Bang for Their Bucks

New study suggests which state higher ed systems most effectively use their funds -- and which don't.
January 17, 2006

When state legislators and governors gather from around the country, they might be forgiven for thinking that all of those who run state higher education systems come from Lake Wobegon, where all children are above average. For in just about every state -- whether generous or frugal on college spending -- administrators say that they are making the absolute best possible use of available dollars.

A new system has been developed to see if they really are -- and the results are sure to please college officials in some states and upset those in others. The system measures spending that goes into higher education and performance in certain areas, with the idea of seeing which states are getting the most bang for their bucks.

The analysis -- developed by the National Center for Higher Education Management Systems -- ranks Utah No. 1 for performance relative to funding, followed by Massachusetts, Colorado, California and North Dakota. The bottom five, starting at 50, are: Alaska, Maine, West Virginia, Hawaii and Vermont. (Summaries of the various rankings appear at the bottom of this article.)

A report accompanying the center's analysis said that the new system might provide perspective to state lawmakers, who don't know what to make of college leaders who complain about their level of support relative to institutions in other states. Because this analysis is independent, it may have more credibility, the report said. It also said that too much of the lobbying done by public colleges and universities focuses on spending levels compared to other institutions, not the relationship between spending and quality.

"In response to the question of 'how much funding is needed?' the typical answer of 'more' or 'as much as our peers' leaves out all consideration of performance and affordability to students," the report said.

The center also did separate analyses for public research universities, bachelor's and master's institutions, and community colleges -- with Colorado, Washington and South Dakota leading the three categories, respectively. The rankings could bolster the assertions of educators in states that did well that they are indeed spending taxpayer funds effectively. But doing well could be a double-edged sword -- some of the states with high scores are a bit parsimonious in supporting their colleges, and might be inclined to go right on doing so, knowing that they are getting good results. Of course some of those scoring poorly are also not known for overflowing coffers.

For the overall state rankings, state support covered both appropriations and tuition revenue. Federal research support was excluded based on the view that such funds must be spent on certain areas. Quality measures included such factors as undergraduate enrollment relative to population, undergraduate degrees relative to enrollment, timely graduation rates of traditional age undergraduates, competitive research funds awarded per capita and percentage of total degrees awarded that are doctoral degrees.

An adjustment was also made for cost-of-living differences. Since states that are more expensive to live in require higher faculty salaries, and since faculty salaries are a major component of state budgets, NCHEMS officials said it would have been unfair to do a straight dollar comparison among the states. Separate calculations were made for the sector rankings, but all focused on various graduation rates.

Patrick J. Kelly, a senior associate at NCHEMS and one of the report's authors, stressed that the project was not designed to say "this system is underfunded or this system is overfunded." Rather, he said the idea was to make comparative data available so that educators and state officials could examine the details. He said that there are many "red flags" that should be visible in different states, but that every red flag did not indicate a problem.

What is clear, he said, is that "funding alone is not correlated with performance" and that some states are doing much better with limited funds than are other states. Kelly said he was "a little concerned" that parts of the report might be used to justify tight budget for colleges. But he said that he believed many states could use the data to show that they make excellent use of their funds, and deserve more. NCHEMS plans to start publicizing the analysis today.

He also said that the data in the report might be helpful in debates over tuition policy. People who assume a direct correlation between funding and performance would respond to a cut of $1 in state support by adding $1 in tuition revenue, he said. Kelly said that is a "knee jerk" reaction that shouldn't happen, and he hoped that the report may prompt some people to reconsider how they set tuition.

Kelly acknowledged that there are important measures of institutional quality that could not be measured, and he said this was especially the case at the baccalaureate and community college levels. NCHEMS could not find good measures of support to local communities, he said, so that mission -- extremely important to community colleges and regional state colleges -- isn't calculated.

Below are overall rankings and rankings for the three sectors NCHEMS analyzed. Data that were used for the rankings generally come from 2002-3.

Performance of Public Higher Education Relative to Spending

State Overall Research Institutions Bachelor's and Master's* Community Colleges
Alabama 28 38 22 13
Alaska 50 48 47 50
Arizona  9 17 * 17
Arkansas 44 42 27 18
California   4  3 16  3
Colorado   3  1  6 19
Connecticut 22 34 26 46
Delaware 19 18 45 48
Florida 16 12 34  6
Georgia 30  5 33  8
Hawaii 47 49 46 40
Idaho 34 44 41 42
Illinois 14 13 14  9
Indiana 33 33 43 39
Iowa  8 15  2  5
Kansas 18 11 13 10
Kentucky 45 41 36 22
Louisiana 42 25 35 27
Maine 49 45 32 32
Maryland  6 28 21 45
Massachusetts  2 31 10 36
Michigan 29 16 28 30
Minnesota 20 20  9 15
Mississippi 37 30 39  2
Missouri 11 39 18 23
Montana 32 21 40 20
Nebraska 15 10 17 16
Nevada 39 37 * 49
New Hampshire 12  2  7 28
New Jersey 40  6  3 31
New Mexico 35 36 44 43
New York 24 24  8 26
North Carolina 23 40 31 29
North Dakota  5 32 30 14
Ohio 27 22 42 35
Oklahoma 36 19 19 11
Oregon 31 27 37 41
Pennsylvania 26 26 11 47
Rhode Island   7 14 23 44
South Carolina 43 29 12 25
South Dakota 17 35 20  1
Tennessee 38 46 29 38
Texas 25  7 24 21
Utah  1 23 15  7
Vermont 46 50 38 33
Virginia 10   9  4 12
Washington 13  8  1  4
West Virginia 48 43 25 24
Wisconsin 21  4  5 37
Wyoming 41 47 * 34

*Not all states have institutions in this category, although one state -- Nevada -- that is not evaluated here recently created an institution for this classification.


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