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Reactions to Budgetary Restrictions for Four Year Public Universities

This study explores how personnel levels at four-year public universities shift as funding levels change. Analyzing data from 1987 to 2008, it investigates the impact of state revenue, tuition, and other sources on faculty, administrators, and total employees. The findings highlight the challenges of budget cuts, potential administrative bloat, and the need for deeper insights into cost management. The implications call for policymakers, administrators, and the public to better understand the consequences of funding reductions on higher education.

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Reactions to Budgetary Restrictions for Four Year Public Universities

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  1. Reactions to Budgetary Restrictions for Four Year Public Universities Justin Shepherd Vanderbilt University justin.c.shepherd@vanderbilt.edu AERA Presentation Spring 2012

  2. Research Question • How do personnel levels change at four-year public universities as their different funding levels are altered?

  3. Conceptual Framework • How do personnel levels change at four-year public universities as their different funding levels are altered? • Wages & benefits comprise 70-80% of university expenditures (Archibald & Feldman, 2008) • Reduction in state funding explains inequality of faculty salaries between private & public universities (Ehrenberg, 2003)

  4. Conceptual Framework • How do personnel levels change at four-year public universities as their different funding levelsare altered? • 1989-1999: Revenues from state fell from 45.1% to 35.8% of total revenues (Santos, 2007) • Legislators target HE for budget cuts b/c they can offset with tuition & college students aren’t neediest population (Delaney & Doyle, 2007; Hovey, 1999) • 1989-1999: Tuition revenues rose from 14.6% to 18.5% of total revenues (Santos, 2007)

  5. Conceptual Framework • Rising Costs • Bowen’s Revenue Theory of Costs (1970) • Niskanen’s Hypothesis (1971) • Administrative Bloat (Massy & Wilger, 1992) • Cost Disease (Levin, 1991)

  6. Hypothesis • Decreasing funding leads to a loss of personnel, implying one of two things: • There is no more fat to be cut • Administrative bloat and cost disease are prevalent and being addressed

  7. Data • Delta Cost Project • IPEDS from US DOE’s NCES • 1987-2008 • Time Adjusted According to BLS • 489 Public Four-Year Universities • Lagged 1 year • Strict Exogeneity

  8. Variables • Dependent Variables • Faculty • Administrators & Professionals • Total Employees • Independent Variables • State Revenue • Tuition • Federal, Private Gifts, Auxiliary, & Other Revenues • Control Variable • Enrollment

  9. Results • State aid is particularly robust across all model specifications for all groups • Professionals have the highest coefficients for the different job classes

  10. Conclusions • Reductions in revenues results in cuts to expenses • Not enough money from other sources of revenues to make up cuts • Runs counter to Bowen & Niskanen • Professionals having the largest coefficient implies there may be bloat • No insight into cost disease (need salary info)

  11. Policy Implications • Policy Makers • Better understand impact of cuts to HE • Administrators • Possible issue with large middle-management class • Public • Better understand tradeoff between taxes and tuition

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