EPPL 601The Financing of Higher

Education

Week #7

Institutional Differences in Funding Revenue

Higher Education Reauthorization Act

• Student Aid– Increased Pell support– Expanded repayment options– Watch lists for institutions with high increases

in tuition– NOT

• Address complex student aid process• Increased funding

HED Act cont’d• Leadership and Accountability (Spellings)

– Diluted role of Secretary of Education in accreditation

– Limited role for national system of data collection

• Private Loan Reform– New provisions to monitor lenders– NOT notify colleges when students get private

loans– Elimination of unfair bankruptcy clause

HED Act cont’d

• Maintenance of effort clause—States not cut funding below average of past five years

• Loss of state flexibility in allocations• Copyright on music—requires expensive

technology programs• Question of real change and answering

tough questions. Consider lack of progress with Spellings!

Funding Public Universities

• Historic funding– Ferry Toll across the Charles River– Tuition– Admission for survival

• Newer trend toward fundraising

Market Model

• Education as a commodity

• Marketing for enrollment numbers

• Focus on prestige/quality

• Equilibrium with enrollment/prestige

BowenLaws of Higher Education Finance

• Colleges and universities raise all the money they can and spend all the money they raise in an unceasing question for power, influence, and prestige.

Tensions

• Interplay between tuition, diversity, selectivity– What is assumed? – How do institutions satisfice?– What might be the difference among

institutions?

Funding and Graduation Rates

• Graduation rates used as a proxy for quality and accountability

• Argues if you put money in up front, are more selective, you get higher graduation

• Tension with issues of access

Private College Funding

• Increased costs– Prestige factor– Tuition discounting– Role of endowments

• Key issues– Shared governance—slow – Federal Government rule on joint action– External actors (alumni, local, interest groups,

rankings)

Community College Funding

• Role of funding formulas– Competition with universities for funds/equity– Individualized funding formulas

• Roots in K-12 and University limbo• Role of local funding• Increased autonomy—at what cost?

Public Revenue Sources2004-2005

Private Funding Sources

Trends in sources of funds, 1920-2001

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

1919-20 1929-30 1939-40 1949-50 1959-60 1969-70 1979-80 1989-90 1995-6

Tuition

Feds

State

Endowment

Gifts

Trends in revenue sources, all institutions, 1919 - 1996

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

1919-20 1929-30 1939-40 1949-50 1959-60 1969-70 1979-80 1989-90 1995-6

Tuition

Feds

State

EndowmentGifts

Sources of income by type of (public) institution, 2000.

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Doctoral Master's Baccalaureate 2-Year.

Student tuition and fees\1\

Federal govern- ment\2\

State governments

Local govern- ments

Private gifts and grants

Endowment income

Educa- tional activities

Auxiliary enter- prises

Hospitals

Other current income

Sources of revenue by type of (private) institution, 2001

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Doctoral Master's Baccalaureate 2-year.

Student tuition and fees

Federal appropri- ations, grants, andcontracts\1\

State appropri- ations, grants, and contracts

Local appropri- ations, grants, and contracts

Private gifts and grants\2\

Investment return (gain or loss)

Educa- tional activities

Auxiliary enter- prises

Hospitals

Other

Public vs. Private Doctoral universities, sources of revenue, '04

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Tuition State Federal Gifts Investment Return

PublicDoctorals04

Private Doctoral

Compare Revenue sources, Private Doctoral with Private Liberal Arts, '04

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Tuition State Federal Gifts Investment Return

Private Doctoral

PrivateLA

Institutional Type Matters

• Institutional Differences– Mission– Funding– Revenue Sources

• Within Institutional Type Differences– Not all privates are the same!– Not all publics are the same!– Not all community colleges are the same!

Redefining Competition in Hed(ala Eckel, 2007)

1. Is it possible for institutions to compete over costs that are transparent?

2. How do current operationalised definitions of quality affect competition?

3. Is the right information available to help students make wise choices?

4. How might institutions, and in turn students, benefit from sepcialisation and not breadth?

….and

5. What might be the implications if colleges and universities competed at the individual course level instead of competing on the whole academic program or undergraduate experience?

6. How might distance learning alter the geographic landscape?

…and finally

7. What would be the implications of alternative incentives for institutions that placed a high value on educaitonal outcomes, student learning, serving low-income students or preparing graduates for pressing state needs?