as taxpayers, North Carolinians should be concerned by university spending. Let’s stop demanding the latest amenities and instead demand the best in academics.
Ashlynn Warta is the state reporter for the James G. Martin Center for Academic Renewal.