November 21, 2019

GUEST ROOM | Our Students Are Paying for a ‘Fat and Happy’ Budget

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In response to The Sun’s Oct. 29 article, “Cornell Bleeds Red Ink in Latest Financial Report with Operating Losses of $104 Million,” as an alum, parent and long-time volunteer for the University I was not surprised by the bad news. While student tuition and alumni contributions continue to rise, once again University expenses outpaced revenues.

In the world of finance, most businesses and not-for-profits lose money by either not generating enough revenue or they pile on too much administrative overhead. Many iconic brands like Eastman Kodak, Lehman Brothers and Enron filed for bankruptcy or closed because executives rewarded themselves with fat salaries and happily ran to the bank while taking their eye off the true meaning of their business. Cornell may be one of the nation’s top universities, but we are also a “not-for-profit” institution, which enables the school to avoid paying taxes and ensures alumni donations are tax-deductible.

However, with the not-for-profit tag also comes the responsibility to ensure the primary objective of the University is education and research, and not to line the pockets of the administration. Let me be clear, the vast majority of our professors and staff work very hard every day and certainly are not overpaid. However, as per the article, Cornell has nearly 18,000 employees with a $2.9 billion payroll, which is a whopping 64.8% or nearly two-thirds of the overall budget. Although The Sun’s article said Cornell can plug the deficit with its $7 billion investment portfolio, the purpose of the endowment is to fund priorities such as student financial aid, lab equipment and facilities — not to cover the cost of excessive spending on payroll.

Based on those numbers, the average income per Cornell employee is approximately $161,000. While that figure may be skewed due to the Weill Cornell Medical Center; the hospital is a moneymaker for the University. In comparison, according to the New York Department of Labor, the average state income including New York City is $63,270. Not-for-profit institutions were created to further a particular social cause and they are meant to help the needy, religious, scientific, research and educational purposes for the greater good of society. The payroll objective of the not-for-profit is that employees should receive good living wages, healthcare and retirement benefits. However, it defeats the entire purpose of a not-for-profit when those employees often earn significantly more than for-profit institutions that pay taxes and drive our economy.

Colleges and universities were granted not-for-profit status in order to further the advancement of education and research. Cornell, as a not-for-profit institution, should be making tuition affordable! According to a U.S. News & World Report piece from Sept. 19, 2019, the average tuition and fees at private national universities have jumped 154% over the past 20 years and have significantly outpaced inflation. Every year, our students and parents are subjected to tuition and fee increases with no end in sight. Therefore, where is the accountability of our administrative decision-making?

The majority of not-for-profits operate under a “wing and a prayer” with very tight budgets and scrape by to the last dollar. For example, I recently served on a $10 million not-for-profit that served people with developmental disabilities. It’s a wonderful organization, and its staff have a real passion for helping their clients who are faced with difficult physical and mental handicaps. The agency provides a valuable service to the community and their employees are paid good wages and benefits but they are not living large. The Executive Director of that organization earns $119,000 per year, which is a nice salary, but still significantly less than Cornell’s average payroll.

In 2012, Gov. Andrew Cuomo (a progressive Democrat) issued an executive order to limit not-for-profit administrative salaries to any state-supported organization at $199,000. Cornell receives much of its funding from both state and federal grants. Gov. Cuomo was furious to learn some state-supported not-for-profits were paying their executives significant six-figure and even seven-figure salaries. His order had bipartisan support but the bill was mostly struck down by special interests and eventually the courts. Meanwhile, New York State continues to have some of the highest taxes in the country and many state-supported not-for-profit executives earn significantly more than their for-profit counterparts.

As a freshman, I remember my advisor inviting me to his home for dinner. He joked “our house is easy to find as we live on Professor Slum Row.” While he actually had a very nice but modest home, I’ll never forget the passion my advisor had for his students and his work at Cornell. The East Hill is a special place, and it’s imperative the University focus on its mission of academic excellence. However, we also have a responsibility to ensure our students are getting a great education for their tuition dollars and those funds are spent wisely. The numbers from the 2018-19 fiscal year-end indicate we have a serious problem with administrative overhead that needs to be addressed. As an alum, the purpose of my letter is not to make enemies with the administration but advocate for our students while ensuring the long term financial health of Cornell University.

Mark Wolcott ’83 is a senior manager at ESL Federal Credit Union. Guest Room runs periodically. Comments may be sent to opinion@cornellsun.com.