In another linked document entitled “Critique of 2.28,” the authors demonstrate very clearly that “…academic programs in the College of Arts and Sciences operate in the black.  Cutting these programs will cost The University money in the coming years.”  They accomplish this goal by correctly calculating and comparing “the revenue-to-cost ratio data from the College of Arts and Sciences to the ratio for other colleges for which data has been provided” and to the overall university ratio of 2.28. 

That ratio was calculated by the Administration as follows:
For the 04-05 Fiscal Year the total salaries of all instructional personnel (not including benefits) was $26.85 million. The actual net revenue of tuition and fees was $61.21 million. The ratio of net tuition revenue to instructional salaries is 61.21/26.85 = 2.28.  

This other critique was created in response to the reasoning put forward in the Administration’s document entitled, “Background Information on the Programs that have been proposed to be ended, Loyola University New Orleans, May 2006.”  Our position is that the 2.28 average overall university ratio of net tuition revenue to faculty salaries, as defined by the Administration, shouldn't be used as a criterion to eliminate individual academic programs below the college level even if this ratio is calculated correctly for each department or program.

First we should note that this ratio shows that, overall for the university, academic programs bring in more than double the amount of revenue that is needed to cover the cost of faculty salaries.  The ratio would only have to be 1.00 in order to just cover the salaries of the faculty who do the teaching.  For full-time faculty, it would only have to be 1.28 to cover salaries plus benefits.  So, contrary to a statement made in one of Fr. Wildes’s letters, Academic Affairs, particularly academic programs provided by the faculty, is probably not where we should be looking to cut costs since this “side” of the university, as administrators call it, generates revenue very well.  Another way to say the same thing is to state that the faculty at LUNO is collectively “worth” 2.28 times as much as their salaries, at least in terms of net revenue from tuition and fees.

So it would be folly to happen to cut a faculty member, or a lucrative program, that drives the numerator of this overall ratio up by attracting or retaining a large number of students. 
Perhaps, instead, one should ask, “Where does the rest of that tuition revenue go, how is it spent, and which of those expenditures can be either reduced or cut out completely?”  For example, vice presidents are very expensive administrators.  Often, they go to meetings, receive costly perks, and tell other people what to do but they do not perform very many real tasks themselves and they do not contribute any tuition revenue directly to the university’s bottom line.  Maybe we could do without one or two or three of those vice presidents.  They do not provide any academic programs that attract or retain students and most of them have competent, capable underlings who actually do the work anyway.  Why don’t we just eliminate a few vice presidents and save the ~$200k+ per VP cost?  Remember, their “net tuition revenue” is zero, so their ratio is zero, which is way below 2.28.  In terms of faculty salary equivalents, cutting one VP position would save about four faculty members, all of whom do generate tuition dollars by virtue of the fact that they teach courses.

But if we must try to follow the reasoning that is put forward in the Administration’s document, then we should first note that a number of factors contribute to the size of this ratio when it is calculated on a per department or per program basis.  These influences must be taken into account in order to interpret these program-specific ratios appropriately.  For example, several departments have numerators that are inflated by the fact that all students are required to take one, two, or even three courses in that discipline in order to earn an undergraduate degree.  Certain other departments, including Communications, Education, and the Computer Science part of the MATHCS department, do not benefit from that sort of numerator inflation.  The numerators of the ratios for these other departments are mostly attributable to courses taken by students who are majoring or minoring in the respective discipline.

In addition, to say that individual programs with higher calculated ratios are subsidizing programs with lower ones greatly oversimplifies the situation.  From the Administration’s document:

“In other words, an instructional program at Loyola, on average, generates net tuition revenue equal to 2.28 times the instructional cost of salaries associated with that program. Programs that generate more than this amount are, in effect, subsidizing programs that generate less than this.”

Note that the first statement does not follow from the data since the average of 2.28 was calculated just from the overall university revenue and costs, not from an appropriate treatment of individual departmental or instructional program ratios.  It is not the average of a distribution of ratios, it is just the overall ratio of 2.28=61.21/26.85.  It is not necessarily true that this ratio does or should apply as an average in any meaningful way at the departmental or instructional program level.

But certainly any program or department that can claim a large number of students as majors contributes substantially to the overall ratio just by virtue of the fact that those students are on campus, they take classes at the university, and they pay tuition.  No matter what department or program those classes are in, the numerator of the overall university ratio is increased if there are more students paying tuition at the university.  But without breaking down the data further and looking more closely at all sorts of factors including majors, minors, electives, and Common Curriculum requirements, it is not possible to say which programs contribute more or less to the overall ratio of 2.28 just by looking at departmental or program ratios.  There is a complex interplay between attracting students to the university in the first place, retaining them, and distributing their academic credits across courses and departments.

For example, last spring, Communications majors accounted for about 12% of the undergrads (442/~3800).  If those students who were majoring in Communications weren't on campus in the first place, then lots of departmental ratios would be smaller, including the ones that are influenced strongly by Common Curriculum requirements.  However, another department with a high ratio but very few majors could lose all of its majors without affecting any of the other ratios, including the overall 2.28, very much at all.  So which programs are being subsidized by which other ones and which programs should we be protecting if one of our primary concerns is the bottom line?

One more criticism of using individual departmental or program ratios for comparison with the overall 2.28 university ratio is that these ratios can be adjusted by adding in or taking out other sorts of costs or revenues.  This practice is, of course, not sound in terms of analyzing the data correctly, but it might slide by in a written document if the reader is not paying close attention.  By the time one is reading about individual programs, one might forget that the benchmark ratio only includes net tuition revenue in the numerator and the cost of faculty salaries (not benefits) in the denominator, therefore no other revenues or costs should be considered when contemplating individual programs. 

But, for example, an additional number that was thrown into the denominator of the ratio calculated for Broadcast Communications by the Administration in their document was a mysterious equipment cost of $154k.  Since ~$66k of that number represents student fees which are certainly revenue rather than costs to the university, we would include it in the numerator, not the denominator, of a revenue-to-cost ratio.  In addition, the benefits for the faculty are added in as a cost.  If grant money or the effect of faculty participation in fundraising, especially from alumni, were to be taken into account appropriately, the departmental numerators would increase more or less.  Of course, then these other pieces ought to be added into the university ratio for comparison as well.  And, of course, it was inappropriate for the Administration to weight the ratio for Broadcast Communications in such an ad hoc way by throwing in additional costs for equipment and benefits in any case.

In the Administration’s document, the last statement in the paragraph represented by the two previously quoted passages says:  “In addition this [presumably referring to ratios calculated for instructional programs] gives an indication of the actual shared costs associated with providing the program (e.g., utilities, maintenance, supplies, insurance, Institutional Advancement, Student Affairs, Business and Administration, student support services, library, etc.).”  This author is totally baffled by this last statement.  The numbers used to calculate the ratios include only actual net revenue of tuition and fees in the numerator and instructional salaries in the denominator.  We fail, utterly, to begin to understand how that information can be used to extrapolate to other areas mentioned above.

The Administration’s “analysis” of this data in terms of the tuition revenue/faculty salary ratio just doesn’t make sense any way you look at it even after the outright errors are corrected (and they have not been corrected on the official web site yet).  If this analysis is really what was used to identify programs and faculty members to be cut, then the Administration and the Board should be very embarrassed.  If one of our students were to hand in such an analysis, he would receive an “F” for that piece of work. 

Finally, if the Administration really did use this ratio as a criterion of primary importance, then why was A&S hacked to pieces when its ratio was way above the 2.28 overall university ratio?  If the Administration was looking to cut academic areas that don’t bring in enough tuition revenue to support themselves, then they should have cut academic programs with much lower ratios first.  Clearly, this was not the approach they took, or at least it was not their biggest concern in the case of the College of Arts & Sciences. 

So we are still left in the dark about the Administration’s motives with respect to cuts to academic programs and the termination of faculty members.  Time will tell, but this author expects the overall university ratio of revenue-to-cost to go down dramatically for the coming year not only because of the obvious effects of Katrina but also because of the much more injurious effects of a misguided, botched attempt to cut costs by our own administrators.  By the program and faculty cuts they have made, they have severely undermined our ability to attract and retain large numbers of students, thereby drastically decreasing our ability to bring in tuition dollars. 

As I have heard other colleagues say, there were no weapons of mass destruction in Iraq and there was no real fiscal crisis at Loyola.  However, we are all suffering the consequences of our Administration’s hasty actions.

“Power dements even more than it corrupts, lowering the guard of foresight and raising the haste of action.”

Will and Ariel Durant

Average Expected Net Revenue - An approach to calculating an estimate of how much net revenue an instructional program should generate based on instructional salaries is to compare the actual instructional salaries (full and part time) to the actual net revenue of tuition and fees. For the 04-05 Fiscal Year the total salaries of all instructional personnel (not including benefits) was $26.85 million. The actual net revenue of tuition and fees was $61.21 million. The ratio of net tuition revenue to instructional salaries is 61.21/26.85 = 2.28. In other words, an instructional program at Loyola, on average, generates net tuition revenue equal to 2.28 times the instructional cost of salaries associated with that program. Programs that generate more than this amount are, in effect, subsidizing programs that generate less than this. This provides a measure useful for program review. In addition this gives an indication of the actual shared costs associated with providing the program (e.g., utilities, maintenance, supplies, insurance, Institutional Advancement, Student Affairs, Business and Administration, student support services, library, etc.).