Commentaries
The Federal Leviathan Is Crushing Colleges and Universities

By Jenna A. Robinson and Jesse Saffron

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March 07, 2016

Public and private universities in the United States are regulated to the nth degree.

Federal, state, and local higher education laws seem to multiply by the hour. Bureaucrats now dictate campus policies regarding academics, sexual assault, athletics, dining, technology, employment, campus construction, and student health, among other areas. Meanwhile, schools devote millions of dollars and valuable resources to comply with those rules—many of which confuse and do little to improve student outcomes. 

Fortunately, college and political leaders are beginning to fight against those costly government intrusions. Last year, for example, the Task Force on Federal Regulation of Higher Education—formed in 2013 at the behest of a bipartisan group of U.S. senators and comprised of top university officials from around the country—released a stunning indictment of what it called the “jungle of red tape” produced by the Education Department. The report cited analysis from George Mason’s Mercatus Center that showed federal higher education mandates increased by 56 percent from 1997-2012.

Today, the situation is bleak: There are thousands of pages of federal regulations, and the Education Department has to release “guidance” letters to clarify vague rules once per day, on average, according to the Task Force.

Case studies from individual schools reveal just how burdensome compliance can be. One example comes from Vanderbilt University, which recently analyzed its federal compliance costs and found that they accounted for $150 million—or 11 percent—of the university’s 2013 expenditures. (Vanderbilt announced that for each student, those compliance costs “equate to approximately $11,000 in additional tuition per year.”)

As the Vanderbilt example suggests, universities navigating this regulatory labyrinth have seen steep rises in administrative costs. For instance, a report produced by the American Action Forum (also cited by the Task Force) found that schools spend millions of labor hours each year to comply with regulations. And in the last decade, the number of administrators with “compliance officer” in their titles increased by 33 percent. 

North Carolina’s universities are not immune to such problems.

“[The] expansion of regulatory and legal oversight of higher education in recent decades has necessitated the development of administrative structures and staffing within colleges and universities that are focused almost solely on institutional compliance,” said UNC system vice president for legal affairs Thomas C. Shanahan in 2013. Shanahan had been called to testify about the high costs of compliance before a subcommittee of the House Education and the Workforce Committee. (In his remarks, he also cited a 2010 study by Stephen S. Dunham, current vice president and general counsel at Penn State, showing that higher education is one of the most regulated industries in the country.)

The “administrative structures” identified by Shanahan come with hefty price tags. As the Pope Center reported last fall, UNC administrative pay is extremely generous, with many campus bureaucrats earning six-figure salaries. In addition, UNC system schools must comply with at least six layers of regulations and rules, including federal, state, and local laws, UNC Board of Governors policies, SACS accreditation rules, and NCAA policies. They also must respond to demands by the agencies that enforce federal and state laws.

Federal compliance is especially onerous and likely causes the greatest stress, for if universities fail to satisfy federal regulators, they and their students can become ineligible for Education Department funding. A study of 13 colleges and universities published in October by the Boston Consulting Group found that federal compliance amounts to between 3 and 11 percent of yearly expenditures (6.4 percent was the median). The study estimated that schools report to approximately 18 different federal agencies and comply with about 30 different areas of regulation and more than 200 federal laws and guidelines. 

Although three UNC institutions were included in the research, specific data for the schools—UNC-Chapel Hill, UNC Charlotte, and NC Central—were not released. But if the UNC system spends the median 6.4 percent of operating expenditures on compliance, then the expense is more than $500 million per year, or about $2,500 per student.

North Carolina officials have begun to speak out against higher education’s bureaucratic machine. Former UNC President Tom Ross and NC A&T State University Chancellor Harold Martin, for instance, both served on the aforementioned U.S. Senate task force on federal higher education regulations, which was led in part by North Carolina Senator Richard Burr. As a member of the Senate Education Committee in 2013, Burr decried the “tidal wave” of federal regulations that he said were “stifling innovation and worse, raising college tuition price tags as schools pass on...compliance costs to students.”

The task force made several solid recommendations aimed at easing the regulatory burden and curtailing Education Department excesses. Some are intended to improve the process to adjudicate campus crime and to streamline state authorization of distance education programs, while others are meant to make the verification process for student financial aid more efficient. Some of the factors that contribute to the rising costs, however, were not addressed in the report, such as the Sarbanes-Oxley law (which has increased colleges’ internal audit costs) and recent changes to Title IX (those changes require schools to concentrate more resources on sexual assault issues).

While the report’s recommendations are a good start, more is needed to ensure that higher education is neither over-regulated nor prohibitively costly. Leaders in North Carolina and around the country need to unite in their battle against regulatory overreach. Interestingly, new UNC system president Margaret Spellings, former Education Department secretary, could emerge as a key leader in that battle. The famous Spellings Commission that she oversaw took aim at costly regulations. And more recently, she has made clear her belief that public higher education in North Carolina should be provided at the lowest possible cost to taxpayers—a goal that is jeopardized when bureaucrats from afar dictate universities' activities.

 


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