Spending Your Tax Dollars

New research on public master's universities finds that they are generally efficient, but economies of scale favor undergraduate over graduate education.

August 16, 2016
Study praises Adams State U for efficiency.

Here’s a strike against the idea that public master’s-degree-granting colleges and universities are inefficient bureaucracies that can quickly slash their way to lean, machinelike operations if they just cut enough fat from next year’s budget.

New research finds relatively few such institutions are inefficient when it comes to costs. It also finds the cost inefficiencies that do exist tend to be long-term, like structural practices and budgeting strategies -- not short-term, like management issues that can be changed overnight.

In addition, researchers found regional cost clustering exists -- costs are more similar, for example, between universities in the Southeastern United States than they are for institutions separated by thousands of miles. And they found that there are economies of scale in undergraduate education but diseconomies of scale in graduate education. That suggests it is more cost-efficient to enroll more undergraduate students but it is not more efficient to enroll more graduate students.

The research, titled “Are Public Master’s Institutions Cost-Efficient? A Stochastic Frontier and Spatial Analysis,” was published online Wednesday in the journal Research in Higher Education. It focuses on public master’s institutions more commonly known as state colleges and universities, according to lead author Marvin A. Titus, an associate professor of higher education at the University of Maryland, College Park. It’s a look at institutions like Bowie State, California State Bakersfield and Frostburg State Universities, not the flagship research institutions that often capture more attention and receive more money per capita.

Titus and co-authors Adriana Vamosiu of the University of San Diego and Kevin R. McClure of the University of North Carolina at Wilmington analyzed cost efficiency for general and educational spending at 252 public master’s institutions using data from 2004 to 2012. It’s a large segment of the higher education sphere -- nearly a quarter of all higher ed enrollments between 1987 and 2010 were at public master’s institutions, the authors wrote. It’s also an important sphere for higher education accessibility -- almost half of students at public comprehensive institutions received Pell Grants, and large portions of African-American, Hispanic, Latino and American Indian students attended the class of institutions, the researchers wrote.

At the same time, public master’s institutions are feeling pressure to change and chase resources. Many pursue prestige by increasing research activity, researchers wrote.

“They really provide service to a large number of students, but they don’t get the same press as research institutions,” Titus said. “Many of those students come from disadvantaged backgrounds. They’re nontraditional students, students who don’t live very far away from the institutions they attend.”

Researchers calculated cost-efficiency indexes for residual (short-term) efficiency and for persistent (long-term) efficiency using four models. Across all models, the residual, or short-term, cost-efficiency index for public master’s institutions notched a mean of approximately 91 percent. The persistent, or long-term, cost-efficiency index mean came in between roughly 84 percent and 86 percent. It was 85.7 percent in two models.

“That represents the percentage of efficiency compared to an institution that’s 100 percent cost-efficient, so they’re using resources in an efficient way that would minimize their costs,” Titus said of the master's universities in the study. “Relatively few institutions are cost inefficient.”

The findings suggest quick fixes to cut costs might not be effective, the authors wrote. An implication is that long-term structural approaches, like putting in place new budget models or consolidating some administrative processes like procurement across systems, might be the most effective way to find cost efficiencies.

“If you see that there is more room for improvement in the persistent cost efficiency, that has implications for the policy you implement, whether it is a policy that addresses some structural changes or a policy that addresses some short-term management changes,” Titus said. “Get rid of a few administrators that aren’t doing their job -- that’s more of a short-term remedy.”

The results could also indicate that investing in public master’s institutions could be an efficient way to make bachelor’s degrees more affordable and accessible to diverse populations of students, researchers wrote.

They also identified the 20 most cost-efficient public master’s institutions under their four models. Institutions named under all four models included Adams State University, Augusta State University, Bowie State University, East Central University and Francis Marion University.

The naming of institutions could be important as experts try to find ways to improve institutions’ efficiency, said Thomas L. Harnisch, director of state relations and policy analysis for the American Association of State Colleges and Universities.

“This really opens up a whole new set of opportunities for research,” Harnisch said. “Hopefully we can share with college leaders throughout the country in an effort to really help bring down costs and expand opportunities for more students.”

Looking within public master’s institutions, researchers found economies of scale for undergraduate education. They found no evidence of economies of scale for research. But they found diseconomies of scale for graduate education.

Those results suggest it is cost-efficient for institutions to enroll more undergraduates. More undergraduates means fixed costs like plant and equipment costs are spread over more students, researchers wrote. It can also mean resources like faculty members, teaching assistants and instructional technology are used in ways that can cut costs per student.

The same is not true when it comes to graduate student enrollment. Economies of scale may not be available for graduate students because a large number of public master’s institutions don’t offer doctoral degrees, researchers wrote. Therefore, they cannot employ large numbers of doctoral students as teaching and research assistants.

“As you expand those kinds of programs at those kinds of institutions, you actually incur diseconomies of scale,” Titus said. “So costs could actually rise because you don’t have the lower-cost teaching assistants that could substitute for your full-time professors.”

That finding might seem out of line with the current climate, in which many institutions are starting or exploring the possibility of starting new graduate programs.

But for state colleges and universities, it’s not always as simple as wringing the most efficiency out of programs, Harnisch said.

“The graduate programs are often in response to market demands,” he said. “And for many of these institutions, they’re the only public university within 100 miles or 200 miles. So they have to serve the needs of the region and of the state.”

Going forward, researchers would like to build on their work to study specific factors that make some institutions more cost-efficient, Titus said. They would also like to look at the ways efficiency and tuition are related.

“We started to do that in the paper, but not in a systematic way,” Titus said. “We started to look at how, among these cost-efficient institutions, tuition may actually be below average, so it pays off with respect to providing access to students.”


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