The Financial Challenges Facing U S Colleges and

The Financial Challenges Facing U. S. Colleges and Universities John Cheslock Director, Center for the Study of Higher Education Associate Professor, Education Policy Studies Pennsylvania State University PHELAP 2016 • Harrisburg | University Park, PA

Presentation Plan Objective: Share some basic frameworks for thinking about revenue and expenditure issues pertaining to higher education that will help you better communicate with various constituencies. Plan (10 minutes) Share revenue-related frameworks (10 -15 minutes) Question and Answer (10 minutes) Share expenditure-related frameworks (10 -15 minutes) Question and Answer PHELAP 2016 • Harrisburg | University Park, PA

PHELAP 2016 • Harrisburg | University Park, PA

Governmental HI ED Funding Story 1. The overall size of the pie is unlikely to grow. 2. Other pieces of the pie are likely to grow. 3. The public has become more comfortable with the higher education slice of the pie shrinking. PHELAP 2016 • Harrisburg | University Park, PA

PHELAP 2016 • Harrisburg | University Park, PA

PHELAP 2016 • Harrisburg | University Park, PA

Tuition Revenue Story We may be approaching (or at) the tuition price ceiling (or at least the net tuition revenue price ceiling). PHELAP 2016 • Harrisburg | University Park, PA

Variation in 2009 -10 Donations PHELAP 2016 • Harrisburg | University Park, PA

Variation in 2009 -10 Endowment Assets PHELAP 2016 • Harrisburg | University Park, PA

Other Sources of Revenue Story Other sources of revenue (e. g. fundraising) can only be part of the solution due to size of funds, restrictions, and inequality across higher education institutions. PHELAP 2016 • Harrisburg | University Park, PA

General Revenue Story: Pessimistic 1. Government funding will steadily evaporate. 2. No other funding sources will replace governmental funding. 3. With a few exceptions, colleges and universities will either close or become diminished institutions. PHELAP 2016 • Harrisburg | University Park, PA

General Revenue Story: Optimistic 1. Government funding trends may reverse. (Free tuition movement could spur greater public investment. ) 2. Higher education institutions will develop new sources of revenue through adaptation. PHELAP 2016 • Harrisburg | University Park, PA

“About 85 institutions in the western world established by 1520 still exist in recognizable forms, with similar functions and with unbroken histories, including the Catholic Church, the Parliaments of the Isle of Man, of Iceland of Great Britain, several Swiss cantons and 70 universities” (Clark Kerr, 1987) PHELAP 2016 • Harrisburg | University Park, PA

Question and Answer (10 -15 minutes) PHELAP 2016 • Harrisburg | University Park, PA

Expenditure-Related Frameworks PHELAP 2016 • Harrisburg | University Park, PA

PHELAP 2016 • Harrisburg | University Park, PA

PHELAP 2016 • Harrisburg | University Park, PA

PHELAP 2016 • Harrisburg | University Park, PA

PHELAP 2016 • Harrisburg | University Park, PA

PHELAP 2016 • Harrisburg | University Park, PA

Four Expenditure Stories 1. Cost Disease (Technology & Labor) 2. Revenue Theory of Costs (Cookie Monster) 3. Principal-Agent Problem 4. Arms Race PHELAP 2016 • Harrisburg | University Park, PA

General Expenditure Story: Questions about the Future 1. Will higher education be disrupted by technology? If so, will higher education institutions adapt? 2. Can institution-level and state-level policies be instituted that limit other cost-drivers without unduly harming the production of teaching, research, and service. PHELAP 2016 • Harrisburg | University Park, PA

Question and Answer (10 -15 minutes) PHELAP 2016 • Harrisburg | University Park, PA