Chart 1
Revenue and cost pressure - hot topics everywhere, including higher education. Here is an update on the latest trends as presented by the Delta Cost Project: Where Does the Money Come From? Chart 1 presents the different types of higher education institutions and the change in sources of funding over the past decade. The scale is total revenue per full time equivalent student.
Let's start with the positive news: The report points out that, "investment returns for nonprofit private institutions rebounded in 2010 as financial markets began to recover." All three types of private institutions experienced significant gains in private gifts, investments, and endowments from 2009 to 2010. Still, only a small number of universities have big enough endowments to have a meaningful impact on funding of operations.
(Side note: If you are interested in more recent trend data for university endowments, see this recent New York Times article).
On the operating side, we quote the report's concise highlights with our emphasis and order of priority:
- State and local appropriations continued their decade-long decline,decreasing by:
- 24% in research universities,
- 24% in master’s institutions,
- 20% in bachelor’s colleges, and
- 20% in community colleges.
- Public institutions' net tuition revenues increased slightly from 2009 to 2010, but not enough to account for the declines in state appropriations. Over the prior decade, however, overall tuition increased in public four-year institutions by an amount greater than what would have been needed to cover losses in state appropriations.
- Community colleges' revenue continued to suffer declines in 2010, as total operating revenues per student declined by 7%, or approximately $1,000 per FTE student from 2009 to 2010. Community colleges are also the only public institutions where total operating revenues per student were lower than they were a decade earlier. Enrollments in community colleges continued to grow in 2010, increasing by 9% over 2009 enrollments. Thus, the growth in enrollment without growth in overall revenues accounts for some of the declines in revenues per student.
- Public research universities' operating revenues per student increased by 8% from their 2009 levels, resulting from gains in all revenue categories except state and local appropriations.
Chart 2 presents the continuation of a decade long trend of privatizing education expenses. "Tuition revenues exceeded state and local appropriations in public research and master’s institutions and were nearly equal in public bachelor’s institutions. Across the public sector, average state and local appropriations per FTE student reached 10-year lows, and tuition revenues were higher than state and local appropriations among public 4-year institutions."
The report also addresses the question of sticker price versus net tuition and the implied discounts provided. In contrast to previous years, published sticker prices among most four-year public institutions increased faster than gross tuition revenue. This suggests that the practice of using other tuition revenue—in particular from out-of-state and international students—to mitigate tuition price increases for in-state students was no longer enough to bridge the gap as of 2010. Perhaps this revenue trend is prompting increased pressure from trustees to ramp up out-of-state and international student recruitment even more.
Tuition revenue: Among private colleges and universities, increases in net tuition revenue between 2009 and 2010 were less than 2% in all types of institutions as a result of tuition discounts almost completely offsetting tuition increases.
Tuition increases: While the percentage increase of tution costs was about twice as high for public universities (3% versus 6%). The absolute dollar increase for students and parents is still much higher at private universities, give the higher tuition level. For example, the report states that, "the 6% increase in tuition at public research universities, for example, represented a $408 increase, whereas the 3% increase in private research universities equaled $930."
Tuition discounting: while a common practice in both public and private institutions, was particularly prominent in the private sector, with discount rates ranging between 27 and 36 percent in 2010. Among public institutions, the discount rate ranged from 10% in community colleges to 18% in research universities. These rates remained relatively unchanged from 2009.
