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13: Cut Faculty Benefits

Thanks to an anon for this point.

What if the conference funds for every faculty member took at $500 cut? That would save at least 100K right there and would not significantly degrade the quality of the either the educational experience the college offers or the opportunities its faculty enjoy.

Again, we are looking for cuts of at least $200,000 per year, cuts that can be maintained for the foreseeable future. How much in conference funds do faculty get? What other similar benefits might be cut? Note that not all faculty use all (?) their funding each year, so $100,000 is an over-estimate, I think.

I have already highlighted two faculty boondoggles (the Sabbatical Grant Program and the Professional Development Fund) that should be ended, but I don’t get the sense that there are big dollar savings here.

I think that the College provides substantial subsidies to faculty housing. I have no idea what the magnitude of these benefits are, but there is no reason for the College to be in the housing business for faculty/staff, any more than for it to grow apples or design clothing. Yet, by being in the housing business, the College can transfer some/lots of resources to the faculty.

The same applies to the Children’s Center. Why should the College be in the business of supplying day care? Why not also start an apple orchard? After all, it would make excellent faculty more likely to come to Williams if they knew that they could get great apples at below-market rates.

Rule #1 about successful non-profits is that the insiders think that they do a great job and should be rewarded more generously. But it can be tough just to raise salaries since it is so easy to compare salaries against outside benchmarks. So, to avoid scrutiny, insiders sometimes steer resources toward themselves and their friends via non-salary mechanisms.

Want to really piss off the faculty? Cut (or, at least, trim) the tuition benefit for faculty children. Normal professionals (like you and I, dear reader) save their own money over time to send their children to college. Not Williams faculty! I believe that Williams will pay half the cost [of tuition] for a faculty child to attend anywhere and all the cost if the student goes to Williams. (Does anyone know the details?)

Trim/cut some combination of the above and we could get to more than $200,000 per year savings.

Chances of that happening? Zero.

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#1 Comment By JG On April 3, 2009 @ 12:19 pm

Can you fix your links please?

#2 Comment By anon On April 3, 2009 @ 1:31 pm

The college provides absolutely no subsidies for faculty housing. It owns a fair amount of property that it rents to faculty, but it definitely rents at market rate. In fact I would say that some of the properties it rents out at what is definitely the top end of the market rate.

Some colleges in small towns claim they are renting properties to faculty at market rates, but by owning 90% of the rental housing in the town, they can essentially set those rates as they please. I see no evidence that Williams does this.

#3 Comment By David On April 3, 2009 @ 1:35 pm

If Williams were renting at market rates, then we would not expect excess demand from faculty for that housing. (And I am certainly ready to believe that this is true.) But then why is there so many details about who gets priority for housing and who does not? If the rates are at the market then there should not be enough excessive demand to justify all that rigmarole.

I have been told that certain parts of faculty are housing are quite popular and so the rules about priority are needed.

Also, what is the status of Pine Cobble? Many years ago this was explicitly described as a subsidy-type arrangement, but I have no recent data.

#4 Comment By anon On April 3, 2009 @ 1:38 pm

“The same applies to the Children’s Center. Why should the College be in the business of supplying day care? Why not also start an apple orchard? After all, it would make excellent faculty more likely to come to Williams if they knew that they could get great apples at below-market rates.”

Here’s a better question: why try to have a serious conversation with someone who so consistently acts like a moron?

There have been serious discussions of the childcare center here (which I notice you don’t link to). Why compare it something so obviously ridiculous as an apple orchard? Why should business pay for health care? Why not buy everyone a pound of bacon a week? Everyone loves bacon!

#5 Comment By anon On April 3, 2009 @ 1:43 pm

“then we would not expect excess demand from faculty for that housing.”

There is no excess demand. A lot of faculty housing sits empty and the college is presently selling some of it. There has to be some sort of system to decide who gets to make their choice before someone else and this system is actually not complex at all.

#6 Comment By David On April 3, 2009 @ 1:55 pm

1) We don’t have a category for Children’s Center posts and so I did not see an easy way to link. There was this post and then some stuff in this comment thread. As best I can tell, nothing invalidates my point that, as a rule of thumb, the College should not be directly involved in doing anything that is not directly related to undergraduates.

Now, many faculty will claim that the things that they like (Bolin Fellows, faculty houses on Pine Cobble, better Children’s Center) are directly related because such programs increase the quality of faculty. Needless to say, I find this unconvincing. And the apple orchard joke was an attempt to be funny! Ah, well.

2) I am glad to hear that there is no excess demand for faculty housing. The College should sell it all.

3) “Why should business pay for health care?” That’s easy! Every other job does and there is no easy way for professors/staff to purchase their own health care. 10 years ago, the College had no involvement with child care, besides allowing the use of a building and I think that it may even have been compensated for that.

4) Everyone does, indeed, love bacon! EphBlog iterates to agreement once again.

anon: Do you have a sense of whether or not there will be any trimming of faculty benefits and how the faculty might react if there were?

#7 Comment By JeffZ On April 3, 2009 @ 1:56 pm

Are we there yet?

#8 Comment By anon On April 3, 2009 @ 2:14 pm

Indeed there have been trimming of benefits (no raises, reduction/eliminations of additional funds for traveling for research, etc.) and I imagine there will be more. My sense is that people understand the necessity of these cuts and I’ve certainly heard nary a grumble.

#9 Comment By Ronit On April 3, 2009 @ 2:26 pm

The College should sell it all.

Only if the properties have negative carry – ie, mortgage and maintenance obligations outstrip rental income. Do you have any evidence that this is the case? If the college is not in a negative carry situation with the properties, why be in a rush to sell an asset that generates a steady stream of relatively inflation-proof income?

Also, the DCF value of a desirable rental property in Williamstown may well be higher than the sale price it would fetch in the market right now.

It makes exactly as much sense for the college to own rental property in Williamstown as it does for the college to have an endowment.

#10 Comment By David On April 3, 2009 @ 2:44 pm

anon: Do you think that there were would be more grumbling if something like a trimming of high salaries occurred? Needless to say, I only have a couple of sources on the faculty and they are hardly a random sample, so I have no idea on what their reaction would be.

Ronit: In theory, you are correct. If the College is going to have X% of its endowment in real estate, then it does not matter if that is invested in faculty housing in Williamstown or class A property in Rio.

But, in practice, I dislike mixing “investments” with actual usage because of the inherent conflict of interest and corporate governance issues. When the College invests in Rio office space, you can be sure that it (or, really, the managers it hires) get the highest possible rent from the tenants. Does the College do the same with its faculty housing? Perhaps. But there is no guarantee that such tough-mindedness will continue. Better to just avoid the conflict altogether.

#11 Comment By Ronit On April 3, 2009 @ 3:16 pm

I dislike mixing “investments” with actual usage because of the inherent conflict of interest and corporate governance issues. When the College invests in Rio office space, you can be sure that it (or, really, the managers it hires) get the highest possible rent from the tenants. Does the College do the same with its faculty housing? Perhaps. But there is no guarantee that such tough-mindedness will continue. Better to just avoid the conflict altogether.

The theoretical “highest possible” rent really makes no difference to the DCF analysis or to the College’s decision to hold or sell the property. Something can be cash-flow positive, and a good asset to hold, regardless of whether or not you are charging the highest possible rent. Especially in the middle of a real-estate recession.

#12 Comment By Jay On April 3, 2009 @ 4:17 pm

Re the question of excess faculty demand for apartments:

I have no idea what properties the College owns and rents to faculty, but I am familiar with one of those properties, the old Southworth school building, that has been turned into apartments for faculty. And that building is wonderful, and apparently there is high demand to live there.

It was completely renovated a few years ago, and turned into a pretty spectacular building. Designed to be highly energy efficient and rather green – efficient German boilers, incredibly insulated windows and walls, radiant heating in the floor, reuse of old materials (they even reused the slate from the old school’s chalkboards in the kitchens).

High ceilings, huge windows, energy efficient, fancy schmancy. I don’t know if any other such buildings were renovated similarly, as this one was done in a pretty low-key manner, but if so, I can easily imagine competition over living there.

#13 Comment By Parent ’12 On April 3, 2009 @ 4:56 pm

Hey!

I thought this series was over. This item isn’t on the original list.

#14 Comment By David On April 3, 2009 @ 5:19 pm

Series is over tomorrow. Seemed that football belonged on a Saturday. This item on faculty benefits was added by suggestion.

#15 Comment By anon2 On April 3, 2009 @ 5:33 pm

On housing subsidies: the College does make below market loans to faculty and some staff — half the market rate to be precise, up to $100K loan (fixed rate, 25 yr, amortizing). It is not uncommon among colleges and universities in doing so. One of the rationales is that it encourages faculty to live relatively close to campus (it must be on a house within two towns of Williamstown). My guess is that by allowing faculty to afford slightly more expensive houses, the loans increase the number of faculty who live in town — which is what many faculty would prefer — instead of living in North Adams, Hancock, or across the state lines in VT or NY (the loan can be used in these places but if the point is to allow people to spend more on housing, then it lets people afford W’town). The faculty obviously benefit from the subsidy. Do students get any benefit from this proximity?

The Pine Cobble development carries a contingent interest loan that is tied to the appraised value of the land. It is designed so that the homeowner gets ‘free’ use of the land but the College gets the appreciation in value of the land. Again, the goal is to have faculty live quite close to campus (and this time, the benefit is tied to being in town).

The rental housing goes mainly to untenured faculty. It probably does facilitate those faculty living close to campus and helps integrate them into the community. This does not seem like an unreasonable goal. Would the private market necessarily generate a large stock of rental property in town close to campus? I expect not. Evaluating a market rent is a bit tricky — if the College charges substantially more than market, then I would expect lots of vacancies. My guess is that some (if not all) of the properties are a good (maybe not great) deal.

The argument in much of this area is that location matters: the College gets something out of having faculty living relatively close to campus. To David, the fringe benefit is just a dollar figure. A complete analysis requires thinking about who benefits from the shift in location of people.

On Child Care: the College wants to be a family friendly workplace. There are for-profit firms that also work along this dimension by trying to provide on-site access to child care (google: family friendly workplace). Nonetheless, spending $6.1 million on a facility that is 9,300 sq ft. could lead to some head scratching. I don’t know much about construction costs but $600 per sq ft seems high to me, especially compared to residential construction. (A 3,000 sq ft house typically doesn’t cost anywhere near $2 million — and the $6.1 m doesn’t include the cost of the land.) A for-profit business that built such a center would probably have to charge hefty fees to cover its costs. Again, I might just not have a good grasp of construction costs in this business.

On research support: it really depends on whether you think rewarding faculty for being active in their academic discipline is a good idea. If you think faculty research is just a hobby, then no big deal — why support faculty research and not faculty fly fishing (or, to use the term du jour, apple farming)?

If you think having faculty who are plugged into a broader research community is important for intellectual development (both of the faculty and the students), the advising of theses, and writing letters for students who want to go to grad school, then supporting this activity is worthwhile. My sense is that these pockets of funds have not expanded dramatically over the last decade — I could be wrong. The travel money is on the order of $1000 per year. It ain’t exactly funding week-long trips to Paris.

David seems to like to compare the not-for-profit with the for-profit world. Here is the question: do for-profit firms ever pay expenses for training and developing workers? I think so. What is tricky in academics is for the institution to identify exactly what development costs are useful — which research projects really help create ideas that keep the intellectual capital stock of the faculty in good shape? This problem leads to the funds being delegated to the control of the faculty (so that it seems ‘discretionary’).

Basically, to put it in business terms, the intellectual capital of the faculty is an important asset used by the College (alas, owned by the individual faculty member). These assets stay at the College for long periods of time (as David likes to point out: the faculty ain’t leaving). Given the nature of the employment contract (read: tenure), one might want to share the costs of maintaining this asset between the employer and the employee. I know what I’m about to hear: Times are tough so lets defer maintaining these assets! Response: the problem is that once people stop doing research, it is hard to get back into research.

Would you feel the same way if the travel funds were being used to go to conferences about pedagogical technique? Why doesn’t the College routinely make funds available for people to go to programs that teach people how to teach (such conferences / programs do exist)? Maybe it does, I don’t know.

#16 Comment By anon On April 3, 2009 @ 5:59 pm

“…the old Southworth school building, that has been turned into apartments for faculty. And that building is wonderful, and apparently there is high demand to live there.”

This is not entirely accurate. The building has had lots of vacancies since it opened, possibly because the rents for it are quite high. There seems NOT to be competition for living there. In fact, because it typically has vacancies, the college has used it for temporary faculty housing when people need a place just for a month or so.

#17 Comment By old-timer On April 4, 2009 @ 9:06 am

Some clarification on the tuition benefit:

1) It’s not a “faculty benefit”, but rather a benefit for all full-time college employees who have been at Williams for more than a certain amount of time (5 years, I believe).

2) The college does not pay “half the cost for faculty children to go anywhere”. Rather it will pay up to half of Williams’ tuition towards tuition at another institution. So the amount of the benefit varies somewhat – depending on the tuition at the college the employee’s child attends – as it cannot be applied to anything other than tuition (non-tuition college costs are substantial, as David will discover when his daughters are older).

It’s interesting that not only does David almost always get things wrong (why not look at the faculty and staff handbooks, which are on-line, and get the correct information?), but, further, that his errors are always in the same direction: the college is profligate, and faculty get too much. Recall that he took the compensation figures (salary + benefits) for Amherst and presented them as Williams faculty salaries, thereby substantially (more than 30%) over-stating the actual salary figures. Random, or honest, errors miss the target facts both on the high side and the low side. A pattern of errors that always miss on the same side indicates either intellectual dishonesty or a strong bias. I’d prefer to think that David is merely biased.

#18 Comment By frank uible On April 4, 2009 @ 9:33 am

I object. He is also dishonest, intellectually and otherwise. Whatever happened to that Purple Cow wrist watch I asked him to hold while I washed my hands?

#19 Comment By PTC On April 4, 2009 @ 10:18 am

Where are you getting this 200k a year number Dave? It seems more than a little low….

#20 Comment By David On April 4, 2009 @ 10:19 am

I appreciate old-timer taking the time to comment. But . . .

It’s not a “faculty benefit”, but rather a benefit for all full-time college employees who have been at Williams for more than a certain amount of time (5 years, I believe).

1) I did not say that it was only a benefit from faculty. Indeed, two years I interviewed a student whose parent worked at Williams and who mentioned the deal. This is a post about cutting faculty benefits, so it belongs here. Do you think that we need a post on cutting staff benefits? Is there $200,000 per year worth of staff benefits that could plausibly be cut? I am ready to have that discussion if you (or someone else) could supply the data.

2) Is it really available for “all full-time college employees?” Apparently so. Wow! Isn’t this really expensive?

3) Am I correct that tuition is waived completely for children who attend Williams?

The college does not pay “half the cost for faculty children to go anywhere”.

Thanks for the knit-picking but didn’t the phrase “the tuition benefit for faculty children” imply the same? In any event, I will update the post.

It’s interesting that not only does David almost always get things wrong (why not look at the faculty and staff handbooks, which are on-line, and get the correct information?), but, further, that his errors are always in the same direction: the college is profligate, and faculty get too much.

Where to start?

1) I made it clear in the post that I did not know the details. Did you read the part where I asked, “Does anyone know the details?”

2) The College does not make it easy to get answers to these and other questions. Should I send you copies of all the e-mails that I have sent to college officials which were never returned or even acknowledged? Let’s be specific. I just spent five minutes searching the handbooks for a description of the tuition benefit when faculty/staff children attend Williams. I have been told (by a faculty member!) that tuition is free for those children. Yet, I can find no info in the handbooks on that.

3) Are you arguing that I should spend more time working on EphBlog? I agree! Just help me to explain that to Professor Bradburd . . .

4) I think that the College spends too much money on X and too little on Y. For example, I want the College to give special cash awards to the best teachers and special scholarships to black students. You may disagree with those ideas, but I do not think that the College is always profligate or that the faculty always get too much.

Recall that he took the compensation figures (salary + benefits) for Amherst and presented them as Williams faculty salaries, thereby substantially (more than 30%) over-stating the actual salary figures.

Huh? Links, please. Although it took a while to get to the bottom of the salary issue, I did so.

What I find most annoying about this sort of criticism when it comes from a faculty member is not so much the criticism per se but the laziness in not doing anything productive. There are hundreds of students who read EphBlog, partly to be educated about the economics and governance of Williams College. I do my best to explain reality to them. Do I make mistakes? Sure! But, instead of carping, this faculty member ought to either join us or fix the mistakes that he sees when he sees them. Doing so would help educate Williams students.

#21 Comment By rory On April 4, 2009 @ 10:37 am

any student who uses ephblog to learn about the economics and governance of williams is an idiot. i tried to think of a clevler line like frank would have, but i failed to

(also, how do you know that comment ws from a faculty?)

#22 Comment By PTC On April 4, 2009 @ 11:57 am

Rory- There are no real numbers here. We do not even know what the operating cost or budget of the school is… what is pushed here is an odd array of suggestions based on zero facts…

David: How much does it cost to run the school?

#23 Comment By David On April 4, 2009 @ 1:14 pm

PTC: Start here for an education on Williams spending. You may not know what Williams spending is, but I have written several thousand words on the topic.

Rory: I think that old-timer is faculty, but I don’t know for sure.

#24 Comment By anon2 On April 4, 2009 @ 3:50 pm

Tuition benefits for children of faculty and staff are a somewhat bizarre form of compensation. After all, why would an employer want to pay someone based on how many children they have and where they go to college? It might help the conversation to consider how the policy started. (For-profit firms sometimes do similar things: why do car dealers almost always have new shiny cars?)

Once upon a time, before need-blind admissions (oh, say before 1970 so not ancient history) and concerted efforts to spend on financial aid (and maybe even before state universities offered reasonably priced options … but I’m not exactly sure how far back to go), elite colleges and universities realized that their faculty could not afford to enroll their children where they taught. Under the same sort of “marginal cost of an extra student is low” theory that we’ve seen on this blog recently, schools decided to offer faculty children free or drastically reduced tuition. I’m not sure whether it was just goodwill or an intentional compensation practice.

This perk has morphed into the current system for several reasons. First, free tuition only helps if the student gets into the school. Admissions officers could feel the stares in the grocery store, etc., if they turned down esteemed Professor X’s child. Also, faculty kids felt little choice among schools since the price break for staying home was huge. To avoid this problem, some schools joined networks so that the faculty kids can get discounts within network. Other schools (and Williams seems to be in this category) moved to a cash payment system.

Second, tax laws shifted inducing schools to become more inclusive. The benefit is not taxed. However, at some point (1986, perhaps), non-discrimination rules began to apply. The tax-free treatment required broad access, creating a move to include staff.

Once the benefit is in place, it is hard to cut since faculty have relied (perhaps, reasonably so if the employer wants to be trusted in the future) on the benefit for long-range planning. Grandfathering current employees can reduce the bitterness created but the grandfathering window becomes long and the affected people near the cut-off are likely to be quite upset. (Grandfathering also means that the cost savings will not show up for a long time.) Given Williams’ tuition, this benefit is not a small piece of change so affected parties have a lot of dollars at stake. So, if you want to find a change than can really annoy some people (for good reason, IMO), make a sudden change in a long-term promised benefit worth a substantial amount of money.

Another odd feature of the policy is that it might reduce financial aid received from the school where a staff member’s child enrolls.

#25 Comment By Parent ’12 On April 4, 2009 @ 6:21 pm

anon2– Thank you for all your recent clarifications about the College. I hope you continue to provide them.

Because of friends & their children, who have benefited from such policies elsewhere, I became familiar with tuition reimbursement. I wasn’t familiar with the consortium approach, nor the history behind the policy more generally. I appreciate your providing it here.

I would imagine for children of current Williams’ faculty & staff it could be stressful to be an Eph. I met someone, who’s now been retired for many years, who transferred from Williams because of that reason.

#26 Comment By kthomas On April 4, 2009 @ 6:34 pm

anon2: The policy at Vanderbilt (circa 1988, though I hear it is similar now) is to pay tuition at a foreign institution only if the child is denied admission to Vanderbilt. One of the people I met through Telluride (admitted to Harvard, chose Cornell) filled out his Vandy app in crayon; this is a common joke and evidently common enough; he was admitted.

Real cost per student is obviously subject to some discussion; does that figure that Williams touts include the budgets of science research facilities, for instance? I doubt even faculty have a good sense of the actual numbers involved.

Offhand, “we take care of our own” comes to mind as a source of the policy, though I might want to point out that a dual-faculty-income family would be unlikely to qualify for much “discount rate” financial aid at Williams. Providing a benefit structure that allows the use of pre-tax as opposed to post-tax dollars also seems, in general, positive.

YMMV, however; this payment looks like compensation for services “past, present, or future” and therefore subject to taxation. IANAL.

There may also be a “all works out in the wash” attitude: because this is a general practice between comparable institutions, and because there may be a general assumption that faculty children are generally desirable as students, we may be in a situation where Williams derives as much benefit (increased revenue from incoming students; outside scholarship is generally a dollar-for-dollar reduction of the Williams award, right?) as cost. Again YMMV.

#27 Comment By anon2 On April 4, 2009 @ 7:41 pm

Ken —

The Vandy story is great.

“Dual-income family” where one earner is a fairly senior faculty member would not get financial aid without having several kids in school; however, remember that the benefit now applies to staff. Also, not every faculty member at Williams has a working spouse (or one who makes a lot of income). I was merely pointing out another odd feature of the program.

I’m pretty sure I have the tax story right but no guarantees — it hasn’t been a tax issue for me. It ranks up there with the parsonage deduction for clerics as an industry-specific tax issue that runs counter to the general rule. I believe the AAUP did some lobbying. If the loophole is there, why not use it?

Williams does draw faculty kids from other places (not just LACs) — a point of pride if one believes that their parents had any influence on them. They might not qualify for aid, however, so it is not clear whether their grants offset Williams aid — it goes back to your previous point.

#28 Comment By Alexander Woo On April 4, 2009 @ 10:36 pm

1) In general I think it is better to cut faculty salaries than faculty benefits, and I think faculty and prospective faculty would agree, at least in their demonstrated preferences.

2) There is a real benefit to having faculty live in town. In fact there is still at least one liberal arts college which still formally requires its faculty to get permission from the president to live outside of town.

3) I would guess that Williams provides its faculty with closer to $2000 a year in travel money.

#29 Comment By anon On April 5, 2009 @ 12:11 am

“3) I would guess that Williams provides its faculty with closer to $2000 a year in travel money.”

No. It’s typically $1000.