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Editor's Page: A Squeeze Play in Campus Dining

Editor's Page: A Squeeze Play in Campus Dining

Administrators in higher education need to remember that consumers are highly sensitive to food and meal plan price increases.

A majority of Americans believe college prices are going up faster than other things they purchase and that colleges could spend less and still offer a high quality education. They also believe colleges today are like most businesses and care mainly about the bottom line (vs. about making sure students have a good educational experience).

These and other findings are from a December survey of over 1,000 Americans done by the National Center for Public Policy in Higher Education (NCPPHE) and Public Agenda. Both are non-partisan public policy think tanks focused on higher education issues*.

Whether or not the respondents are right about the latter issue, there's plenty of evidence they are dead on about the first one. The cost of higher education, as experienced by parents and students, has risen faster over the last decade than any other component of the consumer price index, including healthcare. And its not just tuition: the College Board reports that public four-year college room and board fees increased an average of 5.4 percent last year, even as the inflation rate hovered near zero.

Some argue that such increases are a result of cutbacks in state support. That has certainly contributed to the problem, as it did in 2009 as states were forced to balance their budgets after recession-driven declines in tax revenue. But looking ahead, there's little reason to think the states are going to come into unexpected revenue windfalls anytime soon to offset this trend.

What impact does this all have on campus dining? Most operations are self-supporting and have managed pretty effectively to hold the line on their direct costs in recent years. But their budget fund balance lines have sometimes become a tempting target as administrations seek to make up deficits elsewhere on campus. This can show up as abritrarily increased allocated costs or as increases in the general operating fund “contributions” dining departments are expected to make annually.

This isn't a problem limited to self-operated dining auxiliaries, and can sometimes be exacerbated in contract environments. That's because contracts often include call for the management company to provide upfront money for capital investments to upgrade dining facilities or equipment, costs that must be reclaimed from ongoing dining revenues.

As a contractor looks to recoup its front end investment, it too is often asked to make general fund contributions. And of course, as a profit-making entity, its own management expects a fair return for both its services and any capital investments. In the end, the dollars always have to come out of the prices students pay.

In fact, such third party investments sometimes are necessary because dining departments haven't been able to retain and employ earnings for such purposes over the years, and this is one red flag administrations ought to be wary of. In contrast, regular re-investment in facilities and programs along the way tends to moderate any impacts on meal plan pricing. It also has the advantage of helping prevent declines in participation, and the negative financial consequences that brings.

Most directors well understand the difficult financial bind college administrations are in. While few are enthusiastic about increased contribution lines, they recognize higher education realities and know that, as an auxiliary that does generate cash, this is one of many ways their departments can support a school's larger objectives.

Still, administrations need to be cautious because there is always a point of diminishing returns from such strategies. One sign this could be an emerging problem: recent reports of several schools seeking to require commuter students to buy some form of meal plan as a new way to cover “overhead.” (Such a move by the University of Louisville even caused state lawmakers to propose legislation prohibiting the practice.)

When such policies generate strong pushback from the public, it should be a caution sign for administrators. As the NCPPHE study says, “the public is becoming more frustrated with higher education and more dubious that colleges and universities are cost-effective and doing all they can to keep tuition affordable.”

The public seems to be saying they think college administrations can do a better job of managing their educational cost structures. When it comes to tapping dining revenue as a partial solution, administrators need to remember that consumers are highly sensitive to food and meal pricing. Sending the wrong signals via campus food and meal plan prices can make the public perception worse, not better.

* “Squeeze Play 2010: Continued Public Anxiety on Cost, Harsher Judgments On How Colleges Are Run.”

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