How Much Should Higher Education Cost?

Transcription

1 How Much Should Higher Education Cost? D r. L e e H o l c o m b e R e s e a r c h F e l l o w T h e R a y M a r s h a l l C e n t e r l e e. h o l c o m b r a y m a r s h a l l c e n t e r. o r g

2 Two Phases of State HE Finance 2 Phase 1: Legislative appropriation Phase 2: Distribution of appropriation Traditionally based upon enrollment Moving towards performance Characteristics of metrics Reflect state HE goals Clear Relate directly to institutional operations

3 Phase 1: Legislative Appropriation 3 Much less attention Politics, other obligations, and economic conditions Legislators are increasingly frustrated that recommendations for appropriations are not responsive to their desire to know how much HE should cost and state share

4 General Approach to Determine Legislative Appropriation 4 How much should HE cost in total? Educational costs only Based upon projections for efficiency and productivity How much of the total educational costs should be covered by the state? Multiple approaches could be adopted Use national peer institutions

5 Basic Arithmetic 5 Total Educational Cost = Cost per FTSE * Number of FTSEs

6 Number of FTSEs 6 Number of New FTSEs Number of FTSEs in Year y-1 Number of FTSEs in Year y Number of Leavers = function of the Leaver Rate Number of Completers = function of the Completer Rate

7 Efficiency and Productivity Measures Efficiency Measure: Educational cost per FTSE As this measure improves, total educational costs decrease Productivity Measure: Leaver Rate 7 Number of students who leave without a credential divided by the total number of students in year y-1 As this measure improves, total educational costs increase Productivity Measure: Completer Rate Number of students who leave with a credential divided by the total number of students in year y-1 As this measure improves, total educational costs decrease

8 Key Characteristics of Efficiency and Productivity measures 8 Aligned with stage 2 performance-based distribution Aligned with state HE goals Transparent Relatable to institution-level targets Efficiency measure is comparable to other states and nations

9 An Application to Formula Funding of Texas General Academic Institutions for the Biennium B A S E L I N E M O D E L : A S S U M E M E A S U R E S R E M A I N A T L E V E L S F R O M , T H E I R L A S T K N O W N V A L U E S Estimated Total Educational Expenditures: $15.8 billion 9 S H O W H O W D I F F E R E N T P R O J E C T I O N S R E S U L T I N C H A N G E S I N T O T A L E D U C A T I O N A L E X P E N D I T U R E S U S E S E L F - I D E N T I F I E D N A T I O N A L P E E R I N S T I T U T I O N S A S A B A S I S T O D E T E R M I N E S T A T E F U N D I N G

10 Projected Leaver Rate* % Baseline 17.0% 16.5% 16.0% 16.5% 15.0% 15.5% 14.0% 13.0% Would result in 14,051 additional FTSEs and $218M in funding needed for FY biennium 12.0% 11.0% Leaver Rate = Number of leavers Total enrollment 10.0% *Author s calculations, THECB data

11 Projected Completer Rate* Would result in 14,855 fewer FTSEs and $231M less in total funding needed in FY % % 15.9% 0.14 Baseline Completer Rate = Number of completers Total enrollment *Author s calculations, THECB data

12 Projected Cost Efficiency* Education Cost per FTSE = Costs - Research - Public Service - Auxiliary FTSEs Baseline $15,791 $15,555 $15, $15, Would result in$82m less in total funding needed in FY *Author s calculations, THECB data

13 Projected State Share of Education Costs 13 Multiple approaches could be used Use self-identified national peers Equate institutional missions Research shows that productivity is related to state share Use baseline scenario estimate of $15.8 billion

14 State Share of Education Costs* 14 Funding Source Texas GAIs National Peers State 32.4% 33.4% 27.8% 26.5% 41.3% 38.3% 33.9% 32.7% Student & Parents 27.1% 29.2% 25.9% 27.1% 27.3% 29.6% 29.2% 30.0% Federal 14.6% 16.5% 17.7% 17.4% 15.8% 16.8% 19.0% 19.4% Institutional 25.9% 20.9% 28.6% 29.0% 15.6% 15.2% 17.9% 17.9% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% * Source: IPEDS

15 Projected State Proportion of Education Costs 15 State support as a percent of operational sources (IPEDS, 2011) Texas GAIs 26.5% National Peers 32.7% Difference of ~ 6 percentage points Apply this difference to projected educational costs per FTSE in FY $985M in formula to make up difference Assume 5 biennia to achieve parity with national peers $197M (= $985M/5 biennia)

16 Conclusion 16 Conversations about appropriations would evolve from projections of demographic trends to projections of efficiency and productivity and state obligations for funding levels Efficiency and productivity measures Aligned with stage 2 performance-based distribution Aligned with HE goals Transparent Relatable to institution-level targets Efficiency measure is comparable to other states and nations Measures could be considered for inclusion in state HE plans