More Schools, Less Value

General Motors has plants around the world, but it has only one CEO. The University System of Maryland, on the other hand, has 12 institutions and 12 presidents.

When a General Motors plant becomes redundant, the CEO shuts it down. When a University of Maryland campus becomes redundant, the Legislature debates whether to ask the Board of Regents to conduct a study.

The redundant campus, in this case, is the University of Maryland, Baltimore. Under a proposal championed by state Senate President Thomas V. “Mike” Miller Jr., the Baltimore campus would be combined with the state’s flagship university, the University of Maryland, College Park. The current proposal deals only with merging the two schools under unified leadership (or, to be more precise, with studying such a merger), but some far-sighted Maryland residents fear that this is a “first step toward uprooting the school entirely from Baltimore.”

If it is a first step, it is the first step on a very long road. The fact that the proposal is even news says a lot about how states run large institutions.

Consolidation can save considerable money by streamlining administration, recruitment and fundraising. Yet most state university systems allow separate institutions or semi-autonomous campuses to proliferate for reasons that make more sense politically than educationally or financially.

The State University of New York (SUNY) has 64 campuses, including community colleges, each of which has some degree of independence. That does not include the 23 campuses in Manhattan’s five boroughs, which are part of the City University of New York. California has two separate systems, with overlapping geographical presences: the University of California, with 10 campuses, and California State University, with 23. Community colleges are part of the separate California Community Colleges System.

Community colleges, which are really a modern extension of high school, need to be local. They also do not usually have elaborate infrastructure. But the proliferation of four-year institutions, some of which are eventually upgraded to include research and graduate study programs, has less to do with education than with local ambition, economic development and simple political horse-trading.

Communities covet the benefits that a full-scale college campus can produce. Hosting a university can give a town prestige, create jobs, attract federal funding and produce a stream of graduates, many of whom choose to stay near their alma maters, providing a source of entrepreneurship and innovation. Politicians often do everything they can to protect schools in their locales and to fight changes that might reduce those schools’ ranking in the educational pecking order.

Downgrading the University of Maryland, Baltimore, to a branch campus might save the state money, but it would signal to potential Baltimore residents and businesses that the state’s educational epicenter is elsewhere and that Baltimore’s glory days are behind it. The city would most likely get to keep the remains of Edgar Alan Poe, now beneath the campus of the School of Law, but the law school itself, and the prestige it brings to the community, might move on.

Baltimore’s representatives will try to prevent that from happening. Usually this means making deals with lawmakers from other parts of the state, who have little interest in the dispute but who will be happy to support the Baltimore delegation in exchange for some other favors. As a result, state funds and tuition dollars that could go toward paying professors or buying lab equipment will instead continue to support a duplicate administration.

Anyone who wonders why corporations are posting healthy profits, even in a weak economy, while state and local governments struggle need only look at the Maryland proposal as a microcosm of how business differs from government. Corporations expand and contract; they evolve as the environments around them change. Government institutions, on the other hand, tend to ossify, leaving university systems and other programs marooned by changing tides. The new campuses that sprouted amid the strong demand of the Baby Boom generation now, in many cases, serve little purpose, but continue to stand nonetheless. And they will likely keep soaking up money until states’ treasuries run dry and fiscal crisis makes change unavoidable.

The merger study still faces a vote in the Maryland House of Delegates. And then, for anything to actually happen, the study would have to recommend the merger and the Legislature would have to follow its recommendation.

But trimming a little piece of duplicate government is a nice thought, even if that’s all it ever is.

About Larry M. Elkin 525 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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