Understanding and Communicating Cost Drivers in Postsecondary Education

1. Understanding and CommunicatingCost Drivers in Postsecondary Education SHEEO Professional Development Boston, Massachusetts August 16, 2007 Jane Wellman, Delta Project on Postsecondary Costs

2. Understanding Cost “drivers” • Need to look at ‘Brand’ cost determinants (mission, sector, revenue), versus inflationary pressures on elements of spending over time (cost shifting) • Major brand determinants: • Revenue availability • Discipline mix • Mission – research, service • Curriculum/course enrollment patterns • Student economic circumstances • Admission selectivity

3. Matched Sample Institutional Counts by Primary Segmentation Private NFP Specialty Associates Baccalaureate Doctoral Research Public Specialty Associates Baccalaureate Doctoral Research Bottom Third | Middle Third | Top Third Bottom Third | Middle Third | Top Third Bottom Third | Middle Third | Top Third FTE Expenditure FTE: Top Third FTE: Middle Third FTE: Bottom Third

4. FY 2005 Average Expenditure per FTE by Primary Segmentation Private NFP Associates Baccalaureate Doctoral Research Public Associates Baccalaureate Doctoral Research Bottom Third | Middle Third | Top Third Bottom Third | Middle Third | Top Third Bottom Third | Middle Third | Top Third FTE Expenditure FTE: Top Third FTE: Middle Third FTE: Bottom Third

5. FY 2000 to FY 2005 Average Net Change in Expenditure per FTE by Primary Segmentation Private NFP Specialty Associates Baccalaureate Doctoral Research Public Specialty Associates Baccalaureate Doctoral Research Bottom Third | Middle Third | Top Third Bottom Third | Middle Third | Top Third Bottom Third | Middle Third | Top Third FTE Expenditure FTE: Top Third FTE: Middle Third FTE: Bottom Third

6. Cost of the “brand” - Public Institutional Spending-2005

7. Educational Spending (All Revenue Sources) Per Student – 1987 – 2005 (current dollars) IPEDS preliminary analysis; “Educational spending” =direct spending/FTE for instruction+student services, plus instructional share of remaining categories less auxiliaries and hospitals.

8. Cumulative Growth in Educational Cost per Degree Conferred by Broad Carnegie Classification and Control – in 2005 CPI Adjusted Dollars Research Private Bachelor’s Private Master’s Private Bachelor’s Public Research Public Master’s Public

9. Inflationary pressures on costs • Competition • Administration • Cost of Capital • Benefits • Student/academic support (co-curriculum) including technology • Student financial aid

10. Composite Average Annual CPI Adjusted Percent Change in FTE Expenditures by Broad Carnegie Classification and Control: Fiscal Years 1993-96, 1998-01 and 2002-05 Composite Average Annual Percent Change – FTE Median Composite Average Annual Percent Change – FTE Mean

11. Composite Average Annual CPI Adjusted Percent Change in FTE Expenditures by Broad Carnegie Classification and Control: Fiscal Years 1993-96, 1998-01 and 2002-05 Composite Average Annual Percent Change – FTE Median Composite Average Annual Percent Change – FTE Mean

12. Composite Average Annual CPI Adjusted Percent Change in FTE Expenditures by Broad Carnegie Classification and Control: Fiscal Years 1993-96, 1998-01 and 2002-05 Composite Average Annual Percent Change – FTE Median Composite Average Annual Percent Change – FTE Mean

13. Evidence of cost cutting? • Instruction – • Growing use of part-time faculty • Marginal costs lower in times of growth • Growing use of technology v. personnel • Energy efficiency/utilities costs

14. Institutional Solutions • Core instructional program • Faculty renewal and reinvestment • Curriculum management • Student-centered investments • Reduce freshmen attrition • Increase success in ‘killer courses’ • Invest in student success (first-year programs; bridge programs; learning communities) • Reduce overhead • Improve institutional efficiency • Energy efficiency • Reduce cost of capital • Distance learning • Improve management and oversight of costs: data; accountability strategies; governing board roles

15. Suggestions for SHEEOS • Look at ways that state policies can support institutional solutions • Benchmark costs – develop better cost data, and use it • Faculty salary comparisons – split compensation and benefits • Cost per degree, not just cost per input • Look at core unrestricted revenues; educational costs per students • Engage governing boards – piloting better use of cost indicators to focus conversations • Look at outcomes and access - and cost per • Promote best practices to increase productivity