A substantial opportunity for cost saving in higher education is in cutting unnecessary or tangential programs. While academic programs provide many benefits in addition to attracting tuition-paying students, nearly all operate at a loss and require additional subsidization. In an ideal world, a university would be able to offer programs in every conceivable field, and there would be no limit to the number of available beneficial programs. However, scarcity is the brutal reality, and it forces decision-makers to weigh the costs of providing programs as well as their benefits. Simply put, tradeoffs have to be made.
Universities can cut program costs in two different fashions: across the board or selectively. An across-the-board cut entails a series of small (generally a percentage budget reduction) cuts to many individual programs while leaving existing programs intact. Selective cuts, also referred to as vertical or strategic cuts, are targeted and seek to save money by eliminating entire programs. Both approaches have their advantages and disadvantages. Across-the-board cuts allow a school to retain a higher number of offerings and can be easier to implement. Instead of eliminating functions, the goal is to have each program fulfill its role more efficiently. Economic theory helps explain this as focusing on reducing variable costs while leaving fixed costs largely unchanged. Strategic cuts have the advantage of generally affecting a smaller portion of the university and allowing for the transfer of resources to more productive programs. Rather than reducing the quality of several areas, strategic cuts eliminate poorer-performing programs and shift resources to areas where more beneficial use can be made of them.
Depending on the specific situation that a university finds itself in, one of these approaches may be preferable to the other. Yet, Peter Eckel argues that in the long run, “Eventually the belt can be tightened no more. The continued changes in the environment may eventually force institutions to make strategic decisions and terminate academic programs and restructure core academic functions.” This necessity suggests that long-term budgetary problems, such as those facing universities presently, will force them to take more drastic action through strategic cuts. While times of recession are especially ripe for program reform, it should be noted that reducing costs is often warranted even in the absence of a budget crisis. Although strategic cuts may be more difficult to implement, in general they are the superior because the cuts occur in the least productive programs instead of cutting back on productive and unproductive programs alike. Some programs can be of poor quality, duplicative or irrelevant; thus the regular review and elimination of programs can increase efficiency and lower costs.
Here, we will focus exclusively on strategic cuts made at the institutional level. Strategic cuts are targeted at eliminating individual programs. As such, the decisions leading to a strategic cut strongly depend on the specific circumstances at an institution. Prescribing “one size fits-all” solutions would be inappropriate. Instead, we will outline three important criteria to be used when considering programs for elimination. We will proceed by presenting two different case studies where schools recently implemented, or attempted to implement, strategic cuts. These cases will provide a contextual background to each situation so we can explore and evaluate the decision making and implementation processes that brought about reform.
Criteria for Making Appropriate Strategic Cuts
Strategic cuts are difficult to make, as they often affect a wide range of people and their livelihoods. However, higher education resources are precious and, as Tim Mann says, “If analysis suggests that a program is not financially viable, is without a market and is not mission critical, consider how those instructional, program and physical space resources could be retasked to address emerging needs or other mission-specific needs of the institution.”
Decisions to make strategic cuts develop within specific realities that vary by campus; therefore, different criteria should be used in evaluating which programs are the best candidates for elimination. Answers to the following three questions are vital when strategic cuts are being considered:
1. Is the program critical to the institution’s mission?
2. Is there sufficient student demand and faculty interest?
3. Is the program financially viable?
Strategic missions are specific to individual institutions. There are many programs that could possibly provide benefits to the university and in some way fit its strategic mission. Yet in a world of constrained resources, those programs that adhere most closely to the strategic mission should be given preference. The programs that only marginally contribute to the school’s mission should be considered strongly for elimination when financial pressures make cuts unavoidable.
Colleges and universities should be concerned with meeting student demands. Programs that students do not particularly care for, as demonstrated by low enrollments, should be strong candidates for elimination. It should be noted, however, that suggesting that programs should meet student demand does not mean complete authority should be given to students to determine things such as degree or general education requirements. Indeed, students often lack the information about the necessary coursework for different fields, and a certain amount of general education is important to developing critical thinking skills. These guidelines can be maintained while still focusing on satisfying student demand. Faculty interest should be a major consideration as well. Programs that lack the support of current faculty and require significant new hiring to staff them should be among the first to be eliminated.
It is possible that while a program may align closely with the school’s mission and attract strong student demand and faculty interest, it may fail to pass the third criterion: financial viability. Costs should be considered carefully, with programs being evaluated using a cost-benefit analysis. Some programs may have an unusual source of revenue generation or may save money for other parts of the university. Attributes such as these should be considered and weighed against budget provisions and other costs (such as opportunity costs of resources) when deciding whether to offer the program. Programs with greater benefits than costs should be protected most strongly from strategic cuts.
These three criteria are not an exhaustive list of everything to be considered, but do cover the three most important questions when determining where to make strategic cuts. Furthermore, a program does not have to fail all three to be cut while a program failing one criterion but passing the others may be legitimately saved from a cut. It is up to individual institutions to make these tough calls through their own decision-making processes. Yet these criteria are important considerations and it is crucial that someone is asking these important questions.
Challenges to Making Strategic Cuts
Making strategic cuts can be an arduous proposition for the leaders of an institution. Although limited resources often make cuts a necessity, several realities of the academy make them difficult to implement. As Peter Eckel notes, “the academy is highly participative and grounded in a history of collegiality, shared governance, and professional prerogative.” Modern American universities are often thought of as largely democratic institutions in which various stakeholders, including boards of trustees, administrators, faculty, staff, and students, all share decision-making power. Because each group has different factors influencing their priorities, preferences often conflict, making shared governance rather strained.
Strategic cuts are particularly difficult because they “have the potential to threaten institutions’ core values and alter institutional identities.” While across-the-board cuts simply trim lessvalued dimensions from existing programs, strategic cuts by definition eliminate entire functions. People often attach strong emotions to certain aspects that they believe define their university. For example, cutting football at Ohio State University or engineering at the Massachusetts Institute of Technology would likely elicit a strong outcry because of the centrality of each to their respective university’s identity.
Furthermore, those most intimately involved in programs put on the chopping block are likely to resist proposed cuts tenaciously. Although the overall university may place low value on a program, the faculty and students affiliated with it will certainly disagree. Stakeholder groups never want to be eliminated themselves, and they often lead campaigns opposing a proposed cut. Because faculty and students comprise the bulk of any university, these campaigns can be quite influential. Additionally, both groups are often successful at rousing support for their cause beyond even the immediately impacted individuals. For example, when the history department is cut, history professors and students are likely to be joined in their protests by professors and students from other departments. Both groups often feel obliged to defend their solidarity, knowing that future decisions could impact them next time. Whether the tools used to resist administrative decisions are the threat of unionization, political blocking of other decisions, rallies, or national media outcries, all create controversy. Robert Martin points out that “…administrators and trustees tend to avoid controversies because of their impact on reputation.” When reputation is negatively impacted, things like student enrollments and alumni donations decrease.
Compounding all of these issues is the fact that cuts of this type usually face a backdrop of anxiety and uncertainty because they are almost always accompanied by times of budget difficulty. In addition, administrators are generally better trained at adding new programs than subtracting underperforming ones. The combination of all these factors makes strategic cuts difficult to implement. Yet they can be achieved, and in many cases they are the most effective way to reduce costs. The following case studies examine two instances of strategic cuts and attempt to shed light on the processes by which they came about.
Case Study 7.1: Washington State University Eliminates Theater and Dance, German and Rural Sociology
In the early months of 2009, Washington State University found itself facing an astounding budget deficit of more than $100 million after a 21 percent reduction in state appropriations.184 An approved 28 percent tuition increase and additional $16 million from one-time federal stimulus money brought the gap to $54.2 million—or about 10 percent of the school’s entire budget.185 Clearly, something dramatic needed to be done.
Having already cut 359 jobs (leaving 167 vacancies unfilled and eliminating 192 existing positions), the university implemented strategic cuts, as opposed to across-the-board, in order to prioritize and “preserve the strongest programs.” Washington State opted to eliminate the Department of Community and Rural Sociology, the German major, and the Department of Theater and Dance for an estimated savings of $3.6 million over the next two years.
The Department of Community and Rural Sociology will be phased out beginning in 2010. This decision was reached because the department did not enroll any undergraduate students and generated little external money for research. German will be eliminated as a major in 2011 after allowing currently-enrolled students to complete their degrees. The major granted degrees to only four students in 2008, and university leaders such as Provost Warwick Bayly asserted that by cutting German, the school could offer new majors in Pacific Rim languages.
The Department of Theater and Dance will also be phased out in 2011. The administration claimed that faculty in this department had little time for research and “lacked visibility and impact.” The university president also justified the cut because the school did not have the resources to bring the department to a level comparable to peer institutions.191 Essentially, in the case of this program, the university administration deemed that they valued the Department of Theater and Dance less than the resources that would be required to make it competitive and fit with institutional priorities. Washington State’s program in Sport Management was initially planned for elimination, but survived the cuts. Administrators said that it was saved because the program provides athletic-training services to the school’s sports programs. Data on the number of sport management graduates also show a growing demand for the major, as it produced 45 graduates in 2007 and 63 in 2008. Unlike the other three departments, Sport Management was saved largely because it was utilized by a greater number of students and provided cost-saving value to other dimensions of the university. While it is difficult to determine for certain the appropriateness of sparing Sport Management, making student demand for the major a leading criterion in the decision is commendable.
The key players in all these decisions were President Elson Floyd, Provost Warwick Bayly, and the university’s budget committee. As would be expected, the strategic cuts engendered some backlash from the university community. Following the initial announcement of the proposed cuts in May of 2009, students led a silent protest march across campus ending at President Floyd’s office, and some complained about a lack of transparency in the decision-making process. It was revealed that administrators did attempt to seek input, holding “more than a dozen public meetings to gather comments after releasing their initial budget cut proposals in early May.” Furthermore, in the past year President Floyd has given back $100,000 of his $725,000 salary, and top university administrators agreed to cut their salaries by 5 percent, saving $330,000.
The cuts made by Washington State adhere closely to the criteria set forth earlier. The university’s strategic mission focuses largely on transforming the institution into the nation’s leading land-grant institution through nationally and internationally prominent programs. This focus places a considerable emphasis on research and graduate education. None of the three eliminated programs strongly fit this mission. Additionally, the school hopes that eliminating the German major will free up resources to offer Pacific Rim languages, which are of growing international importance.
Secondly, each of these programs had low student demand and faculty interest. Only four degrees were awarded by the German major in 2008 while the Department of Rural Sociology had zero undergraduates in the program. Rural sociology also brought in little money for support of faculty in their research endeavors. Sport Management was considered for elimination but ultimately preserved. This decision was at least partially made because the program has significant (and growing) student demand, with around 50 graduates per year. Another factor that contributed in sparing the Sport Management program was that it provides free athletic training services to other sport dimensions of the school, a service which otherwise would have been paid to an outside contractor.
Finally, these cuts will save the university an estimated $3.6 million over the next two years.200 This proposal still leaves a considerable budget hole to be covered, but is a decent start. Eleven tenure-track faculty positions will be eliminated and other savings will be realized from reducing administrative expenses to fill the gap. Overall, the strategic cuts made by Washington State, although difficult, did cut costs while minimizing the negative impact on the school’s students, faculty, and institutional mission.
Case Study 7.2: The University of Southern Mississippi considers cutting its Economics Department
In the summer of 2009, the University of Southern Mississippi made headlines in the higher education community when it announced that it would be cutting the economics department as part of a proposal to eliminate $11 to $12 million from their 2011 budget, including $7.5 million from academics. According to the university’s press release, the harsh realities of decreasing state support and rising costs in general left administrators no choice but to make significant cuts in particular areas. The largest cut of all (totaling nearly $1 million) was the discontinuance of the three degree-granting undergraduate economics programs because, according to the university budget document, there were only five graduates per year “between all three programs.” Naturally, the faculty in the targeted economics department was perturbed by this news.
They raised two issues. The first was that they had essentially been barred from the process leading up to the decision, and that therefore not all the relevant information was considered. The second issue raised was the argument that if the cut were to be implemented, the damage to the university as a whole would be significant because the university would be, in the words of one professor, “alone as a major university without an economics faculty.” According to his argument, knowledge of economics is critical if students are to receive a well-rounded education; if the department was eliminated, top educators in this field would not come to USM and students’ education would suffer as a result. This detrimental impact on students would be particularly relevant for business students who rely on economics for the theoretical basis of their business studies. Additionally, according to the same professor, the university as a whole benefits from the economics department because the economics faculty have “excellent teaching performance credentials and have been very supportive and active in service.”
Furthermore, although university administrators highlighted low student demand as a key factor leading to the decision to terminate the department, some faculty contended that the administrators had actually not fully accounted for student demand. For instance, although fewer than 5 students graduated from the economics department per year, many students from other majors take economics courses during their academic career. In fact, one USM professor was quoted as saying that the teaching load for economics faculty is one of the highest at USM. Using overall enrollments in economics courses instead of enrollments in economics degree programs, then, indicates a high student demand for economics. By this measure, the department should not be cut.
The objections that USM faculty raised are critical to analyzing whether the targeted cut of the program was, in fact, a good decision. The objections discussed above address two of the criteria we mentioned earlier: whether the economics department is essential to the education mission of USM and whether student and faculty demands are high for that department. As we noted before, just because any one of the three criteria indicate a cut is justifiable does not necessarily mean that a cut should be made. This particular case study is a perfect illustration of this point.
Based on the issues raised by the faculty, the university revisited its decision to terminate the department; the final decision was that USM would retain the department. Even though the university could have indeed saved a significant amount of money by terminating the department, it was determined during the re-evaluation process that student demand was sufficiently high to retain the department and that doing so was also critical to the institution’s mission.
There are several lessons which can be gleaned from this case study which would be applicable to schools contemplating strategic cuts in the future. First, it is crucial that a proper measure of student demand be used. In the case of USM, it was not sufficient to show that there was low enrollment in the economics programs; rather, a more appropriate metric was enrollment in economics classes precisely because of economics’ fundamental role in both a liberal arts education and in many specific disciplines (including business). Second, it is also important to correctly identify what disciplines are truly part of a well-rounded education. Many would say that economics is one of these disciplines. Finally, whenever department-wide cuts are in view, affected faculty should be a part of the decision process early on, not merely brought in only after decisions are announced. In the case of USM, a failure to consult faculty caused the national spotlight to fall unfavorably on the school.
Strategic cuts can be a useful way to trim a university’s budget. While they are often more difficult to implement than across-the-board percentage cuts, strategic cuts are advantageous in allowing the university to focus its resources in the most highly beneficial programs rather than chipping away at all dimensions equally. Inevitably, some programs are more important to the overall university than others. However, it can be difficult for university administrators to determine which ones are the most valuable.
Three major criteria should help guide this decision. First, programs which are critical to a university’s stated mission warrant support. For example, if a school prides itself largely as a humanities-based institution, one would expect it to have a strongly supported philosophy department. Second, demand from both students and faculty should play a role in determining how much the university community itself values a given program. Programs that consistently enroll few students and have little interest from faculty may be less necessary than others. Finally, financial viability is important. Regardless of the benefits a program generates, it may require such great financial resources that the heavy burden it places on the university does not justify its continued support.
A thorough review of all programs is prudent to determine where precious resources can be put to best use. During the current difficult budgetary climate, universities across the country have considered strategic cuts as one method of meeting budget gaps. Washington State University is one example where strategic cuts were made successfully. Southern Mississippi is an example where the university considered a strategic cut, but eventually decided against it. Both highlight many of the challenges and issues that confront university administrators when considering strategic cuts. Strategic cuts are difficult, but overall, when considered carefully and implemented well, they can be a promising method of helping to reduce costs in higher education.