To:  Dean, UCLA School of Public Policy and Social Research

Fr:  Ryan W. Ozimek Ų Ozimek Consulting, LLC

Re:  Restructuring SPPSR Computer Lab Policy


Summary:

 

            UCLA‚s School of Public Policy and Social Research (SPPSR) is facing a common problem found among universities nationwide:  educating students using the best tools possible on a shrinking fiscal budget.  As computers become more a part of our everyday life, social scientists increasingly depend on them to aid in solving social problems.  At UCLA, the total costs associated with this dependency increased more than 75% over the past eight years as student enrollment and the price of computer related goods rose.  Costs of running the SPPSR computer lab are currently so far over budget, that even a 40% cut in expenses will continue to run a deficit.  A table of financial figures covering 1993-2001 depict the following stark realities:

 

Š        Overall costs of the lab increased 75%

Š        Equipment costs more than doubled, but are currently steady

Š        Students are fickle about any fee increase

Š        Faculty members value other, unspecified educational activities, more than the computer lab

 

            It seems clear that if the SPPSR wishes to maintain a $100,000 budget for a program that current runs at $175,050, serious cutbacks will be required from all parties to reach a conclusion that appeases everyone.  Before any measures are taken to relieve this problem, a full inquiry into student demand for the computer lab must be undertaken. Without results of a survey of student demand, this report will be based on educated estimations of student willingness to pay structures.

 

            Nevertheless, we find that the computer lab has high inherent value to the majority students, and being such we believe the program should be left intact.  In order to keep the facilities open, we recommend that the School cut computer lab costs 25% across the board, along with the addition of a $15 per quarter fee for unlimited access.  Drastic times call for drastic measures.


 

How Did It Get So Bad?

            It‚s safe to assume costs will rise each year.  This increase is commonly associated with inflation, but more often it comes in response to higher consumer demand.  The rising costs at the SPPSR computer lab are a combination of both.  In order to maintain a sufficient number of computers and accessories as student enrollment increased, the lab quickly departed from the $100,000 budget cap.  Between the 1995-96 and 1996-97 school years, the total costs of the computer lab increased more than 25%.  Since that time, however, the costs have risen no higher than the rate of inflation (approximately 3.5% per year).  This steady rise is a good sign that School has costs under control, but with such a deviance from the budget cap, cost cutting devices will need to be brought into effect.

 

Are Costs Outpacing Benefits?

            The staggering costs figures tell us only one side of the School‚s cash flow.  Missing from our data sets are statistics on the demand side.  How much are students willing to pay for time in the computer lab?  How many students have computers at home?  When does computer lab use peak?  Without answers to these three simple questions, much of our work becomes speculative.  It is possible, though, to make reasonable estimates on computer usage.  Let us assume that in this technologically advanced age, 80% of students have home computers.  We can further assume that most of these computers have the basic applications one would expect to find on a college student‚s computer (word processing, spreadsheet, and Internet applications).  If we put a price tag on the average computer „unitš of $1500, then we can say that the average benefit of having a home computer would be at least $750 per year.

 

            Home computing and school computing definitely have their differences.  Home computers give the user the added benefit of 24-hour access.  On the other hand, school computers provide fast Internet access, expensive software, and on site technical support.  A conservative estimation of the benefit of having access to a school computer could be $350 per year, less than half the benefit of a home computer.  If you compare this figure to the average cost per student ($218.81 in 2000-01), you end up with a benefit/cost ratio of 1.6.  Students are reaping an enormous benefit with respect to the costs the School must pay.  This lopsided ratio might signal that students should foot some of the bill the School is currently paying for their large benefits. 

 

Solution:  Cut Costs, Raise Fees, Decrease Hours

            The computer lab divides the School into two opposing sides:  the students, who believe that the lab is a necessary part of the educational experience, and the faculty, who think the bloated computer lab budget could better be spent elsewhere.  Below these superficial reasons are the true demands of each side.  Students want to feel that they are getting their money‚s worth of an education.  As soon as School officials begin charging for items they have taken for granted, it will feel to them that a „rightš has been taken away.  Faculty, on the other hand, want to make sure money isn‚t wasted, and that any „poorlyš spent money should be diverted to their sectors of the department.

 

            Before either side can be satisfied, both sides need to concede part of their demands in the name of cost cutting.  For without cost reductions, the lab will be under-funded, and neither side will gain any benefits.  Our solution has three parts:

 

Š        Flat fee of $15 per quarter

Š        Cut costs 25% across the board

Š        Close lab on lowest demanded day

 

We‚ll move through each part one at a time to breakdown the calculations that led us to these solutions.

 

Flat fee of $15 per quarter

            Our first recommendation is to place a $15 flat fee per quarter for unlimited use of the computer lab.  The limited data we received on the usage of the computer lab helps us little, but without new income from students, the lab will continue to run a deficit.  We recognize that a fee of any kind will lead at least 25% students to stop using the lab, however, we believe that these students are not the School‚s „high-endš users.  Students that are fickle about fees very likely either have computers at home that are better substitutes or cannot afford the increased fee.  The department might be able to use discretionary funding to give „scholarshipsš for those that cannot afford the $15 fee.

 

            The $15 fee is calculated from the Assistant Dean‚s idea of a $3 a week fee.  If we assume that students only use the lab five weeks out of the quarter, then the total revenue per person would be $15 per quarter.  Total revenue from students under our plan would be $27,000 (see Figure 1).

 

            As compared to the proposed $3 weekly fee, a flat fee will allow for a minimal lump sum amount rather than spreading an inconvenient charge every week.  By charging the flat fee, the School can capture a larger amount of the student‚s economic surplus by charging them right after a school break, a time when students often have higher incomes.  The flat fee also captures the student‚s surplus by collecting money for „unlimited useš when we safely assume that most students (over 80% of which have computers at home), and are „light-usersš of the School‚s computers.

 

Cut costs 25% across the board

When costs are more than 75% above budget, and very few sources of additional income abound, drastic cost-cutting measures are necessary to smooth out a deficit running department.  If 25% less students use the lab once the fee is placed, we can estimate that the costs associated with the lab should decrease as well (approximately 25%). 

 

            Currently, total yearly costs swell to $175,050.  A 25% cut across the board would drop costs by $43,762.50 a year.  The exact placement of these cuts would depend on statistics of computer usage by students.

 

Close lab on lowest demanded day

            After the School completes a thorough investigation of students‚ computer use, we recommend that the computer lab shut down on the lowest demanded day.  Very likely, the lowest demanded day will be Friday, when most students stay off campus.  Low demand on Friday, coupled with the projected 25% drop in usage, should allow the School to shut down the computer lab without much outcry from the students while helping the 25% cost cutting measures.

 

Possible Alternatives

            Cost cutting doesn‚t only affect fiscal measures, but also political relationships.  If the administration decides to cut costs drastically, as well as increasing revenues, it may negatively affect relationships of the administration with students and faculty.  Should you feel that the political costs of our recommendations are too high, we recommend that you pursue a less drastic approach.  For instance, you may need to rethink your goal in meeting a $100,000 budget cap by next year.  Instead, a five-year cost cutting approach might work better.  At this rate, students in each class will be less affected by the cost cuts, and the negative political costs associated with the cuts can be spread over three classes of students.  Additionally, political costs associated with the faculty can be mitigated through the implementation of a policy that sets aside more hours in the computer lab for classroom instruction.  This would cut into the time that students could use the computers outside of class, but could quell upset faculty members who believe that money was taken away from classroom instruction to subsidize the computer lab.

 

Conclusions

            University administrators understand the difficulties that arise when they try to appease everyone when a school must undergo drastic cost cuts.  In our case, we must weigh the costs and benefits of the computer lab to both students and faculty.  Bringing a budget back under control within one year is extremely difficult, but with our three-part plan, we believe that both students and faculty will be satisfied with the results.

 

            Administrators should try to explain to the vocal students the true value of having a computer lab available to them on campus.  Remind them that more than 80% of students have computers at home.  Clearly post the results of the computer lab usage study, which very likely will show minimal use during Friday and infrequent use by most students.  Inform the protesters of the scholarship fund for students that cannot afford the added costs.  By taking these measures, the administration can implement a budget policy that satisfies their fiscal needs and student‚s reservations.

 

            This new policy will also please the faculty members.  By cutting costs by more than 75%, the School frees up money that can be used in other „educational activitiesš that the faculty could have a larger voice in determining its allocation.  The administration should meet with faculty leaders to explain how the School has changed its fiscal situation, and assure them that students will still be well equipped for their classes by showing figures from the computer usage survey that show most students have their own computers at home.

 

            The computer lab is a valuable part of the educational experience, both for students and professors.  This policy provides a path for cutting unnecessary costs, acquiring new streams of income, and keeping the facilities open only when students truly demand it.  Students and faculty will both come out of this policy better off, and the administration will be able to move from this problem without damaging the relationship between each group.