We read that a conservative Texas faith tank has convinced the Texas Legislature to force universities to release a “profit-and-loss” statement for every professor:
A 265-page spreadsheet, released last month by the chancellor of the Texas A&M University system, amounted to a profit-and-loss statement for each faculty member, weighing annual salary against students taught, tuition generated, and research grants obtained.
Ms. Johnson came out very much in the black; in the period analyzed–fiscal year 2009–she netted the public university $279,617. Some of her colleagues weren’t nearly so profitable. Newly hired assistant professor Charles Criscione, for instance, spent much of the year setting up a lab to research parasite genetics and ended up $45,305 in the red.
James Kwak is absolutely right to call this “just about the most idiotic way of doing it that I could imagine.” And Daniel Hamermesh is absolutely right in pointing out that this system will have all sorts of unintended consequences, as many faculty activities don’t increase revenue, but are essential parts of education, outreach, and scholarship.
But I want to draw your attention to this chart from the WSJ article because it reinforces what I’ve been saying for a long time about overheads (indirect costs and fringe benefits) on scientific research grants:
We’ll leave aside the puzzling poor performance of some of the science departments. And like I said, this is a stupid way to determine the effectiveness of a university–only ‘free market’ conservatives could come up with something this stupid. But it does highlight an important fiscal reality: research–and the overheads generated by grants–play a critical role in the financial health of many colleges and universities, not just the major research institutions (although there, it can be humongous). Like it or not, the numbers do have to add up.
I’ve described overheads before, but the short version is that if I receive a grant for a million dollars to do the work (“direct costs”)–salaries, equipment, supplies, travel, and so on–typically, universities will be granted an additional thirty to forty percent of that total to pay for costs incurred to the university (maintenance of buildings, administration, benefits for grant-funded employees, etc.). While the exact extra amount will depend on the institution and what’s requested in the grant, this is a reasonable rule of thumb. The actual overhead costs usually don’t run to that much, so part of the ‘overhead’ is actually profit for universities, in that those surplus funds can subsidize other activities.
For many faculty, this brutal accounting-based perspective is nothing new, but I think most people outside of academia don’t realize just how important grant funding is financially. Having said that, to make this the organizing principle for an institution dedicated to education, service (it’s an ag school, they do a lot of outreach), and scholarship is very stupid, and precisely what I would expect from a conservative faith tank.
But, hopefully, this exercise should make those who perpetually claim that professors should ‘do less research and more teaching’, ‘more outreach’, or an elimination of massive 300 student classes realize that, if they want these things, then they will have to pay for them.
An aside: Texas A&M appears to have removed the report from their website (pdf).