UVa’s Invisible Research Subsidies

David S. Wilkes, dean of the UVa schools of medicine

The Trump administration’s proposed budget cuts to the National Institutes of Health will make it harder to find new cures — and harder to create new jobs, contends David S. Wilkes, dean of the University of Virginia’s School of Medicine. In 2016 UVa received $126 million in NIH funding, accounting for about 60% of its research funding.

NIH backing allowed UVa researchers to discover a link between the brain and immune system, potentially leading to treatments of neurological diseases such as autism and Alzheimer’s. An NIH-supported clinical trial is providing the final tests for a UVa-developed artificial pancreas that can help people with Type 1 diabetes. Meanwhile, scientific research at UVa is stimulating the rise of a job-creating innovation ecosystem in the Charlottesville area. Writing in the Richmond Times-Dispatch op-ed page, Wilkes says:

In 2016, the National Venture Capital Association ranked Charlottesville as the fastest-growing venture capital ecosystem in the U.S., and medical start-ups are [an] important part of that boom.

U.Va. Innovation, which helps bring U.Va. research discoveries to the marketplace, has identified more than 50 active companies advancing U.Va. discoveries. Many of those companies were founded to develop U.Va. medical research breakthroughs.

A study conducted by the research firm Tripp Umbach found that in fiscal year 2015, U.Va. School of Medicine’s research generated an economic impact to Virginia of $425.4 million. That economic impact would be greatly diminished if NIH funding were slashed.

Bacon’s bottom line: One can pick at these numbers, but let us accept them as valid for the moment. Wilkes is making the argument that what’s good for UVa research is good for Virginia economic development. Advocates of investing in life sciences are employing similar logic for life-science initiatives in Northern Virginia, Richmond, Norfolk and Roanoke.

UVa is playing a hyper-competitive industry sector, however, and it starts with big competitive disadvantages as it tries to build a biomedical ecosystem from scratch in a small metropolitan area. According to the 2016 Jones Lang Lasalle study, the Boston, San Francisco, Raleigh-Durham and San Diego metropolitan areas have the nation’s leading life-sciences clusters. None of the top 16 clusters are located in Virginia. The closest geographically is the “Maryland suburbs/D.C. metro.” It takes a lot more than a research university to play in this sandbox. A large labor pool is a necessity for recruiting top scientific and entrepreneurial talent, and UVa’s location in little Charlottesville presents a big handicap.

If UVa were investing only its endowment dollars in competing for NIH grants and other life-science research, that would be UVa’s business and nobody else’s. As long as the money for this initiative comes exclusively from wealthy alumni and philanthropists, and as long as Virginia taxpayers, tuition-paying families, and bill-paying patients of UVa’s medical system are held harmless, no one has grounds for complaint.

Unfortunately, UVa isn’t relying solely upon wealthy donors to fund its ambitions to build a world-class medical research center. UVa has developed mechanisms to extract wealth from others — patients, students, taxpayers — to underwrite its efforts. Because these mechanisms are so opaque, however, no one in Virginia sees them.

Wilkes does mention one of these funding sources, UVa’s controversial, $2.1 billion Strategic Investment Fund, in a positive light. The fund was cobbled together from various pots of money which were generating minimal investment returns. By combining these pools of money and handing them over to the University of Virginia Investment Management Company, the university hopes to generate an estimated $100 million a year in investment revenue. The Board of Visitors has approved using most of this money for institutional advancement, including R&D. But that is a choice. Alternatives include using the money to reduce tuition, bolster financial aid, or build non-research programs. Accordingly, students and parents who pay tuition, and the Commonwealth of Virginia, which pays millions of dollars in state support, have a direct interest in how Strategic Investment Fund proceeds are allocated.

According to the National Science Foundation, a third of UVa’s R&D expenditures are internally generated (classified as “institution funds” in the table to the left). Institution funds amounted to $74.8 million for life sciences and $122.6 million for all R&D in 2015 — before the Strategic Investment Fund existed.

I could not find a definition of “institution funds” on the NSF website, but I expect that it includes monies flowing from one or all of the following: (1) the university’s endowment, which is funded by philanthropy; (2) discretionary academic monies, which are funded through tuition and state support; and/or (3) surplus revenues (profits) from the UVa Medical Center, which is derived from patient revenues. To the extent that UVa research is funded by tuition, tax dollars, and patient revenues to cover buildings, faculty, grad students administrative overheard, and the like, it is fair to say that students, taxpayers, and patients are subsidizing research. The size of that subsidy remains a mystery. I don’t believe UVa (or any other Virginia public university) publishes such a number. It may not even calculate a number.

While R&D-generated economic development might be a good thing for Charlottesville and Virginia from the perspective of creating high-paying research and technology jobs, much of the funding ultimately comes from populations who have no idea what they’re subsidizing. Students are paying higher tuition (and accumulating more debt) and patients are paying more for medical services. The system is so opaque, the accounting so arcane, that no one sees or understands these wealth transfers. Perhaps the economic development is worth the cost of higher tuition and patient fees, but who can say unless we have an open and honest conversation?

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25 responses to “UVa’s Invisible Research Subsidies

  1. One of your best posts.

    • For some reason I was unable to edit the comment after the one immediately below so I will edit it here. Sorry about that.

      I agree with Haner’s and Too Many Taxes comments below.

      When applied to university research operations, their comments give me far more confidence in Virginia Techs plans for future research than I have for UVa.’s plans. Indeed, I believe that UVA ‘s plan is headed for going over the falls.

      Virginia Tech, as best I know, has a long record of research and development success. Those past successes by now have been build deep into Va.Tech’s DNA, giving Va.Tech a whole bunch of critical advantages over UVa. in research.

      These Va. Tech advantages include hard learned skills, experiences and talents that are difficult to learn and gather together in one institution, if only because they range across a vast scale of competencies. This is sort of work to be done right and efficiently, such as knowing how to avoid waste by barking up the wrong tree, not to mention working the wrong forests, requires years and years of painful work, failures and set-backs, that defeat the vast majority of people who try to step into the arena where only the best people and teams survive. So these competencies and talents are rare, hard to find and keep, if only for the grit needed to gain the practical know-how that can be gotten only ON THE JOB, often working with select groups.

      A collorary also rules this business. Hardened Veterans and their success over time keeps aggregating the funds and building layer upon layer of capacity that otherwise would be very costly in the short term. Here we speak to infrastructure and other support relationships of all kinds. All of which are critically important to the institution’s future success. Such talent and infrastructure is particularly hard and expensive to replicate in any crash program at a start up university like UVa. It’s impossible to try doing without exposing the University to great risk of loss. You can’t throw these many and different parts together and hope things work out. They surely will not.

      In short VA. Tech knows very well, and has know for a very long time, how to play what is otherwise a very speculative, demanding and risky Game. In University research, success breeds success and also monopoly. Long time players and winners at this demanding game build nearly unassailable market share. And typically they keep growing it in good times and can keep and maintain what they have in bad times, given their built in advantages over want to be competitors. Plus some of these key built in advantages cannot replicated. The need of unique location being a prime example.

      Thus Everyone else in university research typically scrapes by in the best of times, and then too often collapse in heaps of losses at the bottom of the pole when markets contract. Little more than a slight contraction can send many wantabes over the falls. This is particularly dangerous when an new start up institution is relying on narrow fields of expertise and/or a single funding source, such as Federal government.

      UVa has never made money at Research even in the best to times.

      UVA does NOT know how to play game. It cannot know how to play without many more years of experience.

      Nor can UVA have the capacity, depth, and breath to perform even in good times without undertaking a multitude of risks of loss of all sorts. And, almost surely now, today, most trends show UVA headed most likely backwards, with a short distance to the falls. And doing so a number of fronts simultaneously.

      Nevertheless UVA acts determined to plunge wildly into deeper water. What a deadly combination, its arrogance and its grandiose ambitions, despite being at the very low end of a very steep learning curve, with a business plan that puts much of its greatest risks of losses and failures beyond its control.

      For example, this plan is twisting UVA undergraduate teaching way out of shape, both in terms of talent, priority, and capacity, and subject matter.

      Indeed, it believe it is now clear that UVA also compounds its research risk by trying simultaneously to build the University into an International powerhouse. One that it hopes is capable of attracting hordes of additional International students from all over the world. And, in that effort to achieve the highest ratings it can get in yet another arena, and thus attract attention to itself (its administrators and senior faculty), UVA is now spending tens of millions of dollars on an new International Global Curriculum. One that surely most be staffed by new crew of high priced professors. All of this done on the gamble that Chinese and everyone else rich in the Far East, India, and the oil rich Middle East will rush and flock to C’ville Va. for their World Class Global Education.

      Yes, folks, you couldn’t make this up – Unless you were a post modern deconstructionist social engineer technocrat with a gun ho crew.

      In my view, UVA scheme has its risk profile akin to that of a Ponzi operation. It might have stayed afloat a few years had Hillary won the White House. But now, given that Trump not Clinton won the presidency, I’d be retiring too, heading out the door, and getting out of town quick, instead of trying to hold the Alamo atop Carrs Hill.

    • UVA’s ongoing collapse as a serious institution of undergraduate education is a story of many parts. One that began long ago, but over the past five years, since the Spring of 2012, has been gaining speed to the point of today’s recklessness. Indeed this Journey into the Heart of Darkness was plain to see in all its prime parts by May of 2012. Before we are finished on this website with this subject, we will have explored this Fool’s Errant in detail.

      First however a short trip down memory lane.

      There was much paradox in the Reagan Administration. Deregulation was one. Thus, for example, William J. Bennett, Secretary of Department of Education, convened a panel of some 40 leaders in higher education to try to find ways to arrest the alarming erosion of the teaching of the undergraduate Humanities (particularly as inflected through Western Civilization). By that time (1984), College Administrators and Faculty had plainly lost their nerve and bearings, were abandoning the field to barbarians, to the degree that their entire mission and reason for being of their great institutions of learning and teaching was in great jeopardy.

      We might call this problem that Bennett and his cohorts tried to confront DEREGULATION RUN AMUCK.

      So now this noble band of College leaders sought ways to stop the rampant erosion and active destruction going on in Higher Education. Another words they sought ways to DEREGULATE THEIR PROFESSION AND ITS GRAND TRADITIONS.

      This quest in 1984 that so wisely defined the future we find ourselves in today, and their principled quest that tried to find ways to reverse the ongoing destruction of Western Culture by the very institutions of higher learning that Western Culture had uniquely built and funded to preserve and enhance the humanities and sciences that Western Culture had built over nearly three millennium – was overrun. Today we wander amid the ruins.

      Next, in future comments immediately below, we will elaborate. We’ll discuss how deregulation in the 1980s ignited a cultural collapse throughout much of Corporate America as Higher Education burned, and how Government rejoined the destruction later to fuel the fires ever higher. So as to now we will show how we corrupted the entire nation lock stock and barrel, before we here circle back to UVA in its current status as the Poster Child of the entire debacle.

    • To come upon an accident suddenly. To by surprise confront the last flickers of a young girl’s life draining from her eyes. Or if on her face its an obvious crime, her killing before your eyes, its worse. But if a stranger grievously hurt alongside her is trying to help her, the scene suddenly softens, hope blooms.

      But if instead the scene is crowded with unconcerned strangers walking by the dying girl lying there in the street dying, the scene hardens, and hope fades.

      These sorts of things happens all the time all around us all. And we never see or feel them. Instead we pretend to live on.

      A few weeks ago, I called Jim Bacon on the phone.

      “It’s over,” I said.

      “What?’

      “The Humanities, at the University of Virginia, the humanities, they’d dead.”

      This was after a serious look at the University’s undergraduate curriculum.

      At first, studying the individual courses, gave rise to humor. Each course description was written by the professor or instructor teaching it. How eccentric these “writings” appeared at first impression, reading the first one and then another. How ingenious. How clever the words were strung and scribbled together. Someone trying to show off, gain attention to themselves as individuals waving their hands – look at me, look at me.

      And after reading a few – say five or six – how earnest they appeared. Way too earnest. Then the words morphed into the nonsensical and that grew into nonsense on a grand scale, page after page, these persons’ life work to date, and then whole departments of people’s work grew into impenetrable nonsense.

      Then how angry all this nonsense became, the nonsensical rant of an unruly classroom of angry little children – look at me, look at me, how smart and original, and important I am.

      I wanted to toss whole pages of the contrived curriculum of fake history and fake literary classics aside but instead I forced myself to keep reading. Course description after course description, alleged American History, how particularly angry it was. How profoundly angry. And how conformist.

      Suddenly there on the page what had been eccentric and clever before, original even, as if stand up comedy, suddenly was failed into the dead and leaden conformity of a dead girls eyes or worse. Very ugly in spots, fascist even. And it went on an on. And still I read on, amazed.

      I went through some of the subjects I know and love best – The Greek Classics, American History, and Literature. There was very little left of it.

      At a distance the Greek Classic courses taught at UVa are by and large profoundly useless. They would be irrelevant save for the monstrous fact that UVA students never get the chance to experience the real thing, the thing that is the earth, the wind, and the fire of Western Civilization. The place and time this style of humanity started, what we’re talking about here.

      We talking about those first flickers of caring for others amid the overwhelming stench of blood, guts and shit of sword slaughter on Ilium’s fields. The very birth of human emotion. Where one human being amid the loose bloody guts of rape, pillage, and slaughter of whole peoples, begins to care for another human being, ones that are enemy even. Its how a young child woman war prize is lifted out of a sex slavery by a brute to be his wife. Or how a warrior’s tender touch of his wife and a son amid carnage depth charge the humanity of all three, a family now, moments before the warrior father charges into the inferno to protect his woman and child, leaving both wife and child to a fate more horrible than imaginable. And its how his old and enfeebled father, grandfather of dead grandson and enslave mother, his warrior son, husband, and father, just slaughtered, dragged to death and mutilated – how these helpless and defeated old man marches out into the field of slaughter to lift the conquering brute Achilles out of his berserker rage into the first light of human kindness and civility in war.

      All this is how the humanity of western civilization is born on Ilium’s fields of slaughter however tentative it surely is, and then how its sung out of chaos into whole new worlds over the history of mankind over the ensuing millennium into a precious legact of written word that miraculously has handed down through untold generations over 32oo years to us and our children. Only to find that UVA today in the year of 2017 is squandering the irreplaceable treasure of our children’s legacy, forcing it into little more than a banal video game that the UVA professors call education.

      This is a crime against humanity. And they are not even ashamed.

      This sick destruction UVa. style matches the Buddhas of Bamiyan. Both are crimes against civilizations. One in Afganistan by barbarians. One in Charlottesville, Virginia, by people who claim to be professors of the classics.

      Oddly at the University of Virginia the closer you got to Virginia history, one of the cradles of American History and government of free people, the angrier UVa. professors and instructors become. Here we find rant to match the more ordinary and banal of ideologues, little people who never grew up.

      • Wow, Reed, this is a powerful indictment. I would love to see some specifics of what you found in the course descriptions.

        • I need be out the door in only a few minutes, so much be very short in my answer here but will elaborate on all of this and more with time frees up.

          When we spoke those few weeks ago, the curriculum looked to have surely been drafted by the individual professors teaching the course. And it was a comment made back then by Izzo and/or acbar that caused me to first investigate the curriculum in detail.

          I went back to it only a few days ago, in connection with these series of comment that will continue until we get to bottom of this, but what I most recently found was the the course original descriptions of a month or ago, had been totally scrubbed and been redone in a pablum like generic that often said next to number at all – kind a like a product display in a third rate old Soviet Union Supermarket. And overstatement but not by much given the topic.

          In any case it is clear to me anyway the UVA administrators (in alliance with senior turn-coat Deans most likely) are in firm command of the Faculty and are treating their life’s work and curriculum as they treat students – that is as commodities – ones to be watered down and destroyed in the case of humanities.

          Now as to the Video game, it is hard to find be if your weave your way thought the new website to the Classics you will find under Greek Classics a video type course that purports to locate particular killings on the the battlefield as if a war game, this of course is how life is being drained out of the humanities by technocrat high tech geeks trying to get attention to themselves and down techie generation geeks to new virtual reality games of pure fiction.

          In any case there is much to add to this subject and it will be.

  2. I agree completely. I’ve looked at this and find it all but impossible to tell where institutional funding for research is actually coming from. And institutional funding is huge as your graphic shows and it is also the fastest growing area of research funding.

    If you attend a Virginia public university you know precisely how much you are being charged for athletic fees (about $650 per year per student for UVA). What we have here is potentially an undeclared “Research Subsidy Fee” that is much, much larger than other fees and very few people paying tuition realize it or have any idea how large it is.

    Healthcare and higher education costs have significantly outstripped the overall rate of inflation for about 40 straight years. When you see a consistent phenomenon like that, there is, almost certainly, what economists call a structural problem. In both cases, part of the structural problem, in my view, is the dismal level of information provided to buyers. They don’t know where their money really goes or know enough to determine if they are getting a reasonable price.

    I don’t see any reason why it should be this way. I’ve worked in government and I know there is a need for secrecy in some areas like national security and diplomatic relations. This isn’t one of those areas. We know we have a cost problem and we have to get real about addressing the causes.

  3. Good article Jim.

    Back on July 1, 2013 you wrote another fine article posted here entitled “Sullivan’s Plan Optimizes UVA’s Institutional Self Interest.”

    On April 3, 2013 I wrote the following comment to that article:

    “This Sullivan four year plan will profoundly alter to the mission of the University as follows:

    1/ It will shift the University’s primary mission from teaching to research.

    2/ The primary focus of the University will become STEM research, namely a heavy emphasis on research in Science, Technology, Engineering, and Medicine. Thus UVa will become Virginia Tech’s great competitor in state.

    3/ This shift of University focus will require very major new expenditures in heavy infrastructure projects, including highly complex and sophisticated scientific labs, equipment and buildings, as well as the costs of training and equipping scientists, engineers, researchers and other technocrats most.

    4/ This conversion of the University will be built on the backs of the students through the raising of tuition on all students as the primary funding source for the heavy infrastructure costs of this STEM research.

    5/ The University is betting the farm on theory that it can “win” an ever larger share of dwindling Federal research grants (including defense) so as to capitalize on its massive expenditures paid for out of student tuition.

    6/ To assure funds above tuition increases necessary to carry out its plans, Sullivan proposes the creation of an Strategic Investment Fund that will skim monies and borrowing power off the University’s normal coffers so as to place those fund outside the control of the Board of Visitors and vest the power over the monies in University administrators and faculty. (For details of the Fund see the last comment to Article “More Big Tuition Hikes ahead for UVA posted on this website on March 28, 2013).

    Beyond the tuition hikes, and establishing a fund outside the control of the Board of Visitors but within the control of the Administrators and Faculty, the Sullivan Plan bets UVa. future on the dubious theory that UVA can win and ever larger share of Federal research grants despite the fact that:

    1/ Monies available for Federal grants are in rapid decline, and will remain so for the foreseeable future given the nation’s financial crisis.

    2. UVA’s income from federal grants are also in decline, as are its returns on fixed costs from such research, given the cutbacks in Federal spending.

    3/ UVA to date has been a minor player in the federal grant business.

    4/ The competition for Federal grants, always fierce, will increase, given across the board Federal cutbacks in discretionary spending, particularly for UVA that is putting itself in the position of having to compete with far bigger more experienced players in fields of government funded research.

    4/ The burden of any shortfall will force raises of student tuition and cutbacks in other university programs. This forced cutbacks will be acerbated by the privileged position occupied by the Strategic Investment Fund to be controlled by the School Administrators and faculty. It will diminish the monies available for other needs, thus putting additional pressure on student tuition, and University borrowing generally.”

    HERE WE ARE TODAY MORE THAN FOUR YEARS LATER.

    UVA still refuses to inform the public about how their monies – massive amounts of taxpayer funds and tuition payments and other fees and charges paid by students to attend UVA – are being spent and allocated between the real education of students and alternatively the growing businesses that UVA want to engage in to enrich itself, its senior faculty and senior administrators.

    Nor will UVA tell the citizens of Virginia, the patients at their hospital, or their students or their parents, how much of these massive sums of monies paid by them to UVA are being drained away from the real and daily education of their children at UVA and also how much is being drained away from those remaining teachers who actually teach undergraduate students at UVA or dearly want to teach those undergraduates but find themselves more and more deprived of the tools they need to teach UVA undergraduates.

    This is a scandal. One in plain sight, yet still effectively hidden. UVA thumbs its nose at those paying the bills, and suffering the consequences.

    IZZO’s lead in comments are right on target. We’ll get the answers, one way or another. Hope it happens before the financial collapse, and total ruination of undergraduate education at UVA.

    • I agree with Haner’s and Too Many Taxes comments below.

      When I apply their comments to university research operations, I am far more confident Virginia Techs chances of success than I am of UVa.’s Indeed, it believe UVA ‘s is headed for going over the falls.

      Virginia Tech, as best I know, has a long record of research and development success. One that has build deep into Va.Tech’s DNA a whole bunch of critical advantage over UVa. These great advantages include hard learned experience on a deep, complex, hard to learn and vast scale. This is stuff one learns only after years and years of painful work and failure, and set-backs that defeat the vast majority of people with result that only best survive, and do so rare hard to find grit practical know how gotten ON THE JOB. And in so doing to those hardened Veterans and their success funds and keeps on building layer upon layer of what otherwise would be very costly, if not uncomfortable, infrastructure and other support relationships overtime. All of this, the entire complex package, is critically important to the institution’s future success, and very very hard and expensive to replicate in any crash program like UVa’s. And its impossible without great risk of loss.

      In short VA. Tech knows very well, and has know for a very long time, how to play what is otherwise a very speculative, demanding and risky Game. In University research, success breeds success and also monopoly. Long time players and winners at this demanding game build nearly unassailable market share that they keep growing in good times and can keep and maintain in bad times, given their built in advantages over want to be competitors. Plus some of these key built in advantages cannot replicated. The need of unique location being a prime example.

      Thus Everyone else in university research scraps by in the best of times, then collapse in a heaps of losses at the bottom of the pole when markets contract. Little more than a slight contraction can send many wantabes over the falls.

      UVa has never made money at Research even in the best to times.

      UVA does NOT know how to play game.

      t cannot know how to play without many more years of experience.

      Nor can it have the capacity, depth, and breath to perform even in good times without undertaking great risks of loss of all sorts. And, almost surely now, today, all trends show UVA headed most likely backwards, sliding at a fair pace for the falls. And doing so a number of fronts simultaneously.

      Nevertheless UVA acts determined to plunge wildly into deeper water. What a deadly combination, its arrogance and its grandiose ambitions, despite being at the very low end of a very steep learning curve, with a business plan that puts much of its greatest risks of losses and failures beyond its control.

      For just one example, it believe that it is now clear that UVA also compounds its research risk by trying simultaneously trying to build the University into an International powerhouse capable of attracting hordes of additional International students from all over the world. And, so in that effort to achieve highest ratings in yet another arena, the thus attract attention to itself (its administrators and senior faculty) UVA is spending tens of millions of dollars on an new International Global Curriculum staffed by new crew of high priced professors, all on the gamble that Chinese and everyone else rich in the Far East, India, and the Middle East (the oil merchants) will rush to C’ville Va. for their World Class Global Education.

      Yes, folks, you couldn’t make this up – Unless you were a post modern deconstructionist social engineer technocrat with a gun ho crew.

      In my view, UVA scheme has its risk profile akin to that of a Ponzi operation. It might have stayed afloat a few years had Hillary won the White House. So now, given she didn’t I’d be retiring too, heading out the door, getting out of town quick, instead of trying to hold the Alamo atop Carrs Hill.

  4. The thing that strikes me in that chart, Jim, is how FEW dollars are coming from private companies, who are spending stockholder dollars on R&D and should have a strong motivation to invest in success. Those that do, do it somewhere else obviously. I have always suspected that something about Virginia law or the individual schools’ IP policies was discouraging private sponsors.

    I’ve seen discussion after discussion on the inputs of R&D but very little discussion of the outputs. If the researchers do develop something with valuable practical application, a drug or a device that can be patented, who benefits? How much revenue is being generated by all the R&D? Does any of that revenue benefit those who invested involuntarily? Is any re-invested in new projects?

    Clearly lots of basic research has no commercial value but is still worth doing, but making big bucks has to be part of the motivation some time, and that’s fine. What do the taxpayers get if the pot of gold is found?

  5. Back in the old Bell System days (pre-1984) Bell Labs used to engage in two type of research — basic research and applied research. The former was not tied to any product or service, but only to advance scientific and engineering knowledge. The latter was tied to specific products or services. Product-related research was billed to the Bell System’s manufacturing arm – Western Electric. Applied research related to telecom services was billed to the operating companies (e.g., C&P Telephone Co.) through specific contracts. In theory, an operating company could elect to join a project or not. In practical terms, they didn’t have much of a choice.

    The costs for basic research were billed to the operating companies in the License Agreement – services provided by AT&T to its affiliates based on a percentage of revenues. State PUC staff often opposed recovery of payments for basic research as a rate case expense or argued it was product-related.

    This model might work for public university research. Anything beyond basic research should have a paying sponsor. Basic research could be funded by tuition, tax dollars and grants. The University should get patent rights to anything from basic research, with patent rights from applied research going to the sponsor. Would this work?

  6. Is there actual evidence to support the accusation of using tuition for R&D?

    if you don’t have any real evidence.. how can that accusation be anything other than speculation?

    Bonus Question – is there ANY University in Va or for that matter in the entire country where this info is provided so that you know?

    this issue , when you don’t have real evidence, is a bit silly.

    we’ve gotten to the point in our politics where we determine guilt by asking if you’ve stopped beating your wife… that kind of dynamic…

    • Nobody’s accusing UVa of anything here. We’re asking questions. College finances are a black box. Nobody outside the universities themselves really understand how monies are shuffled around. Inquiring minds want to know.

      It strikes me, Larry, that you’d prefer just to shut the whole conversation down.

  7. No I do NOT prefer to shut the conversation down but this one is more akin to a witch hunt where you folks are NOT “just” asking questions. Go back and read and you’ll find that folks, including you Jim are essentially accusing UVA of using tuition money for R&D and you want it “investigated” – because you SUSPECT IT – not because you know anything… just that you don’t know and you demand to ..know.

    I would AGREE that we need more transparency in the budget but that’s what you should be advocating for.. not “investigatng” what you “suspect” with ..really not a shred of evidence.. it’s more akin to a conspiracy theory than anything with any actual evidence.

  8. Larry,

    I think Jim nailed it in this article. University accounting is, perhaps intentionally, opaque. There are a set of revenues and a set of expenses, and it is difficult to see how they are related in many areas because the names don’t match. In this case, NSF data shows that funding for research comes from “Institutional Funds”. There is no revenue fund (e.g. tuition, state appropriation, endowment income, gifts, patent revenue, patient revenue, etc.) that is named “Institutional Funds”. Jim was asking for more transparency on where this comes from so we can make informed decisions on higher education costs. Your comments distract from that.

    You say there is no evidence tuition ever goes to research. You are dead wrong. One type of research is what is called “Departmental Research” (this could be reduced teaching load given to a salaried professor to do research that is not externally funded). Departmental Research is accounted for as Instruction (i.e. there is no difference between from teaching a class and departmental research) by guidelines from the National Association of College and University Business Officers (NACUBO). So unless you are saying tuition doesn’t pay for instruction, it pays for research at any institution that has Departmental Research.

    Here is how “Instruction” is defined in the National Center for Education Statistics database (IPEDS): “Instruction — A functional expense category that includes expenses of the colleges, schools, departments, and other instructional divisions of the institution and expenses for DEPARTMENTAL RESEARCH and public service that are not separately budgeted.”

    https://surveys.nces.ed.gov/ipeds/VisGlossaryAll.aspx

    Please read this piece that was published in the Chronicle of Higher Education as well. Pay particular attention to the second part: http://socrates.berkeley.edu/~schwrtz/CHE2.pdf

    The NSF research data Jim cited, which lists “Institutionally Funded” sources, is about another type of research. This is about research that has external sponsors. However, external sponsors don’t come close to covering all costs, which is why there is an “Institutionally Funded” component. Like I said earlier, we don’t know what goes into “Institutionally Funded” at any specific institution or in aggregate, since it is not provided. There is strong circumstantial evidence that tuition and state appropriations have to be used at many institutions because, if you look at their possible sources of revenue, THERE ARE NOT ANY SOURCES THAT ARE LARGE ENOUGH TO COVER “INSTITUTIONALLY FUNDED” UNTIL YOU GET TO TUITION AND APPROPRIATIONS. There is another post recently on a project at Virginia Tech where this was spelled out in detail.

  9. Larry,

    You act as if it is completely implausible that any tuition dollars go to research. Here is an abstract from a report from university finance and research professionals. They include the Associate Vice President of Finance, Duke University; the Associate Vice President, Financial Management at the University of Washington; the Vice Provost of Research, Stanford. They are subject matter experts. YOU ARE NOT.

    Here is what these experts say (I added the caps):

    “Sources of revenue for both public and private research universities can be divided into unrestricted and restricted resources. Unrestricted resources can be used at the discretion of the institution for the primary missions of teaching, RESEARCH, public service, or any other activity. The primary unrestricted sources for operations are STATE APPROPRIATIONS (public) AND TUITION (both public and private) . . . The single, limited pool of unrestricted revenue is expended according to the competing needs and priorities of the university.”

    Why would they, the subject matter experts, ever have worded it that way if tuition can’t be used for research? Jim’s question was is this true for UVA and how much? Inquiring minds want to know and we can’t tell from the financial reports.

    http://www.cogr.edu/sites/default/files/COGR_Research_Finances_JUNE_20_FINAL.pdf

  10. This National Council on Government Relations Report explains much. It also details several major factors that lay behind my earlier above comments. Such as the ongoing hardships and risks inherent in all research universities. Why they must deploy with great acumen a large variety of skills and assets across vast landscapes of disciplines and competencies, and do so on a very high level buttressed by a strong, wide and deep infrastructure, if they are to successfully manage ongoing losses and capital infusions needed to survive, not to mention do research that has any chance to adequately return the public monies and other losses that that institution and its students will surely incur.

    In addition, I believe this report helps to explain why there appears to be a growing dislocation of alarming proportions between today’s outlays of research monies and real time practical results that flow from these outlays to benefit the public and society.

    The report also helps to show why it is quite likely that UVA’s research growth plans today will impose unique risks on UVA far beyond the great damage already done to the University’s historic strengths and mission.

    We’d try to elaborate here soon.

  11. Here are key bullet-point paragraphs from page 5 of National Council on Government Relations Report:

    1/ Federal, state, and local grants and contracts are the number one revenue source for both public and private research universities … With the majority of funds in this category from federal sources … federally-funded research plays significant role at public and private research universities.

    2/ Awards from private industry and nonprofit foundations to fund research or other sponsored activities similarly enhance the research enterprise at public and private research universities. Historically, donor gifts played a larger role at private universities. However due to diminishing state appropriations, public research universities increasingly pursue this revenue source to fund current operations, endowments and capital projects.

    3/ Net tuition and fee revenue contribution for public and private research universities is essentially equal. Historically, net tuition and fees have been a primary source of revenue for private universities while being a secondary source of revenue for public universities. This is no longer the case. Net tuition and fees now are a primary source of revenue for public universities as well (see “The Tuition Dilemma for Public Universities” below).”

    Plus the Council’s report also makes clear that “institutions with the largest endowments typically are well-established, research-intensive private universities, and the investment income earned on unrestricted portion of endowment gives flexibility to make more substantial distributions to the institution’s annual operating budget. Thus better-endowed private research universities generally have greater total financial resources available, per student, than their public counterparts. Using such private research universities as a model, some public research universities have increased focus on fundraising to grow their endowments.”

    This includes UVA. But UVa., despite being well endowed financially by Virginia state standards, the University is very poorly endowed by Major American Research University Standards.

    UVA’s financial weakness is compounded by:

    “1. The fact that cutting-edge science requires appropriate infrastructure and other support, and institutions incur such real expenses in facility operations and administrative activities when conducting research on behalf of the federal government and other sponsors.” (See Report)

    2. Research universities today are also compelled to underwrite and pay for an increasingly larger share of both F&E direct and indirect cost of federally sponsored research. According to the National Science Foundation, from 1976 to 2012, the share of R&D costs assumed by colleges and universities has grown faster than any other category. Institutional Funds accounted for 21.6% of all R&D expenditures in 2012 compared to 12.0% in 1976—up +80%. Private Industry experienced a similar growth (+58%) while all other sectors declined, including a big drop in Federal Government category (–12%). Indeed, for first time since 1950s, the federal government contribution dipped below 60%. Despite this decline the federal government remains predominant source of R&D expenditure and the source on which U.S. research enterprise most depends.

    All of these risks and challenges that are inherent in UVA’s federal research today are greatly compounded by the fact that UVa. is a start-up research institution by all measures. It not only has a huge learning curve, it also has HUGE out of pocket up front capital costs to built the infrastructure, personnel and external relationships, that it critically needs just to inter into the game, not to mention complete on the level that its ambitions demand. This are enormous costs and huge risks the University is undertaking.

    This report also helps to explain many things and actions that UVa. has undertaken since the spring of 2012.

    For example, President’s Sullivan’s May 2012 suggestion that UVA’s undergraduate program be very substantially watered down, particularly as to Arts and Sciences. And the follow on watering down of faculty, increasing the schools cohort of adjunct and graduate teaching instructors to constitute perhaps a much as 45% of total faculty today, and a much larger percentage of the University’s teaching faculty, particularly for undergraduates.

    This also explains, and totally undermines as bogus, the recent report likely sponsored by UVA that argue that future EFFICIENT deployment of faculty demands a large increase in numbers driven large classroom courses, and a correspondingly large decrease in smaller classroom liberal arts courses that were “inefficient” according to report because they taught subject matter that was overly reliant of the use of verbal and written words as opposed to numbers and formulas.

    Hence, UVA five years later, since 2012, faces the collapse of its Liberal Arts courses and those who teach them, whether to undergraduates or graduate students.

  12. Reed,

    Good points. I think the way universities look at it is external grants increase the overall size of the enterprise, which is a good thing in their view as it increases prestige, etc. The rub, and the reason this report was written, is that universities are having to pick up more and more of the unreimbursed costs associated with pursuing and receiving external grants (start up, unreimbursed overhead, etc.). They would rather have other sources fund more of it.

    Universities have to fund that gap with internal funds and it has been the fastest growing component of research spending for quite some time.
    This can be done with tuition and state appropriation per the report, which was written by subject matter experts. These fund sources are, after all, unrestricted by definition per the report.

    So the question is how big are institutional funds and what are the actual sources? We know from NSF that about $17B, or nearly 25% of all research funding came through Institutional funds in 2015.

    To connect the dots, the implications are:

    1) Transparency and rising costs. Higher education costs have risen faster than almost any other category and have for an extended period of time. If we can’t be transparent about the components of these increases, we are unlikely to effectively address the issue. So, what are the components of Institutional Funds? This is a legitimate question and is what JIM was writing about.
    2) Student debt. Insofar as Institutional funding may drive up costs and student debt, it is a component of what looks like a bubble that will ultimately have to be borne by taxpayers. This has been a concern of JGWILLEY and others.
    3) Academic impact. Institutional funding of research through tuition would constitute a cross-subsidy from academic uses. With the focus on STEM, the most heavily impacted area is likely humanities and social sciences. This is notable concern of REED.
    4) Restructuring. Post-secondary education in the U.S. was not “designed” for the modern world or the information age. Restructuring it may require investment in new areas, but this is difficult when we are bursting at the seams to contain the cost of the current system. This has been a notable concern of ACBAR, LARRY and others.

    My view is pretty simple. We should be as transparent with Institutional funding for research as we are in Virginia with fees for athletics. If it just remains a black box, we won’t make progress.

  13. Izzo,

    I believe the reports that you have put on the table here under this Jim Bacon Post as well as his earlier and most recent posts (re. Stephen Moret), when considered altogether, are dynamite. That they go a long ways towards exposing the deep underlying causes that infect and disrupt the education of so many of our students in today’s selective colleges and universities.

    It was not so long ago that my major concern was second and third tier colleges and universities. On Jan. 28, 2013, in my article titled The Agenda behind the Attack on UVA’s Accreditation on this website, I commented:”

    “The last time I looked the four year graduation rates of institutions of higher learning within the states under the jurisdiction of SACU were: Florida – 35.6% – Georgia – 24.3% – Kentucky – 20% – Louisiana – 15.8% – Mississippi – 22.4% – North Carolina – 36.5% – Tennessee – 31.9% – Virginia – 45% -West Virginia – 22.2%

    So a failed student does not mean a failed school. Quite the reverse, the current system has been built so that a school can do quite well off failed students. One need only keep them in the system long enough thinking they are getting an education, or are eventually going to get one.

    In some case it appears some institutions simple collect warm bodies, arrange various federal, state, and private grants and loans for them (the latter the students personal debt), then keep them going as long as the school can, giving them inflated grades, until they drop out or sit though enough courses to get a worthless degree. There are even programs where the students go through (but never emerge from) remedial programs to prep them for college courses they’ll never take. Not one.

    In these sorts of “schools, the majority of students typically never graduate. Far too often those who do graduate receive worthless degrees. Its appalling. Check out CompleteCollege.org funded by the Gates Foundation. The statistics are devastating.”

    This highlights to collapse of teaching and educating students at many open enrollment colleges in the United States. (Note also I came to UVa. defense here at this time.)

    My attention, however, shifted dramatically in April of 2013. See my April 3, 2013 comment to UVA’s plan to take monies off the top to fund a massive expansion of science (STEM) research at UVa. copied in above. And my April 15, 2013 article “Sullivan’s Risky Bet on STEM found on this website.

    Since 2013, I have come to be convinced that this research plague long has been a major driving force behind the damage done to the education of students in our major universities.

    And, since the teaching of the Humanities have been so grievously damaged by this mad plunge into research, its useful to highlight some of the wisdom that, had not it been destroyed, might have helped prevent today’s debacle in today’s higher education.

    “No man is an island entire of itself;
    every man is a piece of the continent, a part of the main;
    if a clod be washed away by the sea,
    Europe is the less, as well as if a promontory were,
    as well as any manner of thy friends or of thine own were;
    any man’s death diminishes me, because I am involved in mankind.

    And therefore never send to know for whom
    the bell tolls; it tolls for thee.”
    — John Donne, 1624

    And also that:

    “You are all a lost generation.”
    — Gertrude Stein’s epigram in E. Hemingway’s The Sun Also Rises.

    The quotes are powerful and pertinent here if one believes as I do that this out of control University Research craze is killing the education of students in our selective and elite universities, as well as all else it touches, including the courses themselves, whether in Arts or Sciences, undergrad or graduate.

    Indeed, I suggest that much recent evidence shows that this plague is corrupting the integrity and results of scientific research at our colleges and Universities.

    If this be true, then the costs, damage, and loss are beyond calculation. And such damages extend far the waste of great sums money, but impact many generations of students and kin who collectively today suffer losses comparable in many ways to those inflicted on Gertrude Steins young people who live beyond the 1st World War.

  14. In general, I think funding is flowing out of undergraduate humanities to STEM, research, and graduate education. There is a shift at many schools to let students choose more of their own classes vs a core curriculum approach because it is a sort of recruiting tool. (“You can construct your own major in XXXYYYZZZ. You don’t have to take any classes you don’t want to take.”)

  15. I agree generally, Izzo. But I believe the problem is deeper, more expansive, and more damaging than you suggest. And it is clearly a very big and increasing problem referred to constantly throughout the literature. And like so much in higher education, it is a problem with many moving parts.

    First, there is a systemic bias against teaching and educating students. This deep seated and growing bias is driven by the desire of those in control (the administrators and very senior faculty) to focus ever more of their university’s resources on activities and objectives that promote their private interests, and the related institutions interests, at the cost and expense of students who attend the institution and those paying their bills to attend.

    This problem is described in Changing Higher Education Website as follows:

    “The underlying problem is that higher education has decided to price funded research at less than its actual cost. This research under-pricing arguably leads to a great deal of the upward push on tuition that has occurred over the past decades. Since reputations of universities are linked directly to their research expertise and external research funding – not their education – there is a continuing pressure to do ever-more funded research.

    As colleges and universities seek to move up the reputation ladder, they increase emphasis on funded research. This leads to a need for more internal research spending. This in turn increases the pressure to increase tuition.

    This present relationship between education, research and reputation was set in place in a time when resources were less constrained. Over time, however, this coupling of research, education and reputation with its internal feedback loop has produced an enormously expensive product. Very high expenditures in the name of “education” are required in order to balance the product budget, but perversely the loop leads to de-emphasis of education in favor of research. Unfortunately, these “educational” costs that are loaded with research costs have risen so high that both governments and individuals are finding it extremely difficult to pay them, and are rebelling and demanding to know if the outcome justifies the price. And justifying the price when the outcome actually includes a significant purposely hidden component of faculty research is particularly difficult. At the very least, justification will require some actual studies that relate educational outcomes to a wide variety of variables including research status of faculty – studies we have thus far generally tried to avoid.

    It may be time to come clean, and publicly acknowledge that the costs of doing funded research are much higher than the price payed by the sponsors. Parents, students, and governments deserve to know that educational dollars are being spent on effective education, and that faculty are being rewarded primarily for the quality of learning that goes on in their classes. A wide ranging discussion of research funding, how large it should be and how it is allocated must be part of that process. In several countries, such discussions have led to decisions to funnel research funding to a smaller number of institutions in order to maximize research impact. Methods of determining educational effectiveness must be developed, so that reputations of most colleges and universities can be based on student learning rather than faculty research.

    What we have is an enormously successful system of colleges and universities that has feedback mechanisms that lead in many institutions to ever increasing costs and ever sharper focus on high quality research at the expense of other parts of the mission. Eventually such a system will run out of resources and will not meet societal expectations based on its entire mission. One can argue that we have reached that point in many parts of our system of higher education.”

    Please see:

    changinghighereducation.com/2016/08/the-high-cost-of-funded-research.

    Highly informative, its written by Lloyd Armstrong, University Professor Emeritus and Provost Emeritus at the University of Southern California. He held appointments in the USC Rossier School of Education and the USC College of Letters, Arts and Sciences. He was Provost and Senior Vice President for Academic Affairs of USC from August, 1993 to June, 2005. He chaired drafting of the USC’s Strategic Plan (1994) and its 1998 update.

    Armstrong received a B.S in physics from MIT in 1962, and Ph.D. in physics from the University of California at Berkeley in 1966. He was a post-doctoral fellow at the Lawrence Berkeley Laboratory (1966-67) then spent two years as a Senior Physicist at the Westinghouse Research Center in Pittsburgh before going to Johns Hopkins. At Johns Hopkins in 1969 he rose to rank of professor in 1975, chaired its department of physics and astronomy from 1984-1987, and dean of its school of arts and sciences (1987 to 1993). Between 1981-1983, on leave from Hopkins, he served as in the dual roles of Program Officer for Atomic, Molecular, and Plasma Physics and Program Officer for Theoretical Physics at the National Science Foundation. And served on NSF Advisory Committee for Physics (1985-88), and as a member of the Committee of Visitors of the Physics Division of the NSF (1991).

    More to Follow Here.

  16. Reed,

    I agree with you. I was just simplifying where the cross-subsidies are flowing.

    I’ve read the Lloyd Armstrong articles and I think I’ve linked to them here earlier. He knows what goes on because he was a Provost at USC, but note how difficult the black box accounting makes it even for him.

    What I find troubling is how difficult it is for us to have this conversation in the U.S. or even on this blog in a forthright way. In contrast, look at this article about how this same issue was discussed in Australia. It was discussed in the legislature, it indicates that “the university sector has long acknowledged that a portion of teaching funds is used to “cross subsidise” research”.

    https://www.theguardian.com/australia-news/2015/mar/14/university-fees-research-rather-than-teaching-could-soak-up-extra-funds

    In the U.S., if you take a look at the website of the University of Michigan, which may do the most cross-subsidization in total ($500+M in institutional funds a year for research alone and this would exclude what Armstrong calls Departmental Research), you will find that they have a statement about what tuition does NOT pay for. It notably excludes research, but they will also not say explicitly where tuition goes (likely because they don’t have to):

    Q. What does tuition money NOT pay for?

    A. Tuition dollars are not used to pay for these areas:

    Intercollegiate athletics.
    Student housing.
    U-M Health System.
    Student Publications.
    Most construction projects.
    These are all self-funded areas of the university that generate their own funding and pay their own way. No tuition or tax dollars are used in these areas.

    I note Michigan in part because Teresa Sullivan came from Michigan.

  17. Yes, Izzo. Thank you again for bringing Armstrong’s work, and much else, to our attention. As I said earlier, it’s “dynamite.” With it, we reach bottom.

    Now we can work in the dark basement where much of the diseases that infect the body of higher education today are bred. I suspect that most all of today’s dysfunctions in Higher Education ultimately find their tap root deep in this basement. That Armstrong’s work and the work of other’s like him will now greatly help us to explain why the spiraling costs of today’s Higher Education fuel the collapse of the education of the great majority of today’s college and university students.

    The work in this basement will explain much. And requires its solution.

  18. Reed and Jim (and others), you might want to read this book if you have time. I haven’t finished it, but it appears very relevant to what we sometimes discuss here:

    The Great Mistake: How We Wrecked Public Universities and How We Can Fix Them

    It is on Amazon, Google, etc.

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