Strategies for Containing Costs in Higher Education

1
Strategies for Containing Costsin Higher
Education

• Michael F. Middaugh
• Assistant Vice President Institutional Research
  and Planning
  
• University of Delaware
• middaugh_at_udel.edu
• www.udel.edu/ir

2
10 Years of Criticism for Higher Education

• The academic ratchet is a term to describe
  the steady, irreversible shift of faculty
  allegiance away from the goals of a given
  institution, toward those of an academic
  specialty. The ratchet denotes the advance of an
  entrepreneurial spirit among faculty nationwide,
  leading to increased emphasis on research and
  publication, and on teaching ones specialty in
  favor of general introduction courses, often at
  the expense of coherence in an academic
  curriculum. Institutions seeking to enhance
  their own prestige may contribute to the ratchet
  by reducing faculty teaching and advising
  responsibilities across the board, enabling
  faculty to pursue their individual research and
  publication with fewer distractions. The
  academic ratchet raises an institutions costs,
  and it results in undergraduates paying more to
  attend institutions in which they receive less
  attention than in previous decades.
• (Robert Zemsky and William Massy, 1990)

3
10 Years of Criticism for Higher Education

• To an overwhelming degree, they American
  research universities have furnished the
  cultural, intellectual, economic, and political
  leadership of the nation. Nevertheless, the
  research universities have too often failed, and
  continue to fail, their undergraduate
  populationsAgain and again, universities are
  guilty of advertising practices they would
  condemn in the commercial world. Recruitment
  materials display proudly the world-famous
  professors, the splendid facilities and ground
  breaking research that goes on within them, but
  thousands of students graduate without ever
  seeing the world-famous professors or tasting
  genuine research. Some of their instructors are
  likely to be badly trained or untrained teaching
  assistants who are groping their way toward a
  teaching technique some others may be tenured
  drones who deliver set lectures from yellowed
  notes, making no effort to engage the bored minds
  of the students in front of them.
• (Boyer Commission on Educating Undergraduates
  in the Research University, 1998)

4
10Years of Criticism for Higher Education

• The trouble is that higher education remains a
  labor-intensive industry made up of thousands of
  stubbornly independent and mutually jealous units
  that must support expensive and vastly underused
  facilities. It is a more than 200
  billion-a-year economic enterprise many of
  whose leaders oddly disdain economic enterprise
  and often regard efficiency, productivity, and
  commercial opportunity with the same hauteur with
  which Victorian aristocrats viewed those in
  tradeThe net result is a hideously inefficient
  system that, for all its tax advantages and
  public and private subsidies, still extracts a
  larger share of family income than almost
  anywhere else on the planet.
• (Americas Best Colleges, 1996, p. 91.)

5
10 Years of Criticism for Higher Education

• A few weeks ago, Chairman House Committee on
  Education and the Workforce Boehner and I
  released a report called The College Cost
  Crisis which declared that the nations higher
  education system is in crisis as a result of
  exploding cost increase that threaten to put
  college out of reach for low and middle income
  students and families. The report concluded that
  decades of cost increases, in both good economic
  times and bad, have caused Americas higher
  education system to reach a crisis point. It
  also concluded that students and parents are
  losing patience with higher education sticker
  shock and that institutions of higher education
  are not accountable enough to parents, students,
  and taxpayers the consumers of higher
  education.
• The following statistic is one Ive repeated
  many times, and will continue to repeat it until
  we can find a solution and interested parties
  start taking this issue seriously. The fact is,
  according to the Advisory Committee on Student
  Financial Assistance, cost factors prevent 48
  percent of all college-qualified, low income
  high school graduates from attending a four-year
  college and 22 percent from pursuing any college
  at all. The statistics are similarly bleak for
  moderate income families. At the rate we are
  going, by the end of the decade, more than two
  million college-qualified students will miss out
  on the opportunity to go to college.
• (Representative Howard P. Buck McKeon, 2003)

6
Cost Versus PriceWhat Do We Know About Price?
7
1998 Higher Education Reauthorization Act
mandated NCES to conduct a study of higher
education expenditures and their relationship to
price. NCES commissioned three separate studies
in response to the Congressional mandate

• Study of College Costs and Prices, 1988-89 to
  1997-98
  
• What Students Pay for College Changes in Net
  Price of College Attendance Between 1992-93 and
  1999-2000
  
• A Study of Higher education Instructional
  Expenditures The Delaware Study Of Instructional
  Costs and Productivity

8
What Do We Know About College Prices?
9
Study of College Costs and Prices, 1988-89 to
1997-98

• Tuition increased at both public and private
  institutions at a rate exceeding the Consumer
  Price Index, and growth in tuition exceeded most
  other expenditure categories at most
  institutions.
• The study found virtually no relationship between
  financial aid and tuition increases at both
  public and private institutions across the
  Carnegie classification spectrum.

10
Study of College Costs and Prices, 1988-89 to
1997-98

• The study found other non-financial variables to
  be more closely associated with increases in
  tuition.
  
• Decreasing revenue from government appropriations
  in particular, state appropriations was the
  single most important variable associated with
  tuition increases at public four-year
  institutions during the time frame studied.
  Although increases in instructional expenditures
  were associated with tuition increases at those
  institutions, the correlation was far weaker than
  that with the decline in state support for higher
  education.
• Multiple factors at private four-year
  institutions are more strongly associated with
  tuition increases than is an infusion of Federal
  financial aid. Among the internal factors are
  the availability of institutional aid and faculty
  compensation levels, as well as return on
  endowment, gift income, and contract/grant
  revenue. A number of external factors were also
  strongly associated with the magnitude of tuition
  increases including competitor tuition rates,
  particularly at neighboring public institutions,
  and per capita income in the state where the
  institution is located.

11
What Students Pay for College Changes in Net
Price of College Attendance Between 1992-93 and
1999-2000

• It is important to clearly distinguish between
  sticker price, i.e., the published schedule of
  tuition and fees that appear in a college or
  university catalog, and net price, i.e., what a
  student actually pays for a college education
  after financial aid is factored in.
• After adjusting for inflation, there is a
  perceptible increase in average total tuition and
  average total cost of attending a college or
  university from 1992-93 to 1999-2000. However,
  when grant aid was subtracted from tuition to
  arrive at net tuition, there was no change in
  the average amount paid by full time
  undergraduates during the time frame under
  analysis.
• When housing, food, books, and other non-tuition
  living expenses are added to tuition, grants are
  insufficient to cover the increase over time in
  the total cost of attending a college or
  university. However, not all students were
  affected by the increase in total cost in
  comparable ways. Grant aid did, in fact, cover
  total cost for students from the lowest income
  brackets, i.e., those who could least afford to
  pay an increase. Students in higher income
  brackets borrowed to meet the increase.

12
Some Final Words About Price

• There is no pure cause and effect relationship
  between price (tuition) and cost (what
  institutions expend in delivering a college
  education).
• This is due in no small measure to the fact that
  institutions have multiple revenue streams
  available to them, and each revenue stream
  contributes to varying degrees to meeting
  institutional costs.
• Moreover, colleges and universities make choices
  about how they spend revenues. The balance
  between and among teaching, research, and service
  reflect an institutions mission and values. It
  would be foolish to suggest that tuition dollars
  contribute only to instructional expenditures at
  a college or university.
• That said, it is demonstrable that higher
  education institutions have been responsible
  fiscal stewards in containing instructional
  costs, and to the extent that tuition dollars
  contribute to the creation of knowledge through
  pure and applied research or extension and other
  service activity, the common good of society is
  served.

13
What Do We Know About Costs in Higher Education?
14
Delaware Study of Instructional Costs and
Productivity

• Data sharing consortium of 400 four year
  colleges and universities across the United
  States.
  
• Focuses on direct expenditures for instruction,
  which typically comprise at least 40 percent of
  an institutions education and general
  expenditures.
• Unlike some institutional expenditures such as
  health insurance, energy costs, unfunded
  government mandates, etc. that are beyond the
  institutions control, instructional costs are
  within the domain of variables over which a
  college or university has at least some measure
  of control.
• It is therefore imperative to understand what
  factors drive direct instructional expense.

15
Delaware Study of Instructional Costs and
Productivity

• Examined data from three Delaware Study data
  collection cycles 1998, 2000, and 2001 for 25
  disciplines typically found at four year colleges
  and universities.
• The initial hypothesis was that Carnegie
  institutional classification would be a
  significant cost driver, i.e., research
  universities would teach fewer credit hours at
  higher cost than doctoral universities, which in
  turn would teach less and at higher cost than
  either comprehensive or baccalaureate
  institutions.
• Hierarchical linear modeling was used to analyze
  the variance in instructional cost across the
  institutions that participated in each of the
  three data collection cycles.

16
Delaware Study of Instructional Costs and
Productivity

• The single most important variable in explaining
  variation in the cost of instruction across
  four-year institutions that participate in the
  Delaware Study is the mix of academic disciplines
  at those institutions. The relative variance
  explained by this variable ranged from 76.0 to
  82.6 percent in the three data collection cycles
  examined.
• While Carnegie institutional classification could
  be expected to account for some of the variance,
  its explanatory power does not approach that of
  the disciplinary mix within the institutional
  curriculum. When Carnegie institutional
  classification is taken into account, the
  relative variance due to disciplinary mix ranges
  from 81.0 to 88.0 percent in the three cycles
  under examination.

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Delaware Study of Instructional Costs and
Productivity
18
Delaware Study of Instructional Costs and
Productivity
19
If disciplinary mix plays such an important role
in determining overall instructional expense at
an institution, have instructional costs within
specific disciplines grown inordinately over
time, and is it possible to identify those
factors that are statistically most closely
associated with direct instructional
expenditures? The Delaware Study data set again
helps to provide answers to these
questions.Lets first look at cost patterns
over time in those 25 disciplines.
20
Cost per Student Credit Hour Taught in Selected
Disciplines
21
Cost per Student Credit Hour Taught in Selected
Disciplines
22
Cost per Student Credit Hour Taught in Selected
Disciplines
23
With a basic sense of the dynamics of cost growth
over three years in 24 specific disciplines, the
question then becomes one which asks which
variables within disciplines are most closely
associated with the magnitude of instructional
expenditures.After examining multiple cycles
of Delaware Study data, it was determined that
between 60 and 75 percent of the variation in
direct instructional expense within a given
discipline or groups of related disciplines are
associated with discrete and identifiable cost
factors.
24
Delaware Study of Instructional Costs and
Productivity

• The volume of teaching activity, as measured by
  student credit hours taught, is a major expense
  factor. As one might expect, given a relatively
  constant faculty size, expense decreases as the
  volume of teaching increases.
• Department size, as measured in terms of total
  number of faculty, is consistently associated
  with expense. The larger the department, the
  higher the cost.
• The proportion of a departmental faculty holding
  tenure is associated with expense. Since tenured
  faculty are fixed costs, not surprisingly the
  higher the proportion of tenured faculty, the
  higher the cost.

25
Delaware Study of Instructional Costs and
Productivity

• A surprising finding was that, while the presence
  of graduate level instruction is associated with
  higher expense, the measured effect of this
  variable on the magnitude of cost is smaller than
  teaching volume, department size, and tenure
  rate.
• It is frequently assumed that disciplines such as
  engineering and the physical sciences are
  expensive, in part, owing to the
  equipment-intensive nature of those disciplines.
  While measurable, the extent to which expense is
  associated with personnel cost, as opposed to
  equipment cost, has less impact on the magnitude
  of expense than teaching volume, department size,
  and tenure rate.

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Delaware Study of Instructional Costs and
Productivity

• A cost containment zealot might assume that the
  solution to restraining the growth in direct
  instructional expense at an institution rests
  with having faculty teach more, do so in
  departments where there are fewer of them than at
  present, and eliminate tenure.
• Before taking such draconian measures, clearly
  predicated on the assumption that faculty do
  nothing but teach, it must be recalled that
  institutional expenditures patterns are a
  function of institutional choices that are
  typically rooted in the college or universitys
  mission. These choices include a broader
  definition of instruction than simply teaching,
  one that includes faculty scholarship that
  expands the body of knowledge, and academic
  support activity including faculty advising
  directed at enhancing prospects for student
  success. Institutional choices also include pure
  and applied research, and public service activity
  that contribute to the good of the region and the
  nation.
• To the extent that faculty engage in
  out-of-classroom faculty activity, teaching loads
  may be reduced, and concomitant instructional
  expenses may increase.

27
Delaware Study of Instructional Costs and
Productivity

• In 2001, the Delaware Study of Instructional
  Costs and Productivity, under the auspices of a
  grant from the Fund for Improvement of Post
  Secondary Education (FIPSE), expanded its data
  collection activity to include selected measures
  of out-of-classroom faculty activity.
• Data on 38 measures of faculty activity are
  collected at the academic discipline level of
  analysis. These include activities related to
  academic advising, curriculum development,
  publication and other types of faculty
  scholarship, research, professional development,
  and public and institutional service, among
  others.
• The full scope of this data collection effort can
  be ascertained by visiting the Delaware Study
  website at www.udel.edu/ir/fipse.

28
Delaware Study of Instructional Costs and
Productivity

• For purposes of this discussion, we will focus on
  two distinctly different disciplines English
  and Chemistry.
  
• Data will be presented for selected variables
  measuring out-of-classroom faculty activity in
  three functional areas teaching, scholarship,
  and service.
• The benchmarks represent median values for data
  submitted for each variable, and represent counts
  per FTE tenured and tenure track faculty in both
  disciplines.

29
Delaware Study of Instructional costs and
Productivity
30
Delaware Study of Instructional Costs and
Productivity

• Faculty at all institutions are engaged in
  curriculum re-design intended to keep courses
  current with the latest developments in the
  field, with respect to both content knowledge and
  pedagogy.
• Despite the prevailing myth that baccalaureate
  and comprehensive colleges are purely teaching
  institutions, faculty scholarship is alive and
  well, as evidenced by the presence of both
  refereed and non-refereed publications as
  scholarly output. This may well be a function of
  implicit, if not explicit, expectations for
  promotion and tenure at these institutions. Not
  surprising, there is more of this type of
  activity as well as contract and grant activity
  -at doctoral and research universities, where
  this is an explicit condition for promotion and
  tenure.

31
Delaware Study of Instructional Costs and
Productivity

• At comprehensive, doctoral, and research
  institutions, there is clear evidence of faculty
  working with undergraduate students on formal
  research. This activity occurs outside of a
  scheduled class (e.g., senior theses) and is
  intended to prepare students for research at the
  graduate level. The volume of non-thesis/disserta
  tion research in which graduate students engage
  with faculty is heaviest at research
  universities, but is evident at doctoral
  institutions as well.
• Faculty at all institution types are involved
  with approximately four committees related to
  institutional service (e.g., Faculty Senate,
  Promotion and Tenure Committee, etc.), at least
  one activity related to extension or outreach,
  and substantial involvement in both leadership in
  professional associations and professional
  service therein.

32
Delaware Study of Instructional costs and
Productivity
33
Delaware Study of Instructional Costs and
Productivity

• Chemistry faculty are involved in curriculum
  re-redesign as was the case with English. The
  number of students engaged in both undergraduate
  and graduate research with faculty is larger than
  with English, likely due to the analytical nature
  of Chemistry.
• The volume of refereed publications and contract
  and grant activity is larger than English, owing
  to the manner in which scientific information is
  communicated in the discipline, and the far
  greater availability of external funding in the
  physical sciences than in the humanities.
• Service activity, especially institutional
  service, is extensive. Where English faculty
  appear to be more active in outreach, Chemistry
  faculty appear more involved in service to the
  profession.

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Summarizing the Research

• There is a need for clarity in discussing higher
  education costs as opposed to higher education
  price. Research found no cause and effect
  relationship between cost and price. External
  factors (state appropriations, market pressures)
  tend to drive price, while internal factors
  (magnitude of teaching loads, department size,
  etc.) drive cost.
• While there has been a measurable increase in the
  sticker price of a college education, the net
  price after aid has seen minimal growth for most
  students, and no growth for students from lowest
  family income levels.
• While direct expenditures for instruction at
  four-year colleges and universities increased
  from 2000 to 2003, the average rate of increase
  across 24 disciplines typically found at those
  institutions was less that the increase in the
  Consumer Price Index for the same period.

35
Summarizing the Research

• Certain factors are associated with the magnitude
  of direct instructional cost. These include
  volume of student credit hours taught, department
  size in terms of full time equivalent faculty,
  and tenure rate. However, before manipulating
  these factors in any draconian fashion to contain
  costs, it must be underscored that faculty engage
  in activities other than teaching that have
  significant value to students, the institution,
  and the larger society.
• Faculty are typically involved in
  out-of-classroom activities such as curriculum
  re-design, academic advising, thesis/dissertation
  supervision, academic scholarship, and service to
  the profession/institution/community.
• Emphasis on various types of out-of-classroom
  faculty activity generally reflect institutional
  choices related to mission and to the balance
  between and among teaching, research, and
  service.

36
Conclusions

• Colleges and universities are impacted by many
  expenditure categories over which they have no
  control, e.g., health and other insurance costs,
  utility costs, unfunded governmental mandates,
  etc., all of which impact the cost of operating
  an institution.
• It is imperative that institutions demonstrate
  that they understand and monitor those expense
  categories over which they do have control.
  
• Institutions should not shrink from choices
  respect to faculty activity that relate to
  institutional mission. It is crucial that
  faculty engage in research and scholarship that
  adds to the body of knowledge in their field. It
  is equally important that faculty have adequate
  time to advise students, redesign curriculum, and
  engage in professional, institutional, and public
  service.

37
Conclusions

• It is also incumbent upon institutions to manage
  their resources, including faculty teaching
  loads.
  
• Benchmarking tools such as the Delaware Study of
  Instructional Costs and Productivity assist
  provosts and department chairs in assessing their
  resources in comparison with peer departments and
  other departments to which they aspire.
• Colleges and universities must be proactive in
  describing how and why they deploy human and
  fiscal resources in the manner in which they do.

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A fuller discussion of this topic can be found in
an article that I wrote which appears in the
Spring 2005 issue of Planning for Higher
Education, the Journal of the Society for College
and University Planning.(www.scup.org)
Questions????
middaugh_at_udel.edu