“Money makes the world go round,” sings the Cabaret emcee. And it is unquestionably money that’s turning the wheel of decision-making at Millersville right now.

Two weeks ago, in an unexpectedly abbreviated column, I commented on the present “financial crisis” and the way the administration is framing it, and then suggested some alternative strategies that might alter our curricular and staffing habits in cost effective ways that did not sacrifice the quality of an MU education.

[If anyone wants to read the entire text of the essay, go to http://thesnapper.com/2009/09/23/millersville-financial-woes-do-not-shake-faculty/ or email me for a copy.]

I will talk more about that in the weeks to come, but it seems useful to understand how we got here before trying to figure out where to go next. As you will see, key financial incentives in the state system are stacked against educational quality.

Start with SHHE’s “Allocation Formula.” Each of the fourteen institutions is funded annually through a formula based on enrollment of PA resident students, economies of scale, student support costs, and relative physical plant costs.

The formula compensates each university more for some students than for others. Students majoring in science, health and art programs bring at least 40 percent more state funding than students in other disciplines.

Upper level undergrads bring more money that intro level undergrads and masters students bring greater state subsidies than do bachelors students. The thinking at work here is that instruction in some programs is more labor intensive (and equipment intensive, but to a lesser degree) than instruction in other programs. What’s the impact of this?

1. MU gets a certain amount of money per student (determined after the System office takes its cut for various system initiatives and performance funding), but only for in-state students.

It may not make financial sense to accept out-of-state students even if highly qualified students apply.

2. More money is rolling in for science students, art students and health professions students than for history students or education students.

I confess I am unconvinced that the development of a scientist or an artist requires more instructional time and attention than the successful development of an historian or an educator, but I’ll save that for a future column.

3. More money comes to us for each graduate student, and we charge them about 20 percent higher tuition, again because those students supposedly require greater faculty resources.

So now I’m left trying to figure out why we have just raised the cap on graduate classes to 30 if the funding formula “knows” that graduate students require more attention.

If you read the document that outlines the allocation formula (go to http://www.passhe.edu/executive/finance/Documents/Allocation%20Formula.pdf), you’ll hear the siren call of “entrepreneurial” revenue loud and clear.

Universities are encouraged to find ways to raise and retain revenue that does not rely on the state. Novel graduate programs, especially those that employ distance learning formats, make financial sense. So do plans that grant credit to adult learners for life experience.

Another tone struck clearly in the Allocation Formula document is that of “performance funding.” Universities get more money when they do better.

Upward of $40 million is divided among the fourteen SSHE institutions each year for “high performance.” What counts as high performance?

Performance money is awarded to universities based on some defensible success indicators (e.g. the number of degrees awarded, student retention rates, including second year persistence and four and six year graduation rates) on which we hold our own and two on which we do quite well (faculty terminal degrees and employee diversity). But not so hidden in the list of performance indicators are three “efficiency” metrics that can wreak havoc with educational quality.

The first is faculty productivity (total credits per FTE faculty). The second is personnel compensation as a percentage of total expenditures. The third is instructional cost for undergrad and masters costs per FTE student. Taken together, these measures reward larger class sizes and greater use of (cheaper) adjunct faculty.

Think about all of this. The university gets more money if it has larger average class size.

The university gets more money for in-state students and sciences and art students, even if those students don’t bring the highest averages and scores. And the university gets more money if we enroll more masters students no matter how we treat them.

The kicker is that those national rankings of colleges and universities we are so proud of, and that keep our profile high, generally reward those who admit better qualified students, mix in- and out-of-state students, and keep their student-faculty ratios lower (for both instruction and advisement) rather than higher, especially when they can do so at a reasonable cost.

What’s a president and her cabinet to do?

It is tempting to just to follow the money. The educator in me thinks it is also dangerous.