Junjie Guo, Kim Ruhl and Ananth Seshadri
Executive Summary:
- In our first five papers on the economics of UW-Madison, we have shown:
- There is a significant benefit to graduating from UW-Madison, and this benefit varies considerably across majors.
- UW-Madison has been falling in graduate, research, and international rankings. This is not due to lack of state support since there is little evidence to suggest that the Wisconsin taxpayer is stingy.
- State appropriations to UW-Madison, as a fraction of its overall budget, are slightly lower than its peers. UW-Madison is not as effective as it can be in magnifying the impact of state appropriations.
- This report explores the internal and external constraints faced by UW-Madison and the reasons these constraints exist.
- Internal constraints: UW-Madison has an archaic budget model that does not reward economic activity or innovation. The more efficient add-on, activities-based model affects only a small fraction of the overall enterprise.
- External constraints: UW-Madison faces significant price and capital controls.
- Following Reservegate, in-state tuition has been below peer institutions.
- UW-Madison is the only major university that does not issue its own debt for construction projects. It also lacks project management flexibility enjoyed by peer institutions.
- We identify governance both within the institution and across institutions as one explanation for the persistent inefficiency.
- UW-Madison has strong form of governance which makes change difficult.
- UW-Madison shares a governing board with 12 other distinctly different universities. This leads to a potential conflict between the actions of the board and the best interests of UW-Madison.
- Relaxing these constraints would unshackle UW-Madison and help it realize its full potential.
This is the sixth, and final, paper in our series on the economics of UW-Madison. In previous papers, we show there is a significant return to a bachelor’s degree from UWMadison, with an expected return that varies substantially across majors. We show that UW-Madison’s graduate, research, and global rankings have declined over the past few decades. We provide evidence that administrative spending per full-time equivalent (FTE) undergraduate at UW-Madison is near the median of its peers, while the ratio of non-instructional to instructional staff at UW-Madison is higher than the median of its peers. We show that the Wisconsin taxpayer is not stingy in funding either higher education, in general, or UW-Madison, in particular. In fact, state appropriations per FTE undergraduate are higher for UW-Madison than the median of its peers, and, as a share of university revenue, state appropriations for UW-Madison are similar to the median of its peers.
UW-Madison is doing well: It is providing a valuable product to its students and value to its community. How can it do even better? This paper delves into some internal and external constraints faced by UW-Madison. UW-Madison’s budget model is archaic and does not reflect workforce needs and student demand. Its in-state tuition is lower than most of its peers and it is the only major institution without either bonding authority or project management flexibilities. Why is this? One issue is that UW-Madison has a strong form of governance that makes change difficult. It also shares a governing board with 12 other distinctly different universities, causing a potential conflict between UW-Madison and its governing board. Relaxing these constraints could help UW-Madison realize its full potential.