1. 1 Understanding and Communicating Cost Drivers in Postsecondary Education SHEEO Professional Development Boston, Massachusetts August 16, 2007 Jane Wellman, Delta Project on Postsecondary Costs

2. 2 Understanding Cost “drivers” Need to look at ‘Brand’ cost determinants (mission, sector, revenue), versus inflationary pressures on elements of spending over time (cost shifting) Major brand determinants: –Revenue availability –Discipline mix –Mission – research, service –Curriculum/course enrollment patterns –Student economic circumstances –Admission selectivity

3. Public Private NFP Specialty Associates Baccalaureate Doctoral Research Specialty Associates Baccalaureate Doctoral Research FTE: Bottom Third FTE: Middle Third FTE: Top Third Bottom Third | Middle Third | Top Third FTE Expenditure Matched Sample Institutional Counts by Primary Segmentation

4. Public Private NFP Associates Baccalaureate Doctoral Research Associates Baccalaureate Doctoral Research FTE: Bottom Third FTE: Middle Third FTE: Top Third Bottom Third | Middle Third | Top Third FTE Expenditure FY 2005 Average Expenditure per FTE by Primary Segmentation

5. Public Private NFP Specialty Associates Baccalaureate Doctoral Research Specialty Associates Baccalaureate Doctoral Research FTE: Bottom Third FTE: Middle Third FTE: Top Third Bottom Third | Middle Third | Top Third FTE Expenditure FY 2000 to FY 2005 Average Net Change in Expenditure per FTE by Primary Segmentation

6. 6 Cost of the “brand” - Public Institutional Spending- 2005

7. 7 Changes in Total E&G Spending/FTE Student* 19872005 Average Annual % change, 1987-2005 Public 4- yearMean729814483+5.5% Median46529293+5.5% Private 4- year Mean804520935+8.9% Median583515965+9.5% 2-yearMean39297675+5.2% Median35427008+5.4% Access to Capital (average spending/fte) mean private/public 41.11.45+32% median private/public 41.251.72+38% Educational Spending (All Revenue Sources) Per Student – 1987 – 2005 (current dollars) IPEDS preliminary analysis; “Educational spending” =direct spending/FTE for instruction+student services, plus instructional share of remaining categories less auxiliaries and hospitals.

8. Research Private Research Public Master’s Public Master’s Private Bachelor’s Private Bachelor’s Public Cumulative Growth in Educational Cost per Degree Conferred by Broad Carnegie Classification and Control – in 2005 CPI Adjusted Dollars

9. Inflationary pressures on costs Competition Administration Cost of Capital Benefits Student/academic support (co-curriculum) including technology Student financial aid 9

10. Composite Average Annual Percent Change – FTE Median Composite Average Annual Percent Change – FTE Mean Composite Average Annual CPI Adjusted Percent Change in FTE Expenditures by Broad Carnegie Classification and Control: Fiscal Years 1993-96, 1998-01 and 2002-05

11. Composite Average Annual Percent Change – FTE Median Composite Average Annual Percent Change – FTE Mean Composite Average Annual CPI Adjusted Percent Change in FTE Expenditures by Broad Carnegie Classification and Control: Fiscal Years 1993-96, 1998-01 and 2002-05

12. Composite Average Annual Percent Change – FTE Median Composite Average Annual Percent Change – FTE Mean Composite Average Annual CPI Adjusted Percent Change in FTE Expenditures by Broad Carnegie Classification and Control: Fiscal Years 1993-96, 1998-01 and 2002-05

13. Evidence of cost cutting? Instruction – –Growing use of part-time faculty –Marginal costs lower in times of growth –Growing use of technology v. personnel Energy efficiency/utilities costs 13

14. Institutional Solutions Core instructional program –Faculty renewal and reinvestment –Curriculum management Student-centered investments –Reduce freshmen attrition –Increase success in ‘killer courses’ –Invest in student success (first-year programs; bridge programs; learning communities) Reduce overhead Improve institutional efficiency –Energy efficiency –Reduce cost of capital –Distance learning Improve management and oversight of costs: data; accountability strategies; governing board roles

15. Suggestions for SHEEOS Look at ways that state policies can support institutional solutions Benchmark costs – develop better cost data, and use it –Faculty salary comparisons – split compensation and benefits –Cost per degree, not just cost per input –Look at core unrestricted revenues; educational costs per students Engage governing boards – piloting better use of cost indicators to focus conversations Look at outcomes and access - and cost per Promote best practices to increase productivity