public universities will survive. can public higher education? the clair maple memorial address...
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Public universities will survive.Public universities will survive. Can public higher education? Can public higher education?
The Clair Maple Memorial AddressAugust 4, 2003
Larry R. Faulkner, PresidentThe University of Texas at Austin
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Five big forces on public higher Five big forces on public higher educationeducation
Cost-compounding properties of a labor-intensive activity based on rare talent
Reduced propensity for state subsidyResistance to increases in tuition and
fees at public institutionsBroadened expectations concerning the
economic development roleTensions among missions
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Evolution of a public research Evolution of a public research universityuniversity
Budgetary model covering the period through 2020
Representing this kind of university as it might exist for Today’s first-graders, entering 2015 Today’s newborns, entering 2020-2021
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Projections based on long-term Projections based on long-term patternspatterns
Growth of major income streams State appropriations Tuition and fees Endowment income Research support
Growth in costs of delivery Salaries Operating costs
Model for a major public research university
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A “typical” major public research A “typical” major public research universityuniversity
Medical components not included 33,000 student FTE Total budget in 2002-2003 of $1.09 billion
$325 million from state appropriations $240 million from tuition and fees $250 million from external research support $100 million from endowments and gifts $165 million from auxiliaries $10 million from other sources
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2003 Income distribution 2003 Income distribution
0%
10%
20%
30% StateResearchTuition & FeesAuxiliariesEndow & GiftsOther
7
2003 Allocation among major 2003 Allocation among major functions functions
0%
10%
20%
30%
40% EducationResearchAuxiliariesServiceFinancial Aid
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2003 Funding for cost of education2003 Funding for cost of education
State $7,273
Tuition & fees $5,303
Endowments & gifts $455
Other income $182
Total cost of education $13,212
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2003 T&F cost to student has two 2003 T&F cost to student has two componentscomponents
T&F part of cost of ed $5,303
T&F used for financial aid
$303
Total T&F cost to student
$5,606
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Major growth ratesMajor growth rates
Consumer prices 2.7%
Family income 3.5%
State appropriations 1.8%
External research support
7.0%
Old endowment support 2.7%
Endowment growth 2.3%
Salaries 4.8%
Operating costs 3.5%
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Other important assumptionsOther important assumptions
Enrollment remains static at 33,000 student FTE
Any increase in tuition and fees requires a 25% set-aside for financial aid
In 2003, the cost of education was 70% salaries 30% operating costs
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““Tuition complement model”Tuition complement model”
Revenue sources other than tuition & fees grow at stated rates
Cost of education evolves “naturally” according to patterns of the last 15 years: Salaries (initially 70%) at 4.8% Operating costs (initially 30%) at 3.5%
Tuition and fees grow as needed to cover the cost of education
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Total tuition & fee cost to studentsTotal tuition & fee cost to studentsTuition complement modelTuition complement model
0
5,000
10,000
15,000
20,000
25,000
2003 2015 2020
T&F to Fin AidT&F to COE
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Annual rates of changeAnnual rates of changeTuition complement modelTuition complement model
0%
2%
4%
6%
8%
10%
12%
2004 2015 2020
Cost of EdT&F Cost
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T&F cost to student vs. median family T&F cost to student vs. median family incomeincomeTuition complement modelTuition complement model
0%
5%
10%
15%
20%
25%
30%
2003 2010 2015 2020
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2020 Income distribution 2020 Income distribution Tuition complement modelTuition complement model
0%
10%
20%
30%
40% StateResearchTuition & FeesAuxiliariesEndow & GiftsOther
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2020 Allocation among major 2020 Allocation among major functionsfunctionsTuition complement modelTuition complement model
0%
10%
20%
30%
40% EducationResearchAuxiliariesServiceFinancial Aid
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Summary of the tuition complement Summary of the tuition complement modelmodel
Good news: Model feeds the
“natural” growth of the university
Preserves the public institution’s ability to compete with private peers
Bad news: Not politically
sustainable Undercuts the
essential public role of a public university
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““Political limit model”Political limit model”
Revenue sources other than tuition & fees grow at stated rates
Tuition and fees are limited by political reaction to 4.0% annual growth
Salary component of cost of education is limited by total of committed resources including politically limited tuition & fees
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Total tuition & fee cost to studentsTotal tuition & fee cost to studentsPolitical limit modelPolitical limit model
0
2,000
4,000
6,000
8,000
10,000
12,000
2003 2015 2020
T&F to Fin AidT&F to COE
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T&F cost to student vs. median family T&F cost to student vs. median family incomeincomePolitical limit modelPolitical limit model
0%2%4%6%8%
10%12%14%16%
2003 2010 2015 2020
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Annual rates of changeAnnual rates of changePolitical limit modelPolitical limit model
0.0%
1.0%
2.0%
3.0%
4.0%
2004 2015 2020
Cost of Ed T&F Cost COE Salaries
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Uncovered part of “natural” cost of Uncovered part of “natural” cost of educationeducationPolitical limit modelPolitical limit model
0%
5%
10%
15%
20%
25%
30%
2003 2010 2015 2020
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2020 Income distribution 2020 Income distribution Political limit modelPolitical limit model
0%
10%
20%
30%
40% StateResearchTuition & FeesAuxiliariesEndow & GiftsOther
25
2020 Allocation among major 2020 Allocation among major functionsfunctionsPolitical limit modelPolitical limit model
0%
10%
20%
30%
40%
50% EducationResearchAuxiliariesServiceFinancial Aid
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Summary of the political limit modelSummary of the political limit model
Good news: Allows the university
to retain public support
Preserves affordability and access
Bad news: Tends to undercut
the quality of educational delivery
University becomes progressively less competitive for top faculty talent
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Probable responses if forces do not Probable responses if forces do not changechange
Tendency to separate educational and research functions organizationally
Impetus to create a special teaching faculty Political leaders may try to force resources
away from research toward education Research may become increasingly
dominant in institutional decision making
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Toward a more positive futureToward a more positive future
Things we can influence: Marginal improvement
in growth rate for state support
Better political tolerance for changes in tuition and fees through government financial aid
Things we can control: Stronger focus in
endowment development on quality of educational programs
Alter the model for educational delivery to preserve or improve quality at lower cost
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Keep an eye on the cost control Keep an eye on the cost control targettarget
Need to reduce the rate of growth in the cost of education by 1.5% to 2.0% per year
Will take imagination to succeed with preservation of quality
Must work on both components of the cost of education
Success will also be applicable to private institutions