By Joe Malchow
I once asked a pilot friend if he didn't tire of the lumbering, leviathan commercial airliner he flew. He surprised me by saying that a 747 can handle like a Lamborghini if ever it needed to.
A bit of that seems to be underway in Hanover, New Hampshire, where the new president of Dartmouth College, my alma mater, is responding with alacrity to the slackening economy. Even given the market's nosedive, Dartmouth possesses a substantial multi-billion dollar endowment and employs nearly 2,800 full-time equivalent staff and 450 faculty. That's a rather large organization---one now operating at a loss of $34 million.
But Dartmouth has one big asset: a group of Carl Icahnesque independent trustees who were elected by worried alumni in 2004, 2005, and 2008. These outsiders were vigorously resisted by Dartmouth---whose power establishment didn't want activist directors---but the outsiders' platforms of staunch fiscal conservatism and a leap out of the thicket of professional educrats won the day. After all, who needs a "Sustainability Director" or a "Dean of Pluralism"?
Alumni responded by their levels of giving, and Dartmouth's former president, historian James Wright, responded by resigning his post early. In that position, now, is Jim Kim, the Harvard doctor who has never been the head of a major organization but who has now been thrown into a parlous billet.
"I thought I was going to take the first year just to learn about Dartmouth and ask a lot of questions. I did not think I would have to make a lot of tough decisions," Kim said the other day.
But economic infelicity has forced Kim's hand. He called in a group of experts, including Steve Mandel and Leon Black, hedge fund pharaohs who sit on the Dartmouth Board. He also has the benefit of the independent petition trustees---Silicon Valley C.E.O. T.J. Rodgers, Stanford researcher Peter Robinson, and Notre Dame law professor Stephen Smith. This trio (along with legal scholar Todd Zywicki, who left the Board in 2009) ran detailed political campaigns in order to get the votes of Dartmouth alumni. And those campaigns involved advanced analyses of the College's profligate spending.
For example, between 1999 and 2008, non-faculty staffing levels grew by almost 42%, from 2,408 to 3,417 employees, while the number of undergraduates remained unchanged. Long before the asset-bubble burst, petition trustees pointed out that this was ruinous. Alumni voted petition trustees in on this platform of spending cuts, in a democratic process that, like an early warning system, let alumni out in the wide world warn the sheltered administrators of Dartmouth know that things were bad and about to get worse.
When the bubble burst, petition ideas that looked radical suddenly seemed to make sense.
I should say that I was the architect of the petitioners' campaigns. But we were
right. And now Dartmouth President Jim Kim is wielding a forceful veto pen.
Kim has been in office for nine months. In that time, he has replaced the Provost and the Vice President for Finance and Administration. He has placed all parts of the budget on the table, and has instituted a salary freeze. $17 million in assets will be sold off and building projects put on hold.
Perhaps inevitably, there's been a backlash. English Professor Don Pease importunately begged Kim, during a faculty meeting, to consider "the most vulnerable" professors. (Was he referring to the worst ones?) And 75 faculty have circulated a letter making this proud asseveration: "We reject the argument that we must make layoffs because our donors (present and future) are demanding that Dartmouth streamline in this time of economic crisis," which, boiled down to its sugars, says that "we shouldn't do layoffs just because we must."
Beginning in February, after a series of preparatory community confabulations, Kim enacted a plan that lays off 76 non-faculty staff and leaves the teaching force generally intact. A new Shakespearian was recently hired, who doubtless will have in mind wretched Falstaff's complaint in Henry IV: "I can get no remedy against this consumption of the purse: borrowing only lingers and lingers it out, but the disease is incurable."
But Dr. Jim Kim, who worked at Harvard during the woebegone presidency of Larry Summers, has taken the brash Summers model and improved upon it. He has directly told the Dartmouth community that the layoffs are not only layoffs, but actual eliminations of positions: those jobs won't be coming back, even as hiring continues apace in crucial faculty areas. All told, beckoned resignations, layoffs, and the elimination of open positions will cut the College payroll by around 350.
On the income side of the ledger, Kim has eliminated full student grants for students whose families make more than $75,000; and all such families must seek at least $2,500 and as much as $5,500 in loans on the private market each year their son or daughter is at the college. Tuition goes up a typical 4.8% next year.
There are of course facile ways to mend a money-losing college. Like the Obama Administration and Steve Jobs, Dartmouth and its elite peers have a main line into the bank accounts of America's middle and upper-middle class. Social mores compel parents to send their children to college and, like a ratchet, compel the best college into which a student is admitted. Simply hiking tuition is an option. Credit Dartmouth's Kim for eschewing raising prices in favor of structural changes that address the whacky costs of higher education.
But he has more work to do. Every college has crannies of spending that need only the light of day to show up. Joseph Asch, a Hanover resident and business owner, is now running for trustee, and he points out that Ivy League fringe benefits are a mite beyond lavish. Benefits paid out to Harvard employees are, on average, 27.9% of salary; at Yale, 27.5%; at Brown, 26.5%. All high. But at Dartmouth? 43%. If alumni elect Asch, it will be another sign that the standards of the competitive marketplace are coming to bear upon higher education.
It's not surprising that a cloistered institution like Dartmouth can turn on a dime, but it is nearly without precedent in having actually done so. If the rest of the Ivy League were as palsied as Dartmouth in abstruse, illiquid investment portfolios and a childlike insistence on spending with profligacy in boom years, then they too, would reach crisis. Certainly Harvard already has. The American college is still a wild land, where congeries of faculty would prefer a tribal hanging of a president who transgressed their politics than the avoidance of a budget collapse and massive layoffs.
Joe Malchow is a 2008 graduate of Dartmouth College and a writer based in Northern California. He has written for The Wall Street Journal, The Far Eastern Economic Review, and National Review Online. In 2004 he founded Dartblog.com, a widely read running commentary on culture, politics, and American higher education.