several comments on here about this subject, and i see this issue a lot being on the periphery of mid-size schools. the overhead cost to actual direct educational delivery cost is significantly higher than any other business - and there are several drivers:
- regulation from the feds and states create extra administrative burdens that tend to lead to more administrators. this may not always be needed, but few university leaders are accustomed to running tight businesses, so you get creeping headcount over this crap.
- check the size of audit and compliance at any school and benchmark to industry. it is insane.
- most schools now have large diversity and inclusion staffs with VP's over $200k comp. corporations that have tight budgets will not have this cost.
- overhead in the colleges is frequently redundant to university and nobody has balls to address. so a college of engineering will have redundant staff to provost office and also sometimes university level staff.
- many schools take tuition centrally, as opposed to forcing colleges to run local responsibility budgeting - i.e. make a profit at the college level.
- only a few colleges/programs make money - i.e. business, engineering, some sciences, etc.
- Discounts and scholarships can avg as high as 50%, so this cost hits the tuition line. many high ability kids from good income families pay nearly full cost while low income low ability kids get a ride - part of social justice initiative of schools. not saying whether they should do this but it is factual.
- an efficient school can run about 25-30% overhead to revenue vs industry at around 15%.
- Arizona State tries to run efficient and they beat the higher ed target but not the industry target.
- athletics loss tends to burden the school budget. a few sports can actually run a positive but the entire joint tends to lose. scholies are charged to athletics, and Title IX creates a burden as many losing sports add to this burden. not wanting to get in a fight whether it is just - but this is a fact of life for schools (i.e. the avg MAC, USA, Amer, etc school is creating about a $40M loss to their schools. no idea what the burden to PSU for sports.
- Infrastructure cost is enormous and unfunded deferred maintenance can be a huge hit coming. a mid-size school deferred maint could easily > $1B.
- Check the senior leaders at most schools - typical President $500-$1M comp and a leadership team of 10-15 EVP/SVP/VP all over $250k per year plus benefits. in many state schools there may be a pension. once you hire a VP they will create staff also.