connecting the dots between financing and sustainability

Connecting the dots…between $$$ and institutional

sustainability Jane Wellman

WASC Commission on CollegesARC MeetingApril 22, 2010

2

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Bachelor's

Associate

Additional Degrees Needed to Reach 60%

Current production v. increases needed to meet 60% goal

The challenge: Increasing educational attainment to be best in the world…

}+4%/year

Current and projected levels of degree production with no change in performance

Need +8 million more AA/or BA or credentials

3

% Changes in state and local appropriations for higher education 1960 – 2006

Can we break the “Iron triangle” Access

4

QualityFunding

The conditions as they exist: contrary propositions we must try to reconcile

5

• Professed goal to increase educational attainment• Privatization of resources• Growing financial stratification between institutions and

sectors• Spending cuts following recessions occurring primarily in

instructional areas• Public revenues not likely to return past 2006 levels any time

in the next decade• Public opinion skeptical of need for new investments• Weak evidence about the relation between spending and

results• Poor use of evidence about spending within the academy

Conventional wisdoms that get in the way of change

6

Public policy perceptions…

American higher education is the richest in the world = we have the money, we just need to spend it better

• True: According to OECD, US spending per capita $19,746/student – compared to OECD average of $8,415

• False: OECD countries exclude benefits, and US figures include private colleges.

7

OECD, Education at a Glance 2009, Table B.1., annual expenditure per studentFor core educational services only (excludes research and organized activities).

Private Research

Private Bach

elor's

Private M

aster's

Public Research

Public M

aster's

Community Coll..

.$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000Enrollment vs. spending, 2008

Edu

catio

n an

d R

elat

ed S

pend

ing

per

FTE

stud

ent

Total H

eadcount Enrolm

ent (fall)

Source: Delta Cost Project IPEDS Database, 1987-2008; 10-year matched set.

Economic stratification in US postsecondary educationNATIONAL: WHERE THE MONEY GOES, WHERE THE STUDENTS ARE ENROLLED: E&R

SPENDING PER FTE STUDENT/ENROLLMENTS

8

Public policy perceptions…

Institutions can substitute private resources for public funds

• True: private funding increased hugely in institutions in the 1990’s through around 2006, although an unstable source – State revenues now a minority of funds in some public

institutions –mostly research universities, in east • Not so true: private revenues are not going to core

academic functions– And public revenues still a majority $ for most

comprehensives and community colleges 9

*Note: In private institutions, investment returns include unrealized gains/losses.All data are in 2008 dollars.Source: Delta Cost Project IPEDS Database, 1987-2008, 11-year matched set.

1998 2003 2007 2008 1998 2003 2007 2008 1998 2003 2007 2008 1998 2003 2007 2008 1998 2003 2007 2008 1998 2003 2007 2008Public Research Public Master's Community Colleges Private Research Private Master's Private Bachelor's

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

Total Revenues per FTE Student, AY1998-2008

Net tuition State and local appropriationsFederal appropriations and federal, state, and local grants and contracts Auxiliary enterprises, hospitals, independent operations, and other sourcesPrivate and affiliated gifts, investment returns, and endowment income*

2000 2004 2007 2008 2000 2004 2007 2008 2000 2004 2007 2008 2000 2004 2007 2008 2000 2004 2007 2008 2000 2004 2007 2008Public Research Public Master's Community Colleges Private Research Private Master's Private Bachelor's

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000Total operating expenses per FTE student by category (in 2008 $)

Education and related expensesSponsored research, public service, and net scholarships & fellowshipsAuxiliary enterprises, hospitals, independent operations, and other expenses


…where the money goes by major functional area

Public policy perceptions… • Tuitions are going up because of out of control

spending• True: tuitions are increasing faster than almost any

other commodity• 1998-2008 spending up 3% year each year over

inflation/enrollment in private research universities• But actual spending per student didn’t increase much

at all in public institutions – barely above 1% in research universities and flat or declining in community colleges

• What has happened is a subsidy shift – costs are flat, but prices are going up 12

Sources: College Board, “Trends in College Pricing, 2008”; Bureau of Labor Statistics, 2009, www.bls.gov ; U.S. Census, Current Population Study-ASEC, 2008.

1988198919901991199219931994199519961997199819992000200120022003200420052006200720080%

50%

100%

150%

200%

250%

300%

350%

The Rising Cost of College, 1988-2008 (based on increases in current dol-lar amounts)

Public Four-YearPrivate Four-YearPublic Two-YearMedian Family IncomeCPI-UPrescription DrugsHousehold EnergyNew Vehicle

Cum

ulati

ve g

row

th si

nce

1988

http://www.bls.gov/

Changes in subsidy share of costs – public institutions 1998-2008

2000 2004 2007 2008 2000 2004 2007 2008 2000 2004 2007 2008Public Research Public Master's Community Colleges

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$5,342$6,565 $7,411 $7,563

$4,014$4,975 $5,492 $5,607

$2,303 $2,767 $3,003 $3,060

$9021

$7,756 $8,055

$7,414 $6,279$6,347 $6,578

$7,980 $6,957$7,473 $7,579

Public Institutions: Average Education and Related spending per FTE student, by net tuition and subsidies (in 2008$)

Net tuition (student share of costs) Average Subsidy

(38.5%) (23.6%) (30.7%)(30.8%)(30.2%)(46.9%)(47.4%)(45.0%)(35.8%)(50.5%)(51.0%)(48.6%)

$7491

$14363

$15,618



$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$5,195 $6,036 $7,411 $7,563$3,999 $4,507 $5,492 $5,607

$2,201 $2,576 $2,982 $2,992

$8,726 $8,183 $7,756 $8,055

$6,886 $6,884 $6,347 $6,578$7,568 $7,018 $7,258 $7,398

Average Education and Related Spending per FTE Student, by Net Tuition and Subsidy, AY 1998-2008

1998 2003 2007 2008 1998 2003 2007 2008 1998 2003 2007 2008Private Research Private Master's Private Bachelor's

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$16,343 $18,203 $19,586 $19,836

$11,837 $13,025 $14,208 $14,320$10,751 $12,253 $13,297 $13,515

$10,718$12,500

$14,116 $14,496

$2,460 $2,429 $2,102 $2,135 $7,159$7,452 $7,110 $7,292

Net tuition Average SubsidyAll data are in 2008 dollars.Source: Delta Cost Project IPEDS Database, 1987-2008, 11-year matched set.

Cost v price 1998 2008 – National by Carnegie sector

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• Research universities: Cost + 8%, Price up 41%• Masters’ universities: Cost + 6%, Price up 40%• Community colleges: Cost + 3%, Price up 32%

Sector Cost Price

Public research 8% 41%

Public masters’ 6% 40%

Community Colleges

3% 32%

Private research 27% 21%

Private masters 15% 21%

Private bacc 15% 15%

Conventional wisdoms inside the academy

Costs inevitably increase because of the non profit ‘cost disease’

• And because the primary driver of costs is faculty

True: costs do rise to meet revenue – and competition drives spending upward

False: faculty are not the primary cost driver within institutions, spending on faculty has been declining relative to increases elsewhere

17


$0

$5,000

$10,000

$15,000

$20,000

Spending within E&R – instruction, student services, administration/general support and maintenance

Instruction Student Services Admin/Support and Maintenance

62.8% 50.2%50.2%51.2%52.0%51.5%51.6%52.6%53.2%61.7%62.0%63.5%

All data are in 2008 dollars.Source: Delta Cost Project IPEDS Database, 1987-2008, 11-year matched set.

Conventional wisdoms inside the academy …

Money = quality = performance

True: money = prestige, strong correlate with admissions selectivity, academic credentials, class size, research

False: money ≠ performance19

Productivity: Total Funding per Degree/Certificate(Weighted*, 2006-2007)

Public Only

slide 20

29,0

75

30,6

19

33,2

73

33,7

56

34,3

30

34,5

94

36,4

98

37,8

23

38,3

64

38,3

65

39,5

16

39,5

16

39,9

18

42,1

77

42,1

98

42,4

08

42,6

93

42,8

47

42,8

73

42,9

48

43,8

20

44,2

72

44,3

71

45,8

33

45,9

04

46,5

22

46,8

80

47,4

53

47,6

72

47,7

49

48,6

11

49,8

94

52,4

91

52,5

72

52,8

88

53,5

35

54,5

53

56,0

90

56,2

80

56,8

88

56,9

60

59,4

20

59,4

65

63,8

22

64,9

34

65,9

75

66,6

23

72,8

46

75,7

44

79,7

94

86,0

09

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

FloridaColoradoW

ashingtonUtahNorth DakotaO

klahoma

West Virginia

Montana

South DakotaKansasGeorgiaLouisianaW

isconsinIdahoNew

Hampshire

IllinoisM

ississippiArizonaArkansasM

innesotaO

regonKentuckyIow

aVirginiaM

issouriNationO

hioIndianaNebraskaTexasSouth CarolinaNorth CarolinaM

ichiganTennesseeNew

Mexico

CaliforniaM

ainePennsylvaniaAlabam

aNew

YorkNevadaM

arylandVerm

ontNew

JerseyM

assachusettsHaw

aiiConnecticutRhode IslandDelaw

areW

yoming

Alaska

Tuition and FeesState and Local

Sources: SHEEO State Higher Education Finance Survey 2008; NCES, IPEDS Completions Survey; U.S. Census Bureau, American Community Survey (Public Use MicrodataSamples)

*Adjusted for value of degrees in the state employment market (median earnings by degree type and level)

Total Funding per FTE (2006-07)

Performance (2006-07) AL

AZ

AR

CA

CO

CT

DE

FL

GAHI

I D

I L

I N

I AKS

KY

LA

ME

MD

MAMI

MN

MS

MO

MT

NE

NV

NHNJ

NM

NY

NC

ND

OH

OK

ORPA

RI

SC

SD

TN

TX

UT

VT

VA

WA

WV

WIWY

US

15

18

21

24

27

5,000 10,000 15,000 20,000 25,000 30,000 35,000

Performance Relative to Funding: Bachelors Degrees Awarded per 100 FTE Undergraduates

(Public Research Institutions)

slide 21Source: NCES, IPEDS


Performance (2006-07)

AL

AK

AZ AR

CA

CO

CT

DE

FL

GA

HI

I D

I L

I N

I AKS

KY

LA

MEMD

MAMIMN

MSMO

MT

NE

NV

NH

NJ

NM

NY

NCND

OH

OK

OR

PA

RISC

SD

TN

TX

UT

VT

VA

WA

WV

WI US

5

10

15

20

25

30

2,000 5,000 8,000 11,000 14,000 17,000 20,000

Performance Relative to Funding: Bachelors Degrees Awarded per 100 FTE Undergraduates

(Public Bachelors and Masters)



Performance (2006-07)

Performance Relative to Funding: All Credentials Awarded per 100 FTE Undergraduates(Public Two-Year Institutions)


4,000 6,000 8,000 10,000 12,000 14,000 16,0008

16

24

32

40

48

US WY

WI

WA

VA

VTUT

TXTN

SD

SC

RI

PAOR

OKOH

ND

NC

NYNM

NJ

NH

NV

NE

MT

MO

MS

MN

MI

MA

MD

ME

LA

KY

KSIA

IN

ILID

HI

GA

FL

DE

CT

CO

CA

AR

AZ

AK

AL

Tentative conclusions from research on money and effectiveness

Intentionality matters as much or more than money alone

Spending on instruction and student services pays off in learning, retention and graduation

Student aid programs are generally not designed with the goal of student learning or degree attainment

Excess units cost institutions money, cost students time and money, and do not get students to the finish line

24

Spending is going up because of under-prepared students… and the

costs of remediation

25

• True: Underprepared students are less likely to succeed, and we DON’T have a good track record with success in remedial/developmental

Education

• BUT: Remedial education is cheap – as is most ld/ug education – in public 4-yrs

Institutions, likely a net revenue-producer

The reality of cross-subsidies Level of instruction SCH generated as a

percentage of total SCHInstructional spending as a percentage of all instructional spending

Lower division 35% 21%

Upper Division 45% 45%

Graduate 20% 34%

26

Data from 2002-2007 for Ohio, Florida and Illinois public four-year institutions; and1995 – 2004 for SUNY. Report available at http://www.sheeo.org/finance/SHEEO_Cost%20Study%20Report_2010.pdf

• http://www.deltacostproject.org • Insitution-level data using Delta metrics: http://www.tcs-online.org

Contact:Jane Wellman,Delta Cost Project1250 H Street, NWSuite 700Washington DC [email protected]

27

Estimates of attainment goals/gaps from NCHEMS. Data on state revenue trends from Doyle and Delaney. Measures of spending against degree attainment from Patrick Kelly, “The Dread P Word.” All other data are from Delta

Cost Project spending data base.

http://www.deltacostproject.org/

mailto:[email protected]

connecting the dots between financing and sustainability

Economy & Finance

private institutions

private revenues

private colleges

year matched set

cost v price

public funds true

private resources

private funding