Waste in administration is one of the great political props of all times.   How will the Liberals fund those spending increases without raising your taxes?  How will the Conservatives reduce taxes without cutting services?  By getting rid of waste in administration! 

So it is in university politics as well.  Why must students pay so much tuition or taxpayers shell out all that money for operating budgets?  You guessed it: waste in administration.  We didn't hear much about this meme over the past decade, when budgets were rising faster than inflation.  Now that the proverbial crows have come home to roost and competition for funds across campus is becoming fiercer, it's getting another run out. 

Exhibit A for those who wish to fight waste is a piece by W.D. Smith entitled "Where  is all that Money Going?" which appeared in the Maclean's online edition on January 12th and has subsequently been quoted approvingly by all those who think that runaway executive expenditure is the root of all evil.  In this article, Smith uses Statistics Canada data from 1987-8 to 2007-8 look at a number of issues, but his central point with respect to administration is this:  "Shockingly, 20 cents is now spent on central administration for every dollar spent on instruction and non-sponsored research; back in 1987-88, 12 cents went to administration." 

Portrayed this way, administrative costs are up by two-thirds over this period, which would indeed be shocking, if true.  But take a closer look at the data. The problem with any comparison over these two reference years is that it assumes that there has been no change in the definitions or in the base of expenditures covered by the term "general operating budget".  Unfortunately, that's not the case: In 1998-9, there was a very important change in the way Statistics Canada reported institutional financial data.  Prior to that year, "affiliated entities" were not included; after that, they were.  The main effect of this change was to drive down the percentage of total operating expenditures that were classified as "teaching and non-sponsored research" from 61.4% to 58.1%, and increase the percentage classified as administrative expenses from 9.3% to 12.0%.

Do the math.  In the year before the change, the ratio of administrative costs to teaching costs was 15%; afterwards it was 21%.  In other words, the vast majority of Smith's alleged increase in administrative expenditures is the result of a definitional change, not the result of out-of-control, skyrocketing spending. 

If you want to look at like-to-like expenditures, take a look at just the last decade, where there is no break in the data.  Since 1998, the share of overall operating expenditures devoted to teaching has gone from 58.1% to 57%.  The share of operating expenses going to administrative expenses, including external representation - which is now broken out separately in the data but wasn't 10 years ago - has gone from 12% to 12.8%.  

Admittedly, on total operating expenditures of $16-billion, that 0.8% increase is not chump change - it's about $120-million a year across the country.  But it's also clearly not a driving factor in cost inflation, either; $120-million is about what U of T spends on health sciences every year.  Put another way, it's about 2% of the total value of tuition fees paid; if you could magically ratchet back the admin budget down to 1999 levels, the most you could squeeze out of the exercise would be about $100 per student. 

But who is to say that this money isn't actually bringing returns? The most conspicuous increases in institutional administrative spending over the last decade have been in fundraising and other forms of external relations, such as public relations and lobbying.  Maybe that increased spending is part of the reason that overall, total operating expenses across all universities  have increased 72% over the last decade, or about three times the rate of inflation (granted the base has expanded a bit through the addition of a couple of new institutions in British Columbia, but the effects of this are minor).  That's $6.5-billion per year.  And it puts that $120-million figure into some serious perspective.

So where has the bulk of this new money gone?  Well, where it's always gone - to instructional costs, which are almost entirely devoted to instructor salaries.  Partly, this is due to increased hiring to deal with increased student numbers:  total staff numbers have gone from 29,426 in 1999 to 37,710 in 2007 - an increase of 29%.  Those staff, in turn, are paid better than they used to be; salary increases among academic staff have been running at about twice the rate of inflation since 2000-1.  Put these two factors together and you can see why the total academic wage bill (including benefits) has increased by 60% over eight years, from $4.9-billion in 2000-01 to $7.9-billion in 2007-08.

By now, I assume you are getting the picture: administration simply isn't the convenient bugbear many would like it to be.  There are still some convenient targets, of course.  Wages as a fraction of total administrative spending have grown faster than the overall admin budget (and, in fact, account for more than 100% of the increase in administrative expenditures, meaning they have actually cut spending on non-wage items). That's due to three things: growing numbers, a tendency to replace senior administrators with people of similar talents and salary (as opposed to academic positions, where a retiring professor's spot tends to get taken by someone more junior and less well-paid) and, at the very top ranks of Presidents and Vice-Presidents, salary growth that is well above average.

University Presidents' salaries have risen between 50% and 100% over the past decade (the figure varies widely by institution).  Depending on your point of view, that could either mean that they are insufferable greedheads, or they are finally getting paid closer to what they'd be worth in the private sector (though there are still some impressive bargains out there ... how many Canadian companies with a $1.5-billion turnover pay their CEO just $380,000 per year, as U of T does David Naylor?). 

Serious growth?  Sure.  Does it matter a damn?  Well, put it this way: even if there are a few hundred senior administrators out there who are each making some tens of thousands more than they would have if their salaries had increased only in line with professors' pay increases, it would take an extremely generous reading of the data to make the amount "wasted" in this manner to amount to more than $5-million a year across the entire country.    That's less than one-thirtieth of 1 per cent of the entire operational budget. 

Now consider this sobering thought: According to data published under Ontario's Salary Disclosure Act, in 1998 there were about 1,600 university faculty and administrators earning over $100,000.  In 2008, the number was just over 10,000, well over 80% of whom are ordinary teaching staff with no administrative duties.

Like it or not, as budgets start to bite, cost control at institutions has to focus on academic salary mass.  The issue of "skyrocketing" administrative costs is a red herring, pure and simple.