Connecting the Dots between Financing and Sustainability

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Connecting the Dots between Financing and Sustainability by Jane V. Wellman
Presented at the 2010 WASC Academic Resource Conference
April 22 2010 Long Beach, CA

Published in: Economy & Finance
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  • Top Line Findings:Spending Continues to RiseDoesn’t show effects of revenue volatility – (b/c investment return not part of budget?)Overall spending continued to increase for all institutions:increases were greater for the publics (2.5 – 3.5% between 07-08) than for the privates (.5 – 1.5%)All institutions are spending at or slightly above where they were in 2000 -Public Res, Pvt MA, BA <1% annual increase -Pvt. Res was up 2.5% annually.(note – incomparability in public data for 2000 b/c uses gross scholarships/fellowships, but later years use net)2. Overall spending per student continues to obscure what’s being spent on the core academic programLooking just at E&R.. See smaller disparities that when looking at total spending, but still evidentPublic MA and CC spend similar (10-12k), Pub Res (15k)Pvts all spend more than publics – Pvt MA (16k), Pvt BA (20k), Pvt Res (34k)All institutions spent more on E&R in 2008 than in prior yearsFastest growth in 07-08 was in Public Res, MA, and Pvt BA(2.5-3%), which outpaced prior years annual spending growthpvt Res and MA institutions also still spent more, but growth was slower (<2%) and growth was less than in prior years
  • Connecting the Dots between Financing and Sustainability

    1. 1. Connecting the dots…<br />between $$$ and institutional sustainability <br />Jane Wellman<br />WASC Commission on Colleges<br />ARC Meeting<br />April 22, 2010 <br />
    2. 2. 2<br />The challenge: Increasing educational attainment to be best in the world… <br />Current production v. increases needed to meet 60% goal<br />Need +8 million more AA/or BA or credentials <br />Current and projected levels of degree production with no change in performance<br />}+4%/year <br />
    3. 3. 3<br />% Changes in state and local appropriations for higher education 1960 – 2006 <br />
    4. 4. Can we break the “Iron triangle” <br />Access<br />4<br />Funding<br />Quality<br />
    5. 5. The conditions as they exist: contrary propositions we must try to reconcile <br />5<br />Professed goal to increase educational attainment<br />Privatization of resources<br />Growing financial stratification between institutions and sectors<br />Spending cuts following recessions occurring primarily in instructional areas<br />Public revenues not likely to return past 2006 levels any time in the next decade<br />Public opinion skeptical of need for new investments<br />Weak evidence about the relation between spending and results<br />Poor use of evidence about spending within the academy<br />
    6. 6. Conventional wisdoms that get in the way of change<br />6<br />
    7. 7. Public policy perceptions… <br />American higher education is the richest in the world = we have the money, we just need to spend it better<br />True: According to OECD, US spending per capita $19,746/student – compared to OECD average of $8,415<br />False: OECD countries exclude benefits, and US figures include private colleges. <br />7<br />OECD, Education at a Glance 2009, Table B.1., annual expenditure per student<br />For core educational services only (excludes research and organized activities). <br />
    8. 8. Economic stratification in US postsecondary educationNATIONAL: WHERE THE MONEY GOES, WHERE THE STUDENTS ARE ENROLLED: E&R SPENDING PER FTE STUDENT/ENROLLMENTS <br />Source: Delta Cost Project IPEDS Database, 1987-2008; 10-year matched set.<br />8<br />
    9. 9. Public policy perceptions… <br />Institutions can substitute private resources for public funds <br />True: private funding increased hugely in institutions in the 1990’s through around 2006, although an unstable source <br />State revenues now a minority of funds in some public institutions –mostly research universities, in east <br />Not so true: private revenues are not going to core academic functions<br />And public revenues still a majority $ for most comprehensives and community colleges <br />9<br />
    10. 10. *Note: In private institutions, investment returns include unrealized gains/losses.<br />All data are in 2008 dollars.<br />Source: Delta Cost Project IPEDS Database, 1987-2008, 11-year matched set.<br />
    11. 11. …where the money goes by major functional area <br />
    12. 12. Public policy perceptions… <br />Tuitions are going up because of out of control spending<br />True: tuitions are increasing faster than almost any other commodity<br />1998-2008 spending up 3% year each year over inflation/enrollment in private research universities<br />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 <br />What has happened is a subsidy shift – costs are flat, but prices are going up <br />12<br />
    13. 13. Sources: College Board, “Trends in College Pricing, 2008”; Bureau of Labor Statistics, 2009, www.bls.gov ; U.S. Census, Current Population Study-ASEC, 2008.<br />
    14. 14. Changes in subsidy share of costs – public institutions 1998-2008<br />Source: Delta Cost Project IPEDS Database, 1987-2008; 10-year matched set.<br />
    15. 15. All data are in 2008 dollars.<br />Source: Delta Cost Project IPEDS Database, 1987-2008, 11-year matched set.<br />
    16. 16. Cost v price 1998 2008 – National by Carnegie sector<br />16<br /><ul><li>Research universities: Cost + 8%, Price up 41%
    17. 17. Masters’ universities: Cost + 6%, Price up 40%
    18. 18. Community colleges: Cost + 3%, Price up 32% </li></li></ul><li>Conventional wisdoms inside the academy <br />Costs inevitably increase because of the non profit ‘cost disease’<br />And because the primary driver of costs is faculty<br />True: costs do rise to meet revenue – and competition drives spending upward <br />False: faculty are not the primary cost driver within institutions, spending on faculty has been declining relative to increases elsewhere <br />17<br />
    19. 19. All data are in 2008 dollars.<br />Source: Delta Cost Project IPEDS Database, 1987-2008, 11-year matched set.<br />
    20. 20. Conventional wisdoms inside the academy … <br />Money = quality = performance <br /> True: money = prestige, strong correlate with admissions selectivity, academic credentials, class size, research<br />False: money ≠ performance<br />19<br />
    21. 21. Productivity: Total Funding per Degree/Certificate(Weighted*, 2006-2007)Public Only<br />slide 20<br />*Adjusted for value of degrees in the state employment market (median earnings by degree type and level)<br />
    22. 22. Performance (2006-07)<br />Total Funding per FTE (2006-07)<br />Performance Relative to Funding: Bachelors Degrees Awarded per 100 FTE Undergraduates(Public Research Institutions)<br />slide 21<br />Source: NCES, IPEDS<br />
    23. 23. Performance (2006-07)<br />Total Funding per FTE (2006-07)<br />Performance Relative to Funding: Bachelors Degrees Awarded per 100 FTE Undergraduates(Public Bachelors and Masters)<br />slide 22<br />Source: NCES, IPEDS<br />
    24. 24. Performance Relative to Funding: All Credentials Awarded per 100 FTE Undergraduates(Public Two-Year Institutions)<br />Performance (2006-07)<br />Total Funding per FTE (2006-07)<br />slide 23<br />Source: NCES, IPEDS<br />
    25. 25. Tentative conclusions from research on money and effectiveness <br /><ul><li>Intentionality matters as much or more than money alone
    26. 26. Spending on instruction and student services pays off in learning, retention and graduation
    27. 27. Student aid programs are generally not designed with the goal of student learning or degree attainment
    28. 28. Excess units cost institutions money, cost students time and money, and do not get students to the finish line</li></ul>24<br />
    29. 29. Spending is going up because of under-prepared students… and the costs of remediation <br />25<br /><ul><li>True: Underprepared students are less likely to succeed, and we DON’T have a good track record with success in remedial/developmental</li></ul>Education<br /><ul><li>BUT: Remedial education is cheap – as is most ld/ug education – in public 4-yrs </li></ul>Institutions, likely a net revenue-producer<br />
    30. 30. The reality of cross-subsidies <br />26<br />Data from 2002-2007 for Ohio, Florida and Illinois public four-year institutions; and<br />1995 – 2004 for SUNY. Report available at <br />http://www.sheeo.org/finance/SHEEO_Cost%20Study%20Report_2010.pdf<br />
    31. 31. http://www.deltacostproject.org<br />Insitution-level data using Delta metrics: http://www.tcs-online.org<br />Contact:<br />Jane Wellman,<br />Delta Cost Project<br />1250 H Street, NW<br />Suite 700<br />Washington DC 20005<br />jane@deltacostproject.org<br />27<br />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.<br />

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