• April 23, 2014

New Web Tool Helps Both Experts and Public Grasp Colleges' Costs

Higher-education finance is too opaque, says Jane V. Wellman, an expert on college costs, and policy makers as well as the general public often lack basic information about how colleges spend money.

Her group, the Delta Cost Project on Postsecondary Costs, Productivity, and Accountability, aims to change that. This week the group released a Web-based database that tracks the spending and revenue sources of 2,300 public and private institutions. The database, Trends in College Spending Online, tracks a wide array of categories at each college, enabling comparisons among institutions, states, and sectors.

The database will increase transparency and help drive the debate over how higher education should adjust to the "new normal" of reduced revenue sources.

More-Students-Less-Money

"We know how to cut budgets," says Ms. Wellman, Delta's executive director. "We don't know how to restructure costs."

Along with the new tool, the Delta project also released a report on trends in college spending from 1998 to 2008. Although the findings predate the recession, Ms. Wellman says there are lessons to be learned from them. The patterns include a shift toward reliance on tuition revenue during economic downturns, and a spending frenzy by wealthy private universities, which helped fuel competitive pressure and spending across much of higher education.

But the Web tool's potential outshines the newsworthiness of the accompanying report's conclusions.

Building on publicly available numbers from the U.S. Department of Education's Integrated Postsecondary Education Data System, the Delta project organized data into spending categories on a per-student basis at each college. The six major metrics include the average educational cost per student and college spending per degree.

The database's major contribution is that it translates murky, complex information into standard formats that can be tracked over time, with annual data from 2002 to 2008. It also peels away layers of spending that aren't directly related to student learning.

Ms. Wellman says the most important metric is "education and related spending" (which excludes auxiliary operations like hospitals as well as research and public-service costs). Those core expenses—which include instruction and student services—give the best view of the full cost of education and who is paying for it.

As an example, she points to an entry from the database for the University of Maryland at College Park. In 2008 its total education and related spending per student was $16,802. Students paid for 56 percent of that amount, according to the Web tool, while the "subsidy" from institutional revenues such as state funding, endowment spending, and private fund raising was 44 percent.

The entry also includes inflation-adjusted trends in those numbers dating back to 2002. Over those six years, Maryland's education-related spending decreased by about $1,400 per student. And students are now picking up more of the tab. In 2002 they paid for 36 percent, and the subsidy covered 64 percent. Ms. Wellman says her group plans to update the Web tool on an annual basis. Next year's release would include the early impact of the recession.

Declining Share for Faculty

The trend report is the third in a series of studies on higher-education finance by the Delta project, which is an independent, nonprofit research organization. The report was financed by the Lumina Foundation for Education.

Questions the report seeks to answer are clear from its title: "Trends in College Spending 1998-2008: Where Does the Money Come From? Where Does It Go? What Does It Buy?"

It identifies several troubling patterns on the national level. One of the most controversial is the declining share of spending on the "direct cost of instruction," a category that consists largely of faculty pay and benefits.

That expense, like others in the report, is put into context. Instructional costs are given as portions of education spending, on an inflation-adjusted, per-student basis. Across all types of institutions, instructional costs, while increasing, dipped relative to spending on administration, academic support such as libraries and computing, and student services.

For example, an average of 53.7 percent of education-related spending by private research universities in 2008 was on instruction, down from 55.9 percent in 1998. At the same time, the proportion of spending on administration and academic support increased to 35.9 percent from 34.3 percent, while spending on student services went to 10.4 percent from 9.8 percent.

The sole constant among the mounds of data the group analyzed is hardly a surprise: Tuition rates have gone up faster than inflation and family income, with "no discernible payoff in quality, opportunity, or results."

The repeated tuition increases have fed public skepticism about wasteful spending by colleges. And the evidence suggests that people are right to be skeptical, at least in some cases. For example, many private colleges raised tuition despite explosive growth in private gifts and endowment income in the three years before the recession. As the report states, those healthy revenue streams just enabled higher overall spending rates.

The Delta project also points to findings showing that spending patterns are not always consistent with policy priorities.

The Obama administration has set a lofty of goal for the United States to have the world's highest proportion of college graduates by 2020. Yet colleges serving the most students spend the least, per capita, on their education.

The report found that community colleges spend about $10,000 annually on each student, while private research universities spend almost $35,000.

"The current recession will almost certainly increase these inequalities," the report says, "just at a time when more students are forced to consider low-cost educational options."

Comments

1. bcharvey - July 09, 2010 at 10:05 am

These analyses of IPEDS data pull back the curtain a little, but one major factor they are not good at illuminating is the variation in how capital costs are funded. There are two phenomena at work: 1) a growing rift between institutions with relatively modern physical plants and those with large legacy facilities deficiencies; and 2) a widening divide in terms of access to capital to pay for new or modernized facilities. At one end of the spectrum are institutions with relatively good facilities (because they are relatively new and/or they have been relatively consistently modernized over time), while at the other are institutions with crushing facilities challenges (usually because they have relatively old buildings and have not had good access to capital for renewal). And institutions that have also had operating budget constraints that have limited O&M spending (the only piece of this actually tracked by IPEDS) have the additional problem of large deferred maintenance needs.

So from an IPEDS perspective (and therefore a DELTA perspective) imagine three cases: a well-endowed private institution that replaced and renewed buildings consistently since 1950; a relatively new public institution in a growth state; and a land grant institution with a large fraction of its facilities dating from the post-War and Baby Boom surges. Compared with the first two, the last will be spending operating revenue in large amounts to overcome is facilities deficiencies, which will make it look expensive and non-student-oriented, but what is really being measured?

2. johnnugent - July 09, 2010 at 01:00 pm

There's a story about this in the New York Times, with a headline focusing on expenditures on "recreation" vs. instruction. (See http://www.nytimes.com/2010/07/10/education/10education.html?hp) That seems like a bit of a tabloid approach to summarizing what this study is about, as well being potentially misleading. Just because the "Student Services" IPEDS category includes things like athletics spending doesn't mean that increases in spending have all been for "recreation." It makes a great headline that will get lots of hits because it sounds outrageous and confirms peoples' worst fears, but The Times reporter seems to want to draw a finer conclusion than the data allow. I think it shows the difficulty in deploying these data in meaningful ways for comparisons and public consumption.

3. collegeconnectors - July 09, 2010 at 01:38 pm

Interesting to those who want to study college costs. Unfortunately, "grasping colleges' costs" does nothing to help families pay those ever increasing costs.

4. bdr8y - July 09, 2010 at 05:25 pm

Richard Vedder and his toadies are all anti-subsidization of postsecondary education and such reports simply give them fodder to make their often inflated and oversimplified argument. The private universities that Delta and others seem to have a fetish for are such a small, though albeit important, slice of US postsecondary education. What the report does not detail is the fact that private institutions, when they do enroll low-income and racial/ethnic minority students, do a better job of graduating them, and except for the most elite, independent institutions actually enroll larger shares of low-income students than publics.

5. bstevens - July 09, 2010 at 06:48 pm

One cannot accurately compare per-student spending between a community college and a baccalaureate or higher institution until there is a way to measure accurately the higher institution's spending on freshmen and sophomores only. This would be difficult because one would have to pro-rate everything, including sports, facilities, professors' salaries, all other salaries, utilities, housing, etc. Everyone seems to know this, but they don't know how to do it, and therefore continue to put out these nonsensical comparisons. Just one of IPEDS' many faults.

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