The short version: "A major factor driving increasing costs is the constant expansion of university administration."
At the university where a friend works, a huge amount of the staffing expenditure is on (rarely well-run) IT. Another big chunk of the staff is employed to essentially wrangle the part-time faculty who are on short contracts and don't stay for more than one or two years. I think that in many cases universities have turned to hiring staff to circumvent many of the political problems of trying to manage professors (edi…
The story has been related to me like this: Traditionally universities were heavily influenced by the faculty, who had big sway over big decisions. This all came to a head in the 80s when faculty and the administration disagreed over some big issue (like who should be the next president, I believe). The faculty and administration went to court, and the court ruled that the faculty were employees and the administration, essentially, had absolute power and could appoint who they wanted.
This precedent drastically changed how universities were run, and since then faculty has basically been eviscerated (both from a power standpoint and a pay standpoint, ala adjuncts) and universities are now run like businesses (top down management vs. a more distributed/democratic form previously). I haven't been able to find the court case or citations to back this up (closest is a book[1]), but it wouldn't surprise me if true. It would explain a lot that has happened, and if you combine it with other factors like government backed student loans, it's no surprise universities are cash cows run by feudal lords.