May 1

The Spending Side of the Equation

©istockphoto/bluestocking

“The Growing Imbalance: Recent Trends in U.S. Postsecondary Education Finance,” is the result of an unusual attempt to change the way colleges and policy makers analyze higher education. The report — issued for the first time today and now to be an annual project — examines not only revenues, but how colleges actually spend their money.

After years in which people have read about tuition going up, and about state support covering smaller shares of public higher education budgets, the idea is to focus on what results from these and other trends. Some of the findings challenge conventional wisdom — such as the widely quoted belief that the top expense for higher education is the personnel costs associated with professors and other employees.

The report was produced by the Delta Cost Project, part of the Lumina Foundation for Education’s Making Opportunity Affordable program. The overarching thesis of the work is that higher education will do a better job of serving students if everyone is aware of where the money goes — not just how much college costs. By examining the different spending patterns at different types of institutions, the report notes growing gaps among sectors and among items receiving financial support. For example, spending per student at private research universities is almost twice that of public research universities.

The following data show both the public-private gap and the relatively small share of funds that goes to instructional costs (faculty and departmental costs related to what goes on in the classroom), compared to other education-related costs (such as student services and admissions) and non-educational costs (primarily research and service activities).

Median Spending Per Full-time Enrolled Student, 2005, by Sector

Sector	Direct Instructional Costs	Other Educational Costs	Non-Educational Costs	Total
Private research university	$14,134	$11,214	$8,940	$34,288
Public research university	$7,255	$4,416	$9,393	$21,064
Private master’s institution	$6,577	$8,520	$693	$15,790
Public master’s institution	$5,064	$4,620	$1,734	$11,418
Private bachelor’s institution	$6,655	$10,598	$1,208	$18,461
Public community college	$4,051	$3,976	$1,092	$9,119

While the disparities in these figures alone may raise questions to many people, the report notes other factors that may make the figures even more troublesome. One is that spending per student at public community colleges and master’s institutions has gone down, as enrollments have grown and increases in support for these institutions have been modest. Another key factor is that the institutions that spend less and are heading downward in spending per student are the very institutions (along with for-profit institutions) that are enrolling a disproportionate number of the minority and first generation college students whose arrival in higher education is seen by many as crucial to the country’s economic success.

Further, across sectors, spending on instruction has become relatively flat, and is increasing at slower rates than in the past. For example, at private research universities, the report finds that the average percentage change in median spending per full-time enrolled student on instruction was 2.2 percent in the period 1987-1996. But in the period 1998-2005, the increase was only 1 percent. (For public research universities, the figures were 0.5 percent and 0.4 percent in those two periods.)

Jane Wellman, executive director of the project and author of the report (along with Donna M. Desrochers and Colleen M. Lenihan), said that while the data are not shocking to those who work in the field, “a lot of people will be surprised that the big driver of spending is not instruction.”

Another surprise to some, although probably not to those at public colleges, will be the gap in public-private spending rates. “The private research universities are really pulling away,” she said.

In addition, the data raise questions about some of the common strategies suggested for public higher education to support its mission at a time of constrained state budgets. While the data clearly show that public research universities attract considerable research support, that money is for specific projects and has not closed the gap in instructional spending, Wellman said. Further, even as public colleges have raised tuition and raised much more money from private sources, those funds have only made up for some of the losses in state support and have not allowed public higher education to keep up with the privates.

Too many legislators, Wellman said, believe that “if you cut money for higher ed, you can replace it” with tuition revenue and fund raising. The reality, she said, is that “there is no more private money pay for the enterprise than there was 20 years ago.”

“They can’t fund raise their way out of this,” she said.

The dramatic gaps between public and private spending are in large part attributable to the category of non-instructional, education related costs. At research universities, private spending is more than twice public spending per FTE.

This is where spending is on “amenities and the arms race” of competition, Wellman said — especially in student services. Many critics of higher education focus on this type of spending, equating it with the much discussed competition for the best climbing walls in campus recreation centers. Wellman stressed that much of the spending in this category is actually very focused on education: computing, advising services, counseling services and so forth.

Much of this spending is also “consumer driven,” in that colleges are responding to their perceptions of services that students and parents want, she added.

Wellman stressed that the idea of pointing out this and other spending patterns was not to declare such spending bad, but to ask questions about whether it was justified by evidence. “Better counseling might be a cost-effective expenditure,” she said. But the question colleges may want to ask is whether they can show that. Does spending on a new writing center translate into better student performance in the classroom and in turn to better completion rates? Asking such questions, Wellman said, would help colleges identify both areas for improvement and areas for cost savings (or even more spending).

Similarly, she said that focusing on spending will draw attention to the questionable impact of tuition discounting. Advocates of tuition discounting tend to focus on the impact on applications or yield rates. But looking at spending draws attention to the way tuition discounting (when not needed to provide access for low-income students) reduces tuition revenue, and in turn reduces available funds to spend on educational needs.

Along with the data on spending categories, the report includes sections examining tuition and demographic trends. But the portion of the report that is notably different from other analyses is the emphasis on spending. In keeping with the idea of the Delta Project, the data are being made available for use by colleges and others seeking to do their own analyses. Regional groupings — broken down by sector — are also available on the project’s Web site.

What this all adds up to in the report may depress those writing tuition checks. For while the report finds evidence of cost cutting, especially in the public sector, there is no evidence that the changes have led to tuition reductions. And so students are left with insufficient data, the report says, on what they are getting for their tuition dollars. There may be good answers, but the report suggests that they haven’t been offered in enough detail to date — either by colleges or by the state lawmakers who are making decisions that dictate both tuition rates and college spending patterns.

In the report’s closing section, it poses two questions: “Are college tuitions rising because spending is growing? If so, where is the money going?”

The answer: “For more than three-quarters of the students enrolled in higher education, the answer is no: Students at public institutions are paying for a higher proportion of costs, but their money is not translating into a higher level of service. These students are paying more, and getting less. For students in private, nonprofit institutions, the answer is clearly yes: Students are paying more, and the institutions are spending more. But even here, there is not clear evidence that greater spending is translating to improvements in degree productivity.”

— Scott Jaschik

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Comments

The report described in the article seems long overdue, but who will pressure colleges, especially elite colleges charging nearly 50K annually, and allocating only a small segment of their total revenues to instruction and instruction-related costs, to disclose this information to constituents such as faculty and students? The particulars relating to the budget in many colleges are a carefully-guarded secret known only to finance officers.

When self-regulation has consistently failed to produce responsibile management and has led instead to illogical excesses on the fiscal front, the constituents who lose out the most are students and faculty. And yet, until recently, all calls for greater accountability have focussed on these constituents through calls for student and curricular outcomes, areas which have strong self-regulatory measures built into their structures.

But the area that requires the greatest scrutiny, regulation, and accountability is that of finance, a realm of higher education tightly controlled by finance officers who by their very role are more inclined to fund divisions such as Admissions and Advancement over Academic Affairs and Student Life.

If this study prompts calls for greater transparency on fiscal matters by students and faculty, it may stem this disappointing trend which has gone unchecked for the most part, especially at expensive private institutions.

Greyerson, at 6:20 am EDT on May 1, 2008

No surprise here

No surprise here as state cuts have resulted in increasing tuition most of which never seems to end up in the classroom. The budget is so out of wack that the College of A&S is actually running a surplus (based on number of credit hours taught * cost per credit hour) and this money is going to support other things on campus, law school, business school etc. I look forward to the day mean someone actually steps up and says this is crazy.

UK prof, U of Kentucky, at 7:00 am EDT on May 1, 2008

The Basics

Nice work! A thorough exploration of the reasons is a large volume in itself but it never hurts to revisit the basics. We can say this about the institutions and attendant condition we bemoan:

1. We fund these institutions to achieve poorly defined and often conflicting goals. 2. The fuzzy goals are defined in ways that are largely immeasurable. 3. We accept irrational arguments from the institutions that they must self-regulate. 4. Inhabitants of these institutions have few, if any, real incentives to be efficient. 5. The systems of oversight that accredit and regulate these institutions are guilds which primary interest is self-perpetuation. 6. The word ‘efficiency’ does not appear in the language of the accrediting and regulating bodies. Words to the effect, “Hire lots of people like us” appear throughout. 7. Private institutions receive roughly 70% of the taxpayer subsidies accorded to public institutions but the public is largely unaware of this; only the for-profits return funds to the taxpayers.8. The nominal clients of these institutions are primarily students but the defacto clients are the faculties.

Solutions? Again a volume is required but the thin end of the wedge involves creating top-to-bottom incentives for efficiency (this subsumes effectiveness toward defined goals). Sometime in the 21st century, institutions of higher education will be compensated for demonstrated learning outcomes, impact, proficiencies, etc. calculated as net value-added. Probably not this year, though.

Robert Tucker, President at InterEd, Inc., at 12:05 pm EDT on May 1, 2008

No Surprise!

The front line administrators at our college have NOT had a salary increase in five of the last six years. Think about paying for 2008 exspenses with 2002 salary. Makes you want to leave your high paying job in the private sector right.

If it is not going to instruction, and we are not getting it...hmm?

Unionized Civil Servent, at 12:20 pm EDT on May 1, 2008

Open the Books

The next step should be for state legislatures to require open books at all public universities, and for alumni and professional organizations to encourage the same at private universities. Is it possible to make financial information public in this way? You bet. It’s already been done, and it’s been reported right here at Inside Higher Ed:

http://insidehighered.com/news/2008/03/07/financial

R.J. O’Hara, at 1:20 pm EDT on May 1, 2008

Logic bomb?

So the top colleges and universities in the world graduate individuals who are highly sought-after by business, industry, and other institutions of higher education internationally, and

proprietary colleges, that have as of late had many problems with their recruiting and program-completion rates (and their students default on student loans at the highest rates), and these proprietary colleges spend little on amenities. . .

“Better counseling might be a cost- effective expenditure,” she said. But the question colleges may want to ask is whether they can show that. Does spending on a new writing center translate into better student performance in the classroom and in turn to better completion rates? Asking such questions, Wellman said, would help colleges identify both areas for improvement and areas forcost savings (or even more spending).”

How much research will be necessary to show the qualitative difference between the best public institutions, the best private institutions, and the for-profits?

Where is the national/international model for a great store-front college/university with no counseling, no library, no student organizations, scores of well-paid instructors (who do no research) who have had no silly “Educational Pedagogy” training, that routinely graduates highly sought-after alumi?

If your first answer is: correspondance schools from the early 20th century, we need a loud buzzer to deliver a long & loud razzzzzzz-berry for you.

Dr. F. Gump, at 2:20 pm EDT on May 1, 2008

Salaries

Well, at my big Public Research University, the money DID go to the administrators. Not only have we added more administrators, but their salary increases, at a time when the state gave the institution less money than in previous years (our current state contribution is still in actual $ amounts below that of 2002) and tuition has almost doubled from that in 2002, administrators’ (current people, NOT new hires!) salaries increased on average by 3.6%/year, which is above the CPI, while faculty and staff salaries increased on average by 2%/year which is below the CPI! Conclusion: The additional tution money in large part went into administration!

Non-Unionized Faculty Member, at 2:20 pm EDT on May 1, 2008

Non Union Faculty

I feel your pain brother. I bet you are paid more than me though. Our faculty got raises in excess of 3.5% over the six years in question here and are already among the highest paid faculty of any public 4 year in the country. We got the big goose egg for five out of six.

Maybe we should switch schools...

Unionized Civil Servant, at 4:05 pm EDT on May 1, 2008

Spending has gone up on non educational items because funding for those areas has increased much faster than other funding. Mostly I am talking about research funding at major state research schools. While state funding for education has dragged, Federal and other research funding has increased rapidly. So of course more money has gone to things other than the classroom—but it never was available for the classroon either as research funds can only be spent on——-research.

Frank, at 6:30 pm EDT on May 1, 2008

Auxiliaries

Very interesting. I realize this is a spending study, not a funding study, but I would throw into the discussion the role of auxiliary services. I’m guessing they fall under the “Other Educational Expenses” category, but are self-supporting (or revenue generating) through targeted fees. For example, students who live in singles in new buildings pay more, and students who live in doubles in older facilities pay less. Those who eat a lot pay more for a meal plan than those who don’t. These fees are not, nor should they be, comingled with instructional costs. Because they go into, and come out of, separate pots they neither add to nor detract from instructional funds. I would also add that, at many institutions, the student activity fee (which tends to be used for those “other educational expenses” such as counseling and career services) sends the largest percentage to support the athletic programs.

Dr. Hied, at 6:30 pm EDT on May 1, 2008

Missed Connections

The effects have been pretty well characterized, but this article does not really get to actual causes. Why indeed have non-instructional costs grown? What drives decision makers to allocate money to non-instructional tasks? I’ve got two thoughts on that subject.

1) Government regulation of higher education has grown substantially in the recent past. It drives admissions and hiring processes, requires expensive record-keeping and doesn’t contribute directly to educational quality. Want to cut costs? Radically reduce regulation.

2) Academics themselves in their drive to “publish or perish” are behind the growth in non-instructional costs in research institutions. This is why the growth in non-educational costs in community colleges and the like has been checked. The individual career ambitions of the faculty drive greater and greater amounts of their time into research and away from what I consider the other two pillars on which higher education should stand on a) teaching and b) community service. Instead, the professoriate is collectively and individually fixating on research because it is how they are measured for career advancement and tenure. Make high quality teaching count, and individuals and institutions will respond. The day of the 500 person undergraduate survey class should go away with the dinosaurs. Otherwise have the lecture done once, video it and fire the professor. The TAs are doing all the individual instruction anyway. And its no secret folks. The paying public has figured out the scam.

R. Vance, SBCC, at 9:45 am EDT on May 2, 2008

Non-educational Costs

I’d like to echo Frank’s comment and expand on it just a bit. Since non-educational costs include externally funded research, that category is terribly misleading. The University doesn’t get to choose how to spend that money. As a faculty member, I choose what grants to apply for and how to spend the money. My dean can’t decide to take that money and hire an extra prof. If the message people take away from this report is that we can lower education costs by getting rid of climbing walls, it will all be for naught. Yes Inter-cultural centers, reading/writing help centers, computer labs and student lounges cost money, but they are small potatoes compared to the hundreds of millions schools spends on research each year (all funded by outside grants). The better questions to ask are the following: 1) How are tuition dollars spent? 2) Where does university revenue come from? How much comes from the following categories: -tuition, spendable alumni donations, endowment earnings, external grants, state support, corporate donations 3) In what ways are these revenue streams restricted?4) How is revenue from each stream spent?

anon prof, at 10:30 am EDT on May 2, 2008

Sunshine Laws

All public institutions should be required by law throw open all their financial records to public scrutiny.

Most importantly, all Teachers Unions and any other related Unions should be required to do the same.

Every last coin should face the scrutiny of open examination.

Dantana, Unions?, at 10:30 am EDT on May 2, 2008

More for less or More for same?

I’m not sure they document that students are generally paying more for LESS. They are often paying more for the SAME service, but paying a larger fraction of the cost of instruction due to a drop in state funding. However, those responsible would claim that the tax cuts and budget shifts behind this change mean they and their parents are paying less in taxes (now and in the future) or getting other services in exchange. I don’t agree with this approach, but that is a political choice we can only affect if the facts are clearly spelled out.

[My brother votes for the tax cuts and complains about the tuition his kids have to pay. Go figure.] This article could have done more to show the shift in costs over the past generation.

UKProf identifies something (internal transfers between teaching units) that is hardly a new phenomenon. Colleges with a large service load (like Arts and Sciences) have always turned a profit. I saw that at a large R1 when I was a grad student 30 years ago and the appropriation/tuition ratio was radically different from today.

CCPhysicist, at 11:00 am EDT on May 2, 2008

CC’s as Models in Instructional Spending?

As a senior faculty member at a community college, I hardly know how to enter this conversation. We keep “costs down,” as was stated above, by having the highest reliance on part-time faculty in the fields where first-generation, the working poor, minority, working students, and the underserved most need fulltime faculty who both do research and teach—that is, in English, Math, and ESL or ELL programs. It’s a mistake to separate research and teaching—as no field, faculty, or student population remains static. Change is the norm, and lack of research can mean reinventing the wheel in each department on each community college campus in the nation as faculty struggle to meet new challenges changes pose. Talk about lack of efficiency. This happens because of high teaching loads and lack of support for research. Yet, even at our institutions, monies have shifted from instruction. There are many reasons why—accreditation, state and federal legislatures’ accountability standards, articulation with transfer institutions, workforce retraining requirements, to name a few. This has led to more administrative positions. State budget cuts hurt cc’s the most, as nationwide we are more dependent on public funding than other higher ed institutions. So as we hire more PT’s, the work of FT goes up—evaluations, struggling to maintain program consistency—innovation and research goes down as does instructional quality for the most vulnerable. Our facilities deteriorate and we struggle with the resources we have to adequately prepare students for a 21st century workforce and transfer institutions where they are expected to be up-to-date in technology, lab equipment, etc. I agree this report is long overdue. Yet, I don’t think we should hold cc’s up as a model of cost savings or efficient use of instructional funds. Rather, my pipe dream is that faculty from higher ed join together to define what students need in direct instruction and in support of instruction and advocate for change rather than the default position of defending what we currently have—especially when funding structures privilege some institutions and thus create an uneven playing field for students (many of whom are striving to meet transfer requirements to those more privileged institutions).

—CC prof

Jody Millward, use CC prof for signing article, at 3:05 pm EDT on May 5, 2008

Spending Like No Tomorrow

I have some questions that perhaps someone more inside can answer:

1. I read not that long ago that California State University at Northridge had an “unfunded” portion of its budget. The unfunded portion was due to teacher retirement plan contributions. So Q-1: what percent of a university budget goes to faculty retirement? Q-2: is that higher or lower than 15 years ago?

2. The UC system hires people that for some reason need substantial transfer bonuses, moveing allowances and subsidized housing. The head of UC Santa Cruz got a rather hefty lump of several hundred thou for that and the UC even hired her partner. Q-3: what percent of the budget goes to moving and faculty housing and is that higher as a % than 20 years ago? Q-4: if so why?

3. I read about various “conferences” of english, sociology, psychology and other “light subject” professors. Q-5 What percent of the University budgets go to conference travel, housing, per diems, fees etc and is this higher than 20 years ago and what is the justification for this nonesense when tuition is rising? (no, i don’t believe teaching will “suffer” if english professors can’t hob nob at taxpayer expense).

4. Subject proliferation is not news: not when professors seem determined to outdo each other to establish weird subjects unrelated to the real world or even most of the college world. Q-6: When tuition is rising by 48% in public schools, why do we have so many disparate non-core courses in subjects that would never pass a vote of the taxpayers? I am not referring to science courses or my own treasured History Department, but to english, psychology, sociology and political science (whatever that is supposed to be—it made no sense in the 70’s or now) which appear to be weirder each year? Q-7: HAs there been anys tudy of this and its supposed benefits? Are the benefits all presumed because “the more courses the better?” or does someone really insist there are good reasons to flay students and taxpayers with more debt to teach some of these weird courses (you all know generally what I am talking about : don’t pretend I am wrong because I don’t name them all).

Anyway I’d be most appreciative of any answers. Thanks.

frank drebbin, at 3:35 pm EDT on May 7, 2008

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