Who owns universities?  It seems like a simple question but it’s actually deviously complex.

Some universities have actual owners: globally, about two-thirds of higher-education institutions are technically private, through there is some dispute how to count institutions which are not state-owned but accept state money as operating grants (in Canada, this would include McGill).  Most analyses make a distinction between for-profit and not-for-profit institutions, and that is a useful distinction in some respects: for-profits are never particularly reputable, whereas in some countries at least (e.g., the US, Chile, Japan) at least some of the not-for-profits top the prestige rankings (e.g. Harvard, Stanford, Pontificia Universidad Catolica de Chile, and to some extent Waseda & Keio).  But it’s not a perfect distinction, because of course the definition of “profit” and “nor-for-profit” can be a pretty fine line.

I’ll give you an example.  I was once at a private university in Puerto Rico (which, in terms of higher education systems, looks a lot more Latin American than USA-ian) that was essentially family-owned: both the administration and the Board of Directors were stacked with members of a single family, one of whom was also President.  But still, it was considered not-for-profit, basically because of how the budget was structured, surpluses were either retained within the corporation or distributed as salary to the top (family) administrators.  I am simplifying here, but a university with a primary surplus of $1 million that pays out that money as a dividend to an owner is for-profit: a university with a primary surplus of $1 million which pays out that money to a number of individuals within the organization as salary/performance bonus is a non-profit.  Basically, the profit/for-profit distinction has nothing to do with whether or not an institution earns more money than it spends, it has to do with how those surpluses are corralled and distributed. 

Once you realise this, you start to realise that some of the for-profit/not-for-profit distinctions are more porous than they appear.  Last summer, for instance, there was a spate of introspection in the US about predatory master’s programs at prestigious Ivy league not-for-profits: in terms of exploitation, how different is an MFA program that charged well into the six figures for a two-year degree different from a low-quality/high-price private institution such as the ones Tressie McMillan Cottom wrote about in her brilliant Lower Ed?  Not very much, from some perspectives.  In fact, really the only difference is how the money is distributed: at predatory for-profits, it goes to owner’s pockets; at non-profit institutions, the institution goes….well, where exactly?  The endowment?  And where does that go, in the end?  The answer, at the end of the day is that it gets spent on academic amenities – better libraries, better labs, nicer buildings, more research stipends, bigger scholarships which attract brighter students to campus.  In other words – and I’m being slightly cynical here – to a large extent it benefits professors, because this is all money that one way or another makes their jobs more delightful in various ways.  Arguably the difference between profit/non-profit is not one of legal status but simply one of how surpluses are directed.

I could extend this comparison into public institutions, too.  The University of Toronto routinely posts nine-figure surpluses, in large part because it can get away with charging extraordinary fees to international students. That money does not go into anyone’s pockets directly.  But U of T certainly manages to pay its staff better than any other university in Canada.  It has pockets of money to do any number of amazing things.  No one is “profiting”, exactly, but surpluses are being generated and these surpluses are being spent in various ways that benefits groups within the university.  And while U of T may be unique in the size and consistency of its services, it’s hardly alone in Canada, as I have pointed out here for instance.  There are a lot of pretty big institutions running pretty big surpluses.  And it’s worth asking the question “who benefits”?

It’s not enough, it seems to me, to simply say “well, it’s a public university” and wave this issue away.  Public universities may not technically be owned by anyone but their trustees/Governors (acting on behalf of the public, natch), but if they continually generate surpluses beyond those necessary to maintain prudent reserves, then it’s worth asking the question about how these surpluses are directed to various causes within the university.

Now some people will try to analyse this with a labour-management lens.  This approach usually comes back with a host of complaints about administrators spending money on buildings rather than staff.  But this seems to me to be an argument about means rather than ends.  Nobody seriously suggests that administrators pocket extra money from investing in buildings rather than investing in salary; they rather are arguing about whether one has a better return on investment that the other.   Better buildings might mean better students, or happier students, or students more willing to pay tuition, or whatever – it’s still all meant to result in higher income in the future which can be spent in various ways to benefit groups within the institution.

It seems to me therefore that while there may be some benefit in analyzing universities’ behaviour in terms of legal status (for-profit/non-profit, private/public), in practice the way this needs to be analyzed is in terms of “who benefits”?  And this is really hard to do because the array of forces vying to affect the way money is spent can be quite different from one institution to another.  At some institutions, the “prime beneficiaries” of surpluses are top researchers who get spanking new facilities.  At other institutions, the “prime beneficiaries” are probably academic staff in departments who are receiving whacking huge cross-subsidies from other parts of the institution (which departments these are will vary from place to place depending on enrolments and how funding formulas weight various disciplines, but you can usually bet that high-cost science departments are in the mix).  If you want an appropriate economic analogy, think of self-managed worker co-ops, say on the Yugoslavian model.  Sometimes they appropriated capital properly and the institution worked; in other cases, factions within the organization came to “capture” decision-making within the institution and use that capture to systematically divert resources to certain areas. 

Anyways, long-story short: even if public universities aren’t “owned” by anyone, as long as they are generating consistent surpluses, it’s worth looking at how those surpluses get allocated in practice, because “who benefits” is often at least as relevant a question as “who owns”.