Deconstructing the College “Cost Problem”

1

Jane Wellman

CUNY Higher Education Policy

Seminar

March 8, 2012

Dimensions of the cost problem

7/20/09 2

Public, 2-yr

Public, 4-yr

Private, 4-yr

Health insurance

Median Income

New Car

Prescription Drugs

Medical Care

Housing

-10%

10%

30%

50%

70%

90%

99-00 '00-'01 '01-'02 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07 '07-'08 '08-'09 '09-'10 '10-'11

3

% Change in College Sticker Price against other consumer

Areas – 1999/00 – 2010/11

College Prices Growing …

4

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2012

Annual Percent Change in Higher Education Appropriations, FY1960 - FY2012

Percent Change in Higher Education Tax Appropriations

Percent Change in Higher Education Tax Appropriations and ARRA Stimulus Funds

Source: Annual Grapevine reports, FY 1960 - FY 2012 http://grapevine.illinoisstate.edu/index.shtml

A declining share of Americans agree that a college education is

affordable

Do you agree or disagree with the following statement: College costs in general are such that most people are able to afford to pay for a college education. (Asked of general public)

Only 40% feel that the value for the money spent on higher education is

excellent or good…

How would you rate the job the higher education system in this country is doing in terms of providing VALUE for the money spent by students and their families? (Asked of general public)

Spending is not increasing as fast as tuition

• The price/spending gap is biggest among public community colleges

– Net tuition revenue up 35% in 9 years

– Against virtually NO CHANGE in spending per student

– And declines in state/local appropriations of 5% in 9 years

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

20

00

20

01

20

01

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Net tuitionrevenue

State/Localappropriations

Education &relatedspending

The unsustainable cost model: gaps in tuition revenue v. spending, public community colleges, 2000 – 2009

All figures are in 2009 constant dollars, per FTE student. Source, Delta Data base.

Similar patterns – but real increases in spending/student in public four-year institutions

• Public masters’ spending/student/year about 1%/year between 2000 – 2009

– Against tuition increases averaging 5%/year

– And state budget cuts averaging 0.5%/year

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

2000200120012003200420052006200720082009

Net tuition revenue

State/Localappropriations

Education & relatedspending

The unsustainable cost model: gaps in tuition revenue v. spending, public masters’ institutions, 2000 – 2009

All figures are in 2009 constant dollars, per FTE student. Source, Delta Data base.

Among public institutions, research universities fared the best

• Tuition revenues up an average of 5.5%/year since 2000

• Against spending increases per student around 5% per year on average

• And reductions in state/local appropriations of around 1.5%/year

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

2000200120012003200420052006200720082009

Net tuitionrevenue

State/Localappropriations

Education &related spending

The unsustainable cost model: gaps in tuition revenue v. spending, public research universities, 2000 – 2009

All figures are in 2009 constant dollars, per FTE student. Source, Delta Data base.

But – public research universities are falling behind private research institutions

• In 1987, private research universities averaged $1.63 in education and related spending/student for each $1.00 spent in public research institutions.

• That funding advantage increased to $2.25/$1.00 in 2009.

Nationwide average E&R spending/student/year

1987 2009 Annual average % change

Public research universities

$13,032 $15,892 1%

Private research universities

$21,294 $35,854 3%

Private/public funding advantage

1.63:1.00 2.25:1.00

Trends in Labor Costs - 2002-2008

Public

institutions Salary outlay

per employee

Benefit cost

per full-time

employee Compensation per employee

Compensation per FTE

student

Research 0.9% 5.2% 1.7% 1.6%

Master’s -0.6% 4.6% 0.4% 0.6%

Community

colleges 0.7% 5.2% 1.5% 1.1%

Private

institutions

Research -0.3% 1.6% 0.0% 1.7%

Master’s -0.8% 2.4% -0.5% 0.6%

Bachelor’s -0.5% 1.3% -0.2% 0.7%

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19.5% 20.1% 18.9% 19.3%

18.4% 19.3%

23.1% 24.4%

22.6%

20.8% 20.3% 20.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Public research Public master's Public communitycollege

Private research Private master's Private bachelor's

Benefit Share of Compensation, AY2002-2009

2002 2009

Source: Delta Cost Project IPEDS database, 1987-2009, 11-year matched set.

Credit Hour Distribution and Average instructional costs

Public-four year averages, 4-state cost study (SUNY, Florida, Ohio, Illinois)

% of all credits taken

% of total spending on instruction

Avg weighted cost/credit

Lower Division

36% 23% 1.00

Upper Division

48% 44% 1.42

Grad 1 12% 23% 2.88 Grad 2 4% 9% 4.00

100% 100% 1.55 Source: SHEEO, 2010.

29.7 31.2

24.8

11.3

2.8

0.2 0

5

10

15

20

25

30

35

1 to 12 13 to 24 25 to 36 37 to 48 49 to 60 61 to 72

Pe

rce

nta

ge o

f D

rop

ou

ts

Total Months Enrolled Before Leaving Higher Education (Out of 72 Possible)

Percentage of All Dropouts by Cumulative Months Enrolled, Beginning Postsecondary Students 2003-04

60% of attrition occurs in lower Division courses .. Where spending per student is lowest

Source: NCES, BPS, undergraduates only.

18

.

43.8%

29.4%

17.8%

7.3%

1.8%

$8,800

$17,400

$29,400

$42,000

$47,100

0%

10%

20%

30%

40%

50%

$0

$10

$20

$30

$40

$50

One year or less 1-2 years 2-3 years 3-4 years 4+ years

Length of Time Enrolled Before Leaving

Volume and Costs (in $1,000) of Early and Late Attrition

Percent of all attrition E&R expenditures per dropout (1,000's)

Source, BPS, 2003-2004, by 2009.

19

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

Private Research Private Bachelor's Private Master's Public Research Public Master's CommunityColleges

Average education and related spending per FTE student Total headcount enrollment

Spending per student versus enrollment by sector, AY 2009 Ed

uca

tio

n a

nd

Re

late

d S

pe

nd

ing

pe

r FT

E st

ud

en

t

Total H

ead

cou

nt En

rolm

en

t (fall)

Source: Delta Cost Project IPEDS Database, 1987-2009; spending data from the 11-year matched set; enrollment data from the unmatched set.

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New money versus new students—enrollment growth is concentrated in public

institutions, which have had less access to new resources Ten-year change in enrollment versus 10 year change in spending per FTE student, AY1999-2009 (in 2009

dollars)

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

PrivateResearch

PrivateBachelor's

PrivateMaster's

Public Research Public Master's CommunityColleges

Average education and related spending per FTE student (in 2009 dollars) Total headcount enrollment

Change in Enrollment vs. Change in Spending, AY1999-2009

Ch

an

ge

in

Ed

uca

tio

n a

nd

Re

late

d S

pe

nd

ing

pe

r F

TE

st

ud

en

t, 1

99

9-2

00

9 (

in 2

00

9 d

oll

ars

)

Ch

an

ge

in T

ota

l He

ad

cou

nt E

nro

lme

nt (fa

ll), 19

99

- 2

00

9

Source: Delta Cost Project IPEDS Database, 1987-2009; spending data from the 11-year matched set; enrollment data from the unmatched set.

Greater transparency in campus decision-making will result in better financial decisions

Sector Strongly Agree Agree Disagree Strongly Disagree

Public research 14.9% 53.2% 27.7% 4.3%

Public masters 25.5 59.9 20.0 3.6

Public assoc 13.3 53,8 25.4 7.5

Private research

16.0 60.0 20.0 4.0

Private masters 18.5 55.6 23.5 2.5

Private bacc 21.5 46.9 27.1 4.5

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Inside Higher Education, Survey of CFO’s, July 2011.

CFO Opinions about effectiveness of the budget model - % reporting it to be ‘Effective or very effective’

39.7% Overall model is effective or very effective

49.9% Helps us to manage during good times

36.7% Helps us to manage during difficult times

27.6% Helps us re-assess priorities

20.9% Helps develop a business plan for new

academic programs

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Inside Higher Education , 2011 Survey of College and University Business Officers,

July 2011.

Reprise: Elements of the “Cost problem” 1. Tuitions rising

2. State funding for higher education declining

3. Public concern about affordability AND value

4. Cost shifting – spending not increasing as rapidly as tuitions (students paying more, but not getting equivalent increase in $ value)

5. Employee benefits!

6. “Upside down” spending and student attrition

7. Internal/external gaps in understanding about problem and solution

8. Growing gaps between rich and poor

9. Lack of fiscal transparency, and weak use of fiscal data in institutional decision-making

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