Financial Accountability

Last month Oklahoma's higher education regents approved tuition and fee increases for the state's public colleges and universities. No surprise there; as former Harvard president Derek Bok famously remarked, "universities share one characteristic with compulsive gamblers and exiled royalty: there is never enough money to satisfy their desires."

We believe the tuition hike was unnecessary. Contrary to popular belief, universities do not have a revenue problem. As a matter of fact, some of them are extremely wealthy and highly profitable. As Vance H. Fried, Riata Professor of Entrepreneurship at Oklahoma State University, pointed out in a report last month, "Undergraduate education is a highly profitable business for nonprofit colleges and universities. They do not show profits on their books, but instead take their profits in the form of spending on some combination of research, graduate education, low-demand majors, low faculty teaching loads, excess compensation, and featherbedding. The industry's high profits come at the expense of students and taxpayers."

Moreover, the University of Oklahoma (for example) is sitting on an endowment of nearly a billion dollars. Oklahoma State University's endowment is nearly half a billion dollars. But "why should a school create a fund that it never intends to spend?" Dr. Fried asks. After all, "schools aren't trust companies; they are educational institutions.

"These colleges are like poor little rich kids fixated upon their wealth," Dr. Fried says. "Although rich, they constantly complain about not having enough money to cover their needs. Although rich, they constantly try to get more money out of their students and society at large. They continue to build their endowments even though each dollar added to endowment represents a dollar that could have gone to providing an education to current students, researching today's great problems, or to reducing tuition."

A recent SoonerPoll found that Oklahoma voters, by a margin of 81 percent to 6 percent, believe "public colleges and universities in Oklahoma can be run more efficiently." They're correct. Would you believe, for example, that Oklahoma's higher-education system spent more than $188 million on travel over the last three years?

Moreover, the total number of full-time-equivalent employees (FTE) increased by 3,052 in recent years--from 30,070 in 2006 to 33,122 in 2011. Even more startling, there are more than 2,000 employees in Oklahoma's higher-education system earning six-figure salaries. See for yourself at AccountAbilityOK.com.

We believe colleges and universities are making poor use of the money they currently receive. As the nearby chart demonstrates, dismal graduation rates indicate that colleges are failing to engage and educate a staggering percentage of their students.

With Oklahomans paying high prices on everything from gasoline to groceries, this is no time to be charging more for a college education. If colleges would reduce their administrative overhead costs and require professors to teach more, they could cut tuition rather than raising it.

Dutcher is vice president for policy, and Small is fiscal policy director, at the Oklahoma Council of Public Affairs, a free-market think tank.