Letter from the President

REGULATING HIGH COSTS

By Gerhard Casper


When the National Commission on the Cost of Higher Education visited this fall, I raised a seldom-examined pressure on university costs (and, thus, indirectly on tuition): excessive government regulation. Tuition does not pay for regulatory costs ­ indeed, even full tuition covers only about two-thirds of the true cost of attending Stanford. However, the university is forced to pay regulatory costs from unrestricted gifts, endowment and investment earnings that otherwise might be applied to restraining tuition.

Gerhard Casper The costs of complying with federal, state and local regulations are considerable at almost any organization in American society. However, research universities bear some particularly irrational costs. Let me give you an example. Our dean of research, Charles Kruger, was working with a new faculty member to put in place some combustibles for a lab. These were non-toxic fuels and no unusual gases were being used, but meeting the government regulations still cost $600,000. Dean Kruger asked how many kilowatts of combustion were being produced and, when he got home, looked at the amount of combustion produced by his own home’s furnace and water heater. He found they were roughly the same. Now, housing in California is expensive, but no one would dream of paying $600,000 to set up a home furnace and water heater.

By extremely conservative accounting, Stanford absorbs approximately $21 million per year in ongoing costs related to compliance with government regulations. (And that figure does not include any capital costs.) This equals approximately 7.5 cents of every tuition dollar. And it does not even count the

President’s Column (Plain text)

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JANUARY/FEBRUARY 1998

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