Thursday, August 21, 2008

Does Nonprofit Status Drive College Tuition Higher?

A story in CNN Money on the rising costs of college speculates that nonprofit status might be part of the problem. To quote the article:

Colleges could help ease the pressure by adopting cost-containment practices that are standard in private business. But most schools are nonprofits. And without the pressure to produce earnings, they have little incentive to slash expenses or improve productivity.

The question of managerial efficiency in nonprofits is a perennial one and part of the overall debate regarding whether nonprofits' performance should be measured by "efficiency" or some other standard. See, for example, David Brennan's article A Diversity Theory of Charitable Tax Exemption: Beyond Efficiency, Through Critical Race Theory, Towards Diversity and Darryll Jones' blog post back in January about this issue. But the CNN article and other recent articles about nonprofit hospitals requiring up-front payments and building facilities to attract well-heeled patients (see, e.g., the blog posts here and here) continue to raise questions about managerial decisions in an environment where managers have little accountability.

JDC

http://lawprofessors.typepad.com/nonprofit/2008/08/does-nonprofit.html

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