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Follow the Money

July 9, 2010

In a sea of often bewildering data about college spending practices, a small island of clarity is emerging.

In conjunction with its third annual “Trends in College Spending” report, released today, the Delta Project on Postsecondary Education Costs, Productivity, and Accountability provides a publicly available database that allows journalists, policy makers and anyone curious about higher education an opportunity to decipher where college funding comes from and where it goes.

While the Delta Cost Project has for years provided broad overviews of spending practices at various types of institutions, the new database’s groundbreaking feature is that -- fasten your seatbelts -- it allows for an analysis of the budget priorities of individual institutions. Jane Wellman, the project's executive director, hopes that the new data will stimulate conversations about spending priorities and cost containment -- or the lack thereof -- that generally aren’t happening now at the national, state or institutional level. Such conversations, she adds, are long overdue.

“I think we’ve got a lot of habits to break in higher education,” she says.

While there’s much to pore over in the Delta Project’s new report, it is necessarily limited because the federal data on spending the project draws on are now available only through 2008. Consequently, the recession that is now crippling many colleges and universities is barely captured in the current report -- and some of the big spending it meticulously documents happened in what history will likely regard as the heady days of higher ed.

So what can Delta tell us now? Perhaps most importantly, the project can begin to respond in a meaningful way to common arguments that have played out among faculty, students, administrators and state and federal policy makers in the last several years. Here are a few debates we’ve been hearing a lot, and the responses and insights Delta offers:

Too much money is wasted on fat cat bureaucrats and administrators. While the report doesn’t place a value judgment on how much is too much, it certainly will give critics some fodder with which to work. In the 10-year span that predated the “great recession,” public research universities ramped up spending on lawyers, senior-level administrators and accountants at nearly twice the rate of expenditures on faculty salaries and other items directly tied to instruction, the report finds. On a per-student basis, funding for instruction grew by about 10 percent between 1998 and 2008 at public research universities, while institutional support -- a category that captures senior vice presidents and other administrative positions that have boomed at many institutions in recent years -- grew by just under 20 percent.

The total dollar amounts spent on instruction still eclipse institutional support figures, but the pace of growth in instructional spending lagged behind administrative expansion in nearly every category of institution analyzed by Delta. The lone exception was private bachelor’s institutions, which bolstered per-student instruction expenditures by 13 percent, while institutional support increased only about 10 percent.

Harvard University -- in particular -- blows tons of money on administrative pay. In recent years, Harvard did indeed make significant investments in “administrative support and maintenance,” a category that does not directly relate to teaching but instead includes high-level administrators, accountants, lawyers and university presidents. The figure, which includes physical plant operations as well, rose to $41,891 per student in 2008 – a nearly 14 percent increase over the previous year.

If increasing the proportion of people with college degrees is a national goal, it doesn’t make sense to disproportionately subsidize students at public research universities, which often attract more affluent students who are among the most likely to go to college, regardless of state support. Public research universities still had the highest average subsidy levels per student among public colleges in 2008, although they also experienced the most significant reductions -- about $700 per student, compared with $300 for master’s institutions and nearly $200 for community colleges. There are significant differences between states, however. In Illinois, for instance, the per-student funding disparity between research universities and community colleges in 2008 was $2,111 -- about 28 percent higher for research institutions. In contrast, the gap in California is $6,493, or 44 percent, showing that the state gave significantly more support per student to the University of California system than to the community colleges now absorbing many additional students.

Colleges are preserving the “academic core,” even as they cut budgets. It’s important to reiterate that the report does not capture the period when most colleges made their biggest cuts, but it does suggest a slight dip in the resources going toward instruction -- a category synonymous with the “academic core.” Those declines are attributable to incremental upticks in the share of dollars supporting student services, maintenance and “academic and instructional support” -- two subcategories of spending that collectively include computers, libraries and administrative expenses.

The conclusions are wrong, because the figures are wrong. As colleges across the country have moved forward with painful budget cuts, faculty have at times questioned the budget figures administrators provide to justify decisions. Indeed, that skepticism has prompted faculty at some colleges to seek independent audits from outside. The data used by Delta, however, are provided to the federal government by the institutions themselves. That warehouse of public information, known as the Integrated Postsecondary Education Data System, or IPEDS, has collected data in categories largely unchanged for the past 30 years, Wellman notes.

While the Delta database may seem like a gold mine for journalists and policy makers, the numbers can still be misleading. By way of example, an examination of Guilford College’s spending habits and revenue returns from 2002 to 2008 creates the logical impression that dramatic declines in private giving and endowment returns helped spur massive administrative cuts -- and a conscious effort to hold instructional dollars steady.

But Kent Chabotar, Guilford’s president, notes that a number of other variables not captured in the data tell a slightly different story. The reason administrative support dollars per student fell by 12.2 percent was largely because the college’s enrollment has grown at a significantly greater pace than its staff positions, Chabotar says. Indeed, enrollment grew by about 45 percent during the period Delta highlights, while staff grew by about 25 percent, he said. As for the instructional dollars per student holding steady? Chabotar says that’s because Guilford hired enough new faculty to maintain its 16:1 student/faculty ratio, therefore keeping the per-student instructional dollars -- largely driven by faculty salaries -- at a relatively even keel.

“It didn’t make any sense to grow administration [at nearly the pace of enrollment],” he says. “I think we had some excess capacity, and last time I checked students come here for the faculty and not for the registrar or the controller.”

The college’s 85 percent decline in private gifts, investment returns and endowment income between 2002 and 2008 was largely attributable to a below average fund raising year in 2007-8, Chabotar said. Philanthropic gifts fell to $6.8 million from the previous year’s $8.5 million, which was more on par with an average year, Chabotar said.

While some college presidents might not relish having their spending habits compiled in Delta’s database, Chabotar says he welcomes a tool that will help him compare Guilford to other institutions.

“It gives you a very good comparative perspective, which most folks don’t do enough of,” he says. “We’re too much in a bubble.”

 

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