‘Soft Money’

I was well into my administrative career the first time I heard someone use the term “soft money.” It didn’t mean what I thought it meant. I thought it connoted something vaguely sinister, like a slush fund. It doesn’t. It refers to funding that comes with time limits, typically from external grants.

This piece from the Times about COVID funding isn’t about higher ed directly, but I recognized the dynamics. It’s about the mismatch between what would do the most good—sustained, consistent operating funding—and what’s politically available.

The piece details a cycle many of us have seen too many times. A public institution is underfunded for a long time. A crisis hits. Shortly after the peak, a pile of new public funding arrives. Between lag time and rules around spending, much of the money goes unspent for a while. Legislators decide that the unspent money was evidence that the institution wasn’t underfunded after all, so they revert to the previous austerity.

Part of the issue is that it’s hard to get, and keep, terrific people in large numbers when the money is time-limited. That’s particularly true when part of what makes them terrific is years of training.

But a more basic part of the issue is efficiency. Reliable, consistent operating funding—the kind that can pay salaries for permanent employees—can buy a lot more impact than the same amount of money thrown all at once after an emergency. In the context of public health, that means things like having epidemiologists on staff even when there isn’t a pandemic. In the context of higher education, it means supporting institutions through enrollment troughs.

The problem is that the most efficient and impactful use of money is also the least sexy. It’s not the sort of thing that politicians brag about during campaigns. “I supported raising community colleges’ operating funding by 5 percent!” doesn’t quicken the blood unless you’re a community college administrator. And we’re a small voting bloc.

Instead, funding is likelier to go either through students—thereby creating de facto upward pressure on tuition—or to time-limited projects. Both are worthy, and I can certainly come up with far worse uses of money than those, but they deliver less bang for the buck than direct operating support. With permanent employees, you can amortize the cost of a search over more years. They get through the low-payoff part of the learning curve and stick around as they get the hang of the place. Regular employees don’t usually have the external reporting requirements that grant-funded ones do; from the institution’s perspective, time spent on that is a deadweight cost. For permanent employees, the returns on professional development pay off for longer. And at a really basic level, it’s far easier for the institution to plan when it knows who and what it will have to work with.

Soft money beats no money, of course. But if states really want to get the most bang for the buck, and find their way out of the cycle of crises, hard money is even better.