To: Rutgers Board of Governors and Rutgers Board of Trustees



To: Rutgers Board of Governors and Rutgers Board of Trustees

From: Philip Scranton, Board of Governors Professor, History of Industry & Technology

Rutgers University – Camden

Re: Merger Mania

Date: March 25, 2012

On December 14, 2011, I had the opportunity to speak briefly at the Board of Governors meeting on the New Brunswick campus. I expressed my reservations about plans to merge UMDNJ with Rutgers University, focusing on three points. 1) Doing this in a rush as a legacy “achievement” for a retiring chief officer guarantees a disaster, as ample experience from business practices confirms. It may also derail the search for his replacement. 2) UMDNJ is a financial black hole, whose debts and operating losses will absorb unknowable hundreds of millions from Rutgers resources. 3) Revenues for all health services in the US are going to shrink, perhaps sharply, in the next decade, as no modern economy can long sustain spending 17% of GNP on medical treatments. Health care reform means lower government payments at a time when research dollars for medical faculties are shrinking.

This statement (attached) was presented before the announcement that, in order to facilitate the UMDNJ merger, Rutgers-Camden would be separated from the University and united with Rowan University, proprietor of the independent, newly-starting Cooper medical school. Over the last three months, nothing has contradicted or displaced my three objections. Indeed, Rowan’s presidential search has been abandoned and Rutgers’ process must be on life-support, as it’s long past time to have had on-campus interviews and presentations for the 1 July 2012 installation of Dr. McCormick’s successor. Funds for academic medical centers are widely recognized as imperiled by health care reform, as a PriceWaterhouseCooper report confirms.[1] Such medical schools/hospitals operate on a narrow margin, which is shrinking – at Cooper this margin has dropped from 5% in recent years to 1% at present.[2] Cooper will soon need major revenue infusions (not to speak of UMDNJ’s financial miseries). Rutgers pockets will be picked in the North for UMDNJ and revenues from what’s left of Rutgers-Camden will try to help keep Cooper afloat in the South. This is appalling; Rutgers University will never recover from such a politically-driven and educationally-senseless process.

Now, post-Barer, we do have the death of Rutgers-Camden to contemplate. Already a small, up-and-coming research university, RUC may be viewed as the nucleus around which a much larger South Jersey research university can be articulated. Such a vision is hinted in last week’s Rowan plan for reorganization of higher education in South Jersey.[3]

This report is rich with visions and buzzwords and thin on substance; it is a public relations announcement, not a planning document. It lacks a basic understanding of what a research university is, how one is built, how it functions, and how it is financed. Let me follow up on three points only, amid the vast array of conjectures and imaginary futures the report offers.

1) What is the teaching expectation at a research university? At Rutgers and comparable AAU institutions, it is four courses annually, though grant funds can be used to reduce that load to enhance research. The expectation is that faculty will use half or more of their time during the academic year, and most of their summers, for research work. And we do, across the University. What is the teaching load at Rowan University? Eight courses annually, leaving minimal space, perhaps in summers, for research commitments. Before coming to Rutgers nearly 30 years ago, I taught for a decade at a small college with an 8-course load; that was not a research-supportive environment. So what has to happen to faculty loads in order for our Rowan colleagues to have research university conditions for their inquiries and projects? Rowan University must install an across the board four-course teaching expectation, bringing their practices up to the AAU standard. Of course, were this done, perhaps a thousand or so courses would not be staffed, as teaching loads would have been halved. The correct response would be, again with a research university vision, to roughly double the size of the existing Rowan faculty. Alternatively and more realistically, administrators could increase the full time faculty by 50%, and recruit part time adjuncts to cover the other, say, 500 courses.[4] Nowhere in the Rowan “plan” is there discussion of HOW to transition a teaching-centered institution into a research university.

Rowan on its own is plainly not a research university; having the state government “certify” the merged unit as a research university will embarrass New Jersey nationally, among educators and thoughtful leaders, private and public, just as having Rowan become an underfunded, failed, and sham research university will be a permanent tragedy.

2) What is this transition going to cost and where are the funds to be located? Increasingly, not least in the recent report on the Board of Trustees meeting last week,

the question of UMDNJ’s finances has come into focus. Well and good, as they appear to be both opaque, and behind that wall, a mess. However, somehow the question of what it will cost to create the Rowan takeover in South Jersey has escaped attention. To take only one aspect of the problem, will Rowan make an independent effort to create a research library and research-fostering IT capacities comparable to other leading universities? Rowan’s library is one-eighth the size of Rutgers’ library, and the Rutgers Library System spends $6.4 million annually on electronic resources (journals, databases, et al.). What plans has the merger promotion team to secure comparable, permanent funding for such resources, and for equivalent computing power for scientific research – equivalent to that now available at Rutgers?

If the Cooper medical school is likely to be siphoning revenues away from RUC-Rowan, where’s the new funding stream located? The state legislature has been cutting its support for higher education for decades, now, so securing, to repeat, PERMANENT flows to undergird the costs of operating a research university will be a massive challenge. For example, to get a $6 million annual payout for computers/libraries from endowment proceeds would demand an increase in the new university’s endowment of roughly $135 million (at a 4.5% draw rate). Plausible? Hardly.

This discussion focuses only on the research university issue, not the costs of re-branding, creating computer system compatibility, merging the two business schools, and replacing those Rutgers Camden faculty members who, doubting the plausibility of the scheme, choose to seek to develop their research and professional careers elsewhere.

3) Last, why do we face the politics of urgency? When I objected to the initial proposal in December, it seemed clear that the President and Governor Christie were in a great hurry to get the deal done by July 1, 2012, the closing date for Dr. McCormick’s term. Precisely because of this, nothing even approximating the planning for the prior merger, attempted in the Vageolos years, was attempted. Due diligence and deep data - not public relations and bullying – could be the key to making sensible and defensible judgments about the current prospect. There is no logic whatsoever (other than that of political backscratching) to creating a set of consortia agreements in the Rutgers Newark complex and not doing the same thing in the South. No thought has been given to the unintended consequences of racing to the finish line to complete this ill-considered merger. As one of my colleagues noted recently, any CEO who tried such a quick-and-dirty reorganization would face shareholders lawsuits instantly, as shabby planning and rushing to judgment invariably damage asset values. Yes, if Rutgers rejects this whole scheme (as the Governor says, it’s all or nothing), Dr. McCormick will be disappointed and Governor Christie (and George Norcross) will be angry. But they get angry a lot, and they make repeated threats about the consequences of not going along with their plans. So be it. We are Rutgers, the State University of New Jersey, and we hold (and are held) to a higher standard of behavior, thoughtfulness, and responsibility than political actors accept. Say no to the whole package; it’s a walking disaster that will damage Rutgers immeasurably.

----------------------------------------------------------------------------------------------------------

My 12/14/11 statement to the BOG

I’m Phil Scranton, Board of Governors Professor of American History at Rutgers Camden, and a specialist in business, economic and technological history. I’m grateful for the opportunity to register my opposition to item 8a [the RUNB/Robert Wood Johnson merger].

Three points in three minutes. First, an undertaking on this scale in the final year of our President’s term is poor business policy. Exiting CEOs have a terrible habit of attempting ambitious legacy projects, leaving their successors with a mass of unanticipated consequences. This merger project will thus have a negative effect on the pool of scholar-administrators who may succeed President McCormick.

Second, as UMDNJ President Owen noted last year in testimony to the Life Sciences Task Force: “payment for healthcare services is decreasing, and market place competition for patients is increasing; donors’ portfolios have lost 35% of their value, their owners cannot be as philanthropic as they were and research appropriations are down... UMDNJ has cut its recurrent expense base so much that the quality of instructional programs are threatened.” UMDNJ is financially troubled; Rutgers has a $100 million surplus this year. I worry that UMDNJ is looking for a pocket to pick, and that it’s our pocket.

Finally, long term prospects for health care spending in the US are dreadful; we have overemphasized this sector for decades, starving investments in education and innovation. As Andy Xie wrote in Monday’s Market Watch column: “Excessive health care spending ... eclipses the U.S. trade deficit in seriousness. Some 17% of the nation’s GDP is spent on health care — twice as much as in other developed economies... Unless these costs are brought under control, America will never resolve its fiscal crunch.”

This nation cannot and will not sustain such spending. The percentage of GDP devoted to health care must and will fall, shrinking revenue streams to medical schools, hospitals, researchers, as the medical establishment increasingly represents an obstacle to sustainable growth. In ten years, universities without medical schools and hospitals, universities like Rutgers and Princeton, will be celebrating, while those with med schools and hospitals will be suffering. Seeking to add a medical school to Rutgers is a dated strategy – as my students would say, SO Last Century. Rutgers needs, genuinely needs, to discover educational growth paths for the 21st century, rather than chasing a prestige bubble which will burst in all our faces.

-----------------------

[1] See The Chronicle of Higher Education at:



[2] See Philadelphia Inquirer, “Powerful Medicine,” March 24, 2012 at:

[3] Available at:

[4] The New Jersey Student and Parents Consumer Information Website has comparable data for Rutgers and Rowan faculty numbers and teaching work. Rutgers had at the last semester reported just over 2,000 full time tenure track faculty teaching just under 4000 courses (2/term). It also had 1100 full time non-tenure track professors and 1500 part time adjuncts, together teaching just over 3,000 courses. Rowan by contrast had 341 full time tenure track professors teaching 1261 courses (3.7/term), plus 700 full time non tenure track and adjunct faculty, offering 1300 courses. Reducing the teaching load for the 341 FT tenure track Rowan faculty to 2 courses per term would mean that 540 courses per term would need to be staffed. On a 2/term load plan, Rowan would need to hire 270 new full time tenure track faculty to fill these 1080 classrooms. Without taking startup packages for scientists and others into consideration, and estimating conservatively $60k starting salaries (less in humanities, more in sciences), this would add $16.2 million to the permanent payroll, not counting benefits. For data, see and RU_ConsumerInfoActIndicators2011_11111.xls For option two above, Rowan would need to locate another 250 adjuncts, plus hire 130-140 full time faculty, but the adjuncts would have to be found locally.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download