1. Reactions to Budgetary Restrictions for Four Year Public Universities Justin Shepherd Vanderbilt University justin.c.shepherd@vanderbilt.edu AERA Presentation Spring 2012

2. Research Question How do personnel levels change at four- year public universities as their different funding levels are altered?

3. Conceptual Framework How do personnel levels change at four-year public universities as their different funding levels are altered? Wages & benefits comprise 70-80% of university expenditures (Archibald & Feldman, 2008) Reduction in state funding explains inequality of faculty salaries between private & public universities (Ehrenberg, 2003)

4. Conceptual Framework How do personnel levels change at four-year public universities as their different funding levels are altered? ◦ 1989-1999: Revenues from state fell from 45.1% to 35.8% of total revenues (Santos, 2007) ◦ Legislators target HE for budget cuts b/c they can offset with tuition & college students aren’t neediest population (Delaney & Doyle, 2007; Hovey, 1999) ◦ 1989-1999: Tuition revenues rose from 14.6% to 18.5% of total revenues (Santos, 2007)

5. Conceptual Framework Rising Costs ◦ Bowen’s Revenue Theory of Costs (1970) ◦ Niskanen’s Hypothesis (1971) ◦ Administrative Bloat (Massy & Wilger, 1992) ◦ Cost Disease (Levin, 1991)

6. Hypothesis Decreasing funding leads to a loss of personnel, implying one of two things: ◦ There is no more fat to be cut ◦ Administrative bloat and cost disease are prevalent and being addressed

7. Data Delta Cost Project ◦ IPEDS from US DOE’s NCES ◦ 1987-2008 ◦ Time Adjusted According to BLS ◦ 489 Public Four-Year Universities ◦ Lagged 1 year ◦ Strict Exogeneity

8. Variables Dependent Variables ◦ Faculty ◦ Administrators & Professionals ◦ Total Employees Independent Variables ◦ State Revenue ◦ Tuition ◦ Federal, Private Gifts, Auxiliary, & Other Revenues Control Variable ◦ Enrollment

9. Table 1. Descriptive Statistics meansd Faculty578.7734.2 Administrators116.1177.8 Professionals455.0867.0 Total FT Employees1884.22774.1 State Aid (in Millions)103.2152.1 Tuition Revenues (in Millions)59.1591.15 Total Revenues (in Millions)283.9490.0 Observations10,623

10. Table 2. Results of Fixed Effects (Faculty) Logged Regressors (1)(2)(3)(4)(5)(6) State Aid 0.30*** (0.03) 0.27*** (0.03) 0.20*** (0.02) -0.22*** (0.03) - Tuition 0.14*** (0.01) 0.10*** (0.02) 0.02 (0.02) -0.09*** (0.03) - Federal Aid -0.04*** (0.01) 0.03 (0.01) -0.04** (0.01) - Private Gifts -0.01 (0.00) 0.01 (0.00) -0.00 (0.00) - Auxiliary Revenue -0.05*** (0.02) 0.02 (0.02) -0.02 (0.02) - Other Revenues --0.00 (0.00) 0.00 (0.00) -0.00 (0.00) - FT Undergrads --0.37*** (0.07) -0.33*** (0.07) 0.31*** (0.05) Total Revenues ---0.48*** (0.03) -0.43*** (0.07) Year Dummies NNNNYY Standard Errors in parentheses All variables lagged 1 year * p < 0.05, ** p < 0.01, *** p < 0.001

11. Table 3. Results of Fixed Effects (Administrators) Logged Regressors (1)(2)(3)(4)(5)(6) State Aid 0.28*** (0.06) 0.27*** (0.06) 0.27*** (0.06) -0.23*** (0.07) - Tuition 0.08*** (0.03) 0.10** (0.03) 0.10** (0.04) -0.15* (0.06) - Federal Aid --0.04 (0.03) -0.04 (0.03) --0.02 (0.03) - Private Gifts -0.01 (0.01) 0.01 (0.01) -0.00 (0.01) - Auxiliary Revenue -0.08** (0.02) 0.07** (0.02) -0.07** (0.02) - Other Revenues --0.03*** (0.01) -0.03*** (0.01) --0.03*** (0.01) - FT Undergrads --0.02 (0.08) -0.03 (0.08) 0.06 (0.07) Total Revenues ---0.35*** (0.05) -0.39*** (0.08) Year Dummies NNNNYY Standard Errors in parentheses All variables lagged 1 year * p < 0.05, ** p < 0.01, *** p < 0.001

12. Table 4. Results of Fixed Effects (Professionals) Logged Regressors (1)(2)(3)(4)(5)(6) State Aid 0.40*** (0.06) 0.34*** (0.06) 0.33*** (0.06) -0.19** (0.06) - Tuition 0.64*** (0.03) 0.54*** (0.03) 0.53*** (0.04) -0.06 (0.05) - Federal Aid -0.13*** (0.02) 0.12*** (0.02) -0.07** (0.02) - Private Gifts -0.01 (0.01) 0.01 (0.01) -0.01 (0.01) - Auxiliary Revenue -0.03 (0.02) 0.02 (0.03) --0.00 (0.02) - Other Revenues -0.01* (0.01) 0.01* (0.01) -0.00 (0.01) - FT Undergrads --0.05 (0.08) -0.36*** (0.08) 0.33*** (0.07) Total Revenues ---1.29*** (0.05) -0.41*** (0.08) Year Dummies NNNNYY Standard Errors in parentheses All variables lagged 1 year * p < 0.05, ** p < 0.01, *** p < 0.001

13. Table 5. Results of Fixed Effects (Total Employees) Logged Regressors (1)(2)(3)(4)(5)(6) State Aid 0.31*** (0.03) 0.27*** (0.03) 0.22*** (0.02) -0.21*** (0.03) - Tuition 0.17*** (0.01) 0.13*** (0.01) 0.07*** (0.02) -0.09*** (0.03) - Federal Aid -0.04*** (0.01) 0.03* (0.01) -0.04** (0.01) - Private Gifts -0.01** (0.00) 0.01** (0.00) -0.01* (0.00) - Auxiliary Revenue -0.05*** (0.01) 0.03* (0.02) -0.03 (0.02) - Other Revenues --0.00 (0.00) -0.00 (0.00) --0.00 (0.00 - FT Undergrads --0.29*** (0.06) -0.28*** (0.06) 0.27*** (0.04) Total Revenues ---0.52*** (0.02) -0.43*** (0.06) Year Dummies NNNNYY Standard Errors in parentheses All variables lagged 1 year * p < 0.05, ** p < 0.01, *** p < 0.001

14. Results State aid is particularly robust across all model specifications for all groups Professionals have the highest coefficients for the different job classes

15. Conclusions Reductions in revenues results in cuts to expenses ◦ Not enough money from other sources of revenues to make up cuts ◦ Runs counter to Bowen & Niskanen Professionals having the largest coefficient implies there may be bloat ◦ No insight into cost disease (need salary info)

16. Policy Implications Policy Makers ◦ Better understand impact of cuts to HE Administrators ◦ Possible issue with large middle-management class Public ◦ Better understand tradeoff between taxes and tuition