The Iowa Board of Regents and the AAU

This post is part of an extended Open Letter to the Iowa State Auditor.

In the two previous posts it was noted that over the past four years the Iowa Board of Regents has raised tuition out of scale to any legislative funding cuts, and that student-subsidized economic development is one explanation for how that new unrestricted revenue is being spent. Unfortunately, because the regents routinely obscure and even scrub tuition totals from their public reports, and because the board is only obligated to report on economic development which is directly funded by the legislature, we have no way of knowing whether the regents are taking money from students and spending it on economic development that the state desires, but does not want to fund with taxpayer revenue. What we can say is that any new economic development programs at the state universities are almost certainly being funded by tuition revenue, because everyone agrees that there is simply no other substantial source of revenue to draw from.  

And of course if that’s true for economic development — and it is — then it’s true for any significant new spending on the regent campuses. If the legislature is cutting back, then new programs and initiatives will have to be funded from the bank accounts of students and families, through the imposition of increased tuition and fees. In that context, the regents have increased tuition 18% or so over the past four years, and will now increase tuition a minimum of another 16% over the next five. Specifically, the board will increase tuition 3% per year, and more if the legislature does not offset inflation with increased appropriations. Notably, and in contravention of assertions that tuition only increases when legislative funding falls, those 3% hikes will still be imposed even if the legislature increases funding beyond inflation.

Despite the board’s laudable mission to provide “high-quality programs of…study at reasonable cost”, it is to the obvious advantage of the regents — and thus to the state — to generate excess revenue from tuition and fees, which can then be used for purposes peripheral to, or even divorced from, that academic mandate. Because the board obscures the amount of new revenue it generates with each tuition hike, it is all but impossible to track money flows through the regents enterprise, but on rare occasions we do have visibility to the linkage between tuition hikes and spending. In particular, because the University of Iowa is using its strategic plan as justification for a slate of new expenditures, and has attached dollar values to specific initiatives, we can see where significant sums of new, unrestricted tuition revenue are destined.

As noted in the prior post, in the first three and a half years of his contract, UI President J. Bruce Harreld pushed through multiple tuition hikes to generate a mountain of new unrestricted revenue for the school. That windfall is now being used, in part, to fund the five-year cost of the new UI Strategic Plan, which was prepared under his watchful eye in 2016, and which Harreld has pegged between $155M and $165M. We know that linkage is explicit because during the summer of 2017, when all three of Iowa’s public universities presented five-year tuition proposals to the board’s Tuition Task Force, Harreld overtly and repeatedly tied his request for rapacious 7% annual hikes to the need for additional revenue to fund the university’s strategic plan.

As also noted in the prior post there are important discrepancies between Harreld’s claims about what the UI Strategic Plan entails, and what tuition revenue will be used for in the context of that plan. Before we dig into specifics, however, note that strategic plans at colleges and universities are largely administrative and often aspirational, and as such rarely have a fixed cost — let alone a price tag over a hundred million dollars. In fact, if we look at the current UI Strategic Plan (2016-2021), outside of philanthropic goals in the Engagement section there are few if any specific dollar amounts, and no reference to the $155M-$165M that Harreld claims he must have in order to meet the plan’s objectives.

Likewise, if we look at the prior UI Strategic Plan (2010-2016), which was developed under former President Sally Mason, we find a similar document outlining administrative goals, action steps, and metrics for tracking progress. Nowhere in that document is there a total projected cost, and in local press reports from that time there is no mention of a budget for Mason’s plan. Indeed, even when we look through the annual progress reports on the UI web site — which bridge both of those strategic plans over the past ten years — we find no internal mention of a budget for those plans, and recent progress reports do not detail how much of Harreld’s $155M-$165M has been raised or spent so far. (2018 report here.)

The inescapable conclusion is that when Harreld talks about funding the UI Strategic Plan, he is appropriating the concept and aspirations of that document to push for high-dollar expenditures which may only be tangentially connected to the text. It is as if Harreld has recast the strategic plan as a business plan, to which he then ascribed specific dollar amounts for various line items. It is precisely because of those dollar amounts, however, that we gain visibility into how he intends to spend some of the new tuition revenue that he has engineered, and that UI will reap in years to come. In fact, by comparing the strategic plan to Harreld’s budget for implementing that plan, we can objectively see that his financial aims are widely divorced from the aspirations of the document itself.

The three areas of focus in the UI Strategic Plan are: Research and Discovery, Student Success, and Engagement — the latter of which Harreld routinely mischaracterizes as economic development, or replaces altogether with entrepreneurial buzzwords like ‘innovation and commercialization’. (In reality, Engagement comprises the service mission of the school, along with philanthropy by Iowa’s quasi-independent non-profit foundation, and only peripherally touches on economic development as an objective.) Because there are three broad areas of focus in the plan, we might also expect each area to receive roughly a third of the budgeted $155M-$165M cost. Assuming for the sake of simplicity that the entire plan came in under budget, and only cost $150M over five years, that would be $50M each for Research and Discovery, Student Success, and Engagement.

Indeed, we can see that implicit assumption — and Harreld’s routine rhetorical misrepresentation of the strategic plan — in a presentation that he gave to the Board of Regents on 09/13/18. At the 53:46 mark Harreld is heard speaking over a graphical slide which shows an annual cost of $31M to implement the plan over five years ($31M x 5 = $155M), and that amount is then distributed to Research and Discovery, Student Success, and — instead of Engagement — to Innovation and Commercialization. Because there are no budgeted amounts for those three labeled areas of focus, however, the general impression is that all three will receive roughly equal, or at least substantial, funding from that annual $31M revenue bonanza.

In that same presentation, at the 1:05:50 mark we also get confirmation that students will bear substantial responsibility for the cost of the UI Strategic Plan. In the graphic on that slide, internal cost recoveries account for $11M of the projected annual $31M cost of the strategic plan, UI will request an additional $7M from the legislature each year, and the remaining $13M contribution will be paid through tuition and fee revenue. (If the legislature falls short in any year — as may already be the case this year — additional tuition revenue will be used to compensate for that shortfall as well.)

From these numbers we can reach two important conclusions. First, Harreld’s $155M price tag for the UI Strategic Plan is actually $100M, because one third of the sticker price will be covered by internal cost recoveries ($11M x 5 = $55M). Second, of the $100M that will be externally funded by some combination of legislative support and tuition revenue, the best-case scenario is that students will contribute $65M ($13M x 5 = $65M), or two thirds of that amount, and the legislature will contribute the rest ($7M x 5 = $35M). The worst-case scenario is that the legislature will contribute nothing, meaning the entire $100M will come from student and family bank accounts.

Because UI has already increased annual tuition revenue by $50M, as compared to 2016, the good news is that almost all of the money needed to fund the UI Strategic Plan — at least according to Harreld’s budget — has already been banked, even before the new five-year tuition plan kicks in. (As noted in prior posts, UI is net ahead $79M through the current fiscal year, even after all funding cuts are accounted for.) If the legislature meets its $7M obligation under Harreld’s budget, then students have already contributed what Harreld claims to need from tuition revenue. Alternatively, if students have to fund the entire $100M, that total will be surpassed in the coming fiscal year.

What we still do not know, however, and did not learn from Harreld’s presentation last September, is how all of those budgeted funds will actually be spent in support of the UI Strategic Plan. Given the entire $155M, what does Harreld specifically plan to do with that money to advance Research and Discovery, Student Success, and Engagement — or whatever phrase he substitutes for that part of the plan?

To answer that question we have to go back another year, to the Tuition Task Force meetings in August of 2017. During the proposal that Harreld pitched to the task force on 08/14/17, a slide appeared titled ‘Implementing the UI Strategic Plan’, and the graphic on that slide (p. 20) shows the line-item costs arrayed like peacock feathers around a total projected cost of $155M-$165M. From that slide, here are the line items and their projected costs, grouped by the part of the strategic plan to which they belong:

ENGAGEMENT
* Economic Development increased by 10% – $6 million

STUDENT SUCCESS
* Cultural Diversity and success of non majority students – $10 million
* Increased graduation rate (4 year undergrad – 60% 6 year doctoral – 75%) – $2 million
* High Impact Practices for students – $5.5 million
* Faculty Compensation – $4.8 [million] (Median of Peer Group)

RESEARCH AND DISCOVERY
* Funded Federal Research – $127 M (Median of Public AAU universities)
* Citations in publications Covered in $127M (Median of Public AAU universities)
* National Academies –Covered in $127M (Median of Public AAU universities)
* Faculty Awards, Fellowships, – Covered in $127M (Median of Public AAU universities)

Even if everything you know about the UI Strategic Plan is only what you have read in this post, some of those budgeted line items probably seem out of kilter. For example — and despite Harreld endlessly talking about the importance of economic development, or innovation and commercialization — the entire cost of that solitary line item under Engagement is only $6M, and that’s over five years, or a relatively paltry $1.2M per year. Not only is that a mere 4% of the projected $155M cost of the overall plan, but potentially more interesting is the fact that the University of Iowa will apparently spend about $60M on economic development over that time frame, or $12M per year. (While spending on economic development in the strategic plan is relatively small, that does not mean all of Harreld’s spending on economic development is fully encapsulated by the UI Strategic Plan.)

The next four line items fall under the Student Success heading of the strategic plan. If you have any familiarity with the higher-ed industry, however, you may note that those items are also metrics used by U.S. News and World Report in ranking rank America’s colleges and universities. In fact, three of the four line items under that section are specifically referenced in the U.S. News rankings methodology (see ‘social mobility’, ‘graduation and retention rates’, and ‘faculty salary’), while the fourth — high impact practices — may also be covered given the plasticity of that term. (For the uninitiated, gaming the U.S. News rankings is not only a thing in higher-ed, but despite efforts by Harreld and his management team in prior years, UI’s ranking plummeted lasted year. For more on the deleterious effects of gaming college rankings, see this post.)

The final four line items fall under the heading of Research and Discovery, which, in an academic setting, holds out the promise of inventions and advances that will change the world for the better. In the specific descriptions of those budgeted line items, however, there is yet another connection to an organization which ranks colleges and universities, and this one is overt. In the repeated parentheticals under that section of the strategic plan, UI makes clear that it intends to spend a significant amount of money raising those factors to the “Median of Public AAU universities”.

To see how closely those budget line items adhere to the AAU’s own metrics, consider the following from the AAU Membership Policy page:

Phase I Indicators

Competitively funded federal research support
Membership in the National Academies (NAS, NAE, IOM)
Faculty awards, fellowships, and memberships
Citations

As you can see, the four budgeted line items under Research and Discovery are the four most heavily weighted metrics for membership in the AAU, of which UI (1909) and ISU (1958) are long-time members. Because the AAU is an exclusive, invitation-only organization, however, falling in those metrics does not simply result in a lower ranking, it risks potential expulsion. Fortunately, the AAU keeps its members apprised of their standing by routinely issuing reports about those and other, lesser ‘membership indicators’.

As an aside, note also that in the budgeted line items ascribed to the strategic plan, what the AAU calls “competitively funded federal research support” is described as “funded federal research”. That change in phrasing by UI is misleading at best and deceptive at worst because it is all too easy to misread that description as ‘federally funded research’. External support by the federal government and others adds up to hundreds of millions of dollars in research funding each year (see bar chart here), but that is clearly not what the line item in question refers to, which is a substantial cost to the university, for which revenue must be found.

To grasp the magnitude of the financial commitment that AAU membership requires — and indeed, the commitment that UI intends to make going forward — here are the totals for the budgeted line items under the three main areas of the strategic plan:

ENGAGEMENT — $6M
STUDENT SUCCESS — $22M
RESEARCH AND DISCOVERY — $127M
TOTAL — $155M

In stark contrast to Harreld’s many public statements, which routinely extol the virtues of economic development, that peripheral goal — to say nothing of the greater cause of Engagement — receives negligible funding over the five-year span of the UI Strategic Plan. Likewise, although Harreld often talks about Student Success, and about increasing faculty salaries, that area of focus receives less than 15% of total spending on the strategic plan, and most of that is aimed at gaming the U.S. News rankings. As for Research and Discovery, of the $155M that Harreld intends to spend, a whopping $127M will go toward improving the metrics by which UI maintains its standing in the AAU.

The obvious question, of course, is how the University of Iowa profits by spending $127M over five years to appease the AAU. What return on that investment have the savvy execs in central administration guaranteed, in exchange for that massive outlay of scarce resources? As it turns out, however, membership in the AAU actually confers no tangible benefits on its members, other than the prestige of belonging to the AAU. Meaning in exchange for spending $25M per year for the next five years, the University of Iowa will simply procure the right to tout the fact that it is a member in good standing of an organization that effectively charges $25M a year for those bragging rights.

And if that sounds completely absurd, that’s because it is completely absurd — but it’s also true. Over the past century, in order to avoid the ignominy of expulsion, the AAU has convinced several member institutions to voluntarily withdraw, after they consistently fell short in the AAU’s internal rankings. In 2011, however, the AAU took the unprecedented step of expelling a member for failing to devote sufficient resources to AAU’s ‘membership indicators‘. That school — the nearby University of Nebraska at Lincoln (UN-L) — now serves as a warning that a similar fate could befall other AAU member schools that fail to maintain their metrics, and yet the only impact on UN-L is that they are now no longer a member of that exclusive academic club.

From a 05/02/11 article in the New York Times, following the expulsion of UN-L from the AAU:

Although membership in the association — which now will have 61 members, including most Ivy League institutions and many of the top state schools, like Texas A&M and the University of North Carolina — brings no specific benefits, many campuses see it as a proud indicator of their status.

“Some believe it helps attract faculty,” said Barry Toiv, a spokesman for the group, “and the presidents of member universities appreciate the opportunity to meet twice a year with others facing the same set of issues, and work together on policy and funding issues.”

From a 03/22/16 article in the Columbia Missourian, when the University of Missouri was feeling heat from the AAU membership minders:

At its core, the AAU’s current standards emphasize its overall purpose: prestige.

“It depends on what you regard as being important,” [UN Chancellor Harvey] Perlman said. “If you want gold stars after your name, then (the AAU is) important because the AAU is a gold star.”

A little over a year after that article appeared, concerning another Midwestern research university that is also still a member of the AAU, on 05/08/17 J. Bruce Harreld explicitly made the case for improving Iowa’s AAU metrics, while simultaneously omitting the staggering cost of maintaining that prestigious association:

Here are just one set of rankings. This is the AAU and how they look at us. I would say in 2010, which is way up here, we were in the 50th percentile in roughly all of these metrics. This fall, when they sent me the data, we had fallen to the 25th percentile.

This is the game we’re playing. This is the fight that we’ve got. We need more resources, and a good portion of that will go toward supporting students. Better mentoring. You know of the counseling services that we’re expanding. We’ve already done that. Can’t hire them fast enough. The Living Learning Centers. So we’re in the big leagues, and we need the resources to compete.

In reality, the multi-million-dollar price tags attached to the three components of the UI Strategic Plan, by Harreld himself, make clear that only a small amount of money will be spent on students, while 82% of the “new resources” devoted to that plan will be used to appease the AAU. Worse, because of faltering legislative support, students will not only not reap any benefit from that massive outlay, they and their families will pay the bulk of that $127M over five years, so the fragile egos among the administrators, faculty and staff at UI can keep their “gold star”. Of the $155M total for the strategic plan, the best-case scenario is that students will contribute $65M from tuition, which is just over half of the $127M that Harreld intends to spend on maintaining Iowa’s AAU membership. If the legislature falls short of funding, however, students could be responsible for $100M, or the vast majority of the AAU spending — all for the sake of academic prestige.

Even if we assume the best-case scenario, and pro-rate the total amount of tuition revenue across the three areas of focus in the UI Strategic Plan, that means students will contribute about $2.6M to Engagement, about $10M for Student Success, and $53M toward Research and Discovery — which we now know to mean satisfying the membership requirements of an academic organization which “brings no specific benefits”. (As for the worst-case scenario, students and families would end up paying an obscene $83M over five years.)

Across the regents enterprise, however, that’s only half the cost, and conceivably less, because Iowa State is also a member of the AAU. For arcane reasons related to the AAU membership indicators, ISU is also at significantly greater risk of expulsion, and may have to contribute significantly greater revenues than UI to improve their own membership benchmarks. And of course the majority of all of that new spending will come from tuition revenue paid by ISU students and families. (For a deep dive into UI, ISU and the AAU, see this post.)

Even if we merely double the cost of maintaining Iowa’s AAU metrics to account for Iowa State, that’s $254M over five years between the two schools, or more than $50M annually to maintain membership in an academic organization which confers no tangible benefits. That might (or might not) be fine if the legislature was paying the freight with taxpayer dollars — because the state itself wanted that lofty academic status attached to its two research universities — but that burden is now clearly falling on students who attend those schools. In fact, we have indirect confirmation of that from the Tuition Task Force, which subsequently changed longstanding regents policy that all three state universities remain in tuition lockstep. Starting this year, the one school that is not a member of the AAU — Northern Iowa — will be allowed to lag behind, or, alternatively, the two AAU schools will begin charging a premium. (Notably, when the universities unveiled their purportedly independent tuition proposals to the task force, the UI and ISU plans were exactly the same.)

As with revenue totals from tuition and fees, and spending on economic development, the Board of Regents consistently obscures the cost of maintaining AAU membership for its two research universities. Not only does that cost total more than $100M at UI alone, and not only will a substantial portion of that money come from tuition, but we still only have visibility to the increase in that spending that will occur over the next five years. In the interest of transparency and accountability, and in order to determine how much money is being spent on that otherwise empty association, the Iowa State Auditor should prepare a report which answers the following question:

What is the annual cost to the Iowa Board of Regents for maintaining the AAU membership of Iowa and Iowa State?

How much taxpayer money does the legislature contribute to maintaining AAU membership for UI and ISU? How much tuition and fee revenue is devoted to that association? If UI intends to spend $25M a year for the next five years — $127M overall — is that the entire cost, or the tip of a much larger outlay? Have UI or ISU been warned that they are at risk of expulsion? Has anyone at the Board of Regents, or at the state schools, made financial commitments to the AAU about increasing expenditures, specifically in order to avoid expulsion?

As for coming up with that $127M, the UI Strategic Plan runs for five years, from 2016 to 2021, but has no dollar values attached. From a presentation about that plan we have the total purported cost, but that information seems to have been unveiled in the summer of 2017, when the board was deliberating the new tuition regime it is now enacting. One additional question, then, is whether the 3% annual tuition hikes that the board just granted to UI and ISU — for each of the next five years — are specifically intended to fund improvement in the AAU membership indicators for those schools. But of course to make that determination, one of the things we would need to know is how much money the board will generate from those hikes, which it will never publicly report.

The Iowa Board of Regents — which is a department of state government — has been pleading poverty for years. Per the board’s own policy manual it is charged with offering “diversified and high quality programs of…study at reasonable cost”, yet one of the state schools not only plans to spend $127M on membership in an academic country club, but to stick students with a significant percentage of that multi-million-dollar cost. While AAU membership may indeed make it easier to attract the kind of administrators, faculty or staff who are impressed with status symbols, the state owes it to students and taxpayers alike to explain why it is spending $127M on an association that returns “no specific benefits”.

Mark Barrett