Rebooting finance in public higher education Jane Wellman

Rebooting finance in public higher education Jane Wellman AASCU Annual Meeting Charleston, SC November 22, 2010

Outside inside: the fractured dialogue about college costs and the road ahead Group Definition of Problem Public Caught between Protect access at all growing importance costs! and decreasing access State Financial Officers (and legislators) Need more college graduates Faculty Deteriorating quality of Raise standards, students and declining improve K-12, stop standards talking about productivity! College Presidents Caught in iron triangle Source: John Immewahr, Villanova University, based on research for Public Agenda. Solution Increase productivity and retention! Reinvest in higher education!

The problem of multiple –and sometimes conflicting – truths 4

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 • Not so true: OECD countries exclude benefits, and US figures include private colleges. OECD, Education at a Glance 2009, Table B. 1. , annual expenditure per student For core educational services only (excludes research and organized activities). 5

Economic stratification in US postsecondary education WHERE THE MONEY GOES, WHERE THE STUDENTS ARE ENROLLED Source: Delta Cost Project IPEDS Database, 1987 -2008; 10 -year matched set. 6

• Tuitions are going up because of out of control spending • True: tuitions are increasing faster than almost any other commodity • And before the recession spending per student did go up 3% 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 masters’ institutions and community colleges 7

The Rising Cost of College, 1988 -2008 (based on increases in current dollar amounts) 350% 300% Cumulative growth since 1988 250% Public Four-Year Private Four-Year 200% Public Two-Year Median Family Income CPI-U 150% Prescription Drugs Household Energy New Vehicle 100% 50% 0% 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Sources: College Board, “Trends in College Pricing, 2008”; Bureau of Labor Statistics, 2009, www. bls. gov ; U. S. Census, Current Population Study-ASEC, 2008

…where the money goes by major functional area

Changes in subsidy share of costs Source: Delta Cost Project IPEDS Database, 1987 -2008; 10 -year matched set.

The primary driver of costs is faculty salaries – which can’t be reduced because of tenure True: spending on faculty is the largest single spending area False: faculty are not the majority of employees • Spending on faculty is declining relative to other areas • And most increases in compensation are going to benefits 11

• In 2009, 46% of all employees in public and private non-profit institutions have faculty status – Compared to 23% in for-profit institutions • Of these, the percent with tenure or on track: – Public four-year: 70% – Private four-year: 61% – For profit: 0. 4% • % of instructional titles with part-time status: – 52% 12

% Changes in faculty compensation, 1979 – 2008 (in 2009 constant dollars) Salary Benefits Public Research 26% 78% Private Research 41% 98% Public Masters 11% 59% Private Masters 23% 83% Public two-year 8% 65% 13

National averages, spending per FTE student in 2008 -9 Public research universities Public masters institutions Public community colleges Instructional 6771 salaries exclusive of benefits 3923 1918 Student services spending 3841 2208 1417 Employee benefits 5762 3153 1913 14

States can save money by shifting students to community colleges • True: cost per student in the community colleges on average is 14% less than in public masters’, and 34% less than public research costs • BUT the state share of costs is higher – in many states subsidy costs are higher than in masters’ institutions • AND cost per degree is actually higher in CCs 15

Spending and subsidies per Student – national averages Public research Public masters Public CCs E&R spending per student $15, 619 $12, 185 $10, 396 State and local subsidy per student $8, 055 $6, 578 $7, 404 16

Spending per Degree and Completion, AY 1998 -2008 (in 2008 $) Education and Related (E&R) Spending per Degree 1998 2003 2007 2008 Education and Related (E&R) Spending per Completion (Award) 1998 2003 2007 2008 Public Research $59, 225 $61, 521 $62, 617 $64, 009 $58, 350 $60, 576 $61, 436 $62, 654 Public Master's $50, 481 $53, 477 $53, 600 $55, 292 $49, 922 $52, 507 $52, 532 $54, 252 Community Colleges $87, 617 $76, 309 $72, 830 $73, 709 $47, 798 $47, 634 $45, 732 $45, 949 Source: Delta Cost Project IPEDS Database, 1987 -2008, 11 -year matched set.

Spending is going up because of under-prepared students… and the costs of remediation • True: Underprepared students are less likely to succeed, and we DON’T have a good track record with success in remedial/developmental Education • BUT: we don’t know what we spend on remediation – on a per student basis • Remedial education is cheap – as is most ld/ug education – in public institutions, likely a net revenue-producer 18

The reality of cross-subsidies Level of instruction SCH generated as a percentage of total SCH Instructional spending as a percentage of all instructional spending Lower division 35% 21% Upper Division 45% Graduate 20% 34% Data from 2002 -2007 for Ohio, Florida and Illinois public four-year institutions; and 1995 – 2004 for SUNY. Report available at http: //www. sheeo. org/finance/SHEEO_Cost%20 Study%20 Report_2010. pdf 19

For more information, go to: Delta Cost Project http: //www. deltacostproject. org http: //tcson-line. org 20