Report Compares College Spending, Resources Before Recession

A report released today details where colleges were spending their money in the years leading up to nationwide budget crises in higher education.

The report, “Trends in College Spending,” comes from the Delta Project on Postsecondary Education Costs, Productivity, and Accountability, and includes a database open to the public on exactly what institutions were spending their money on, and where their funding was coming from. As the data available includes spending information through 2008, when many colleges had not yet been feeling the worst of the recession, education analysts suggests it paints a fairly accurate picture of where administrators’ priorities lie when it comes to spending.

An article in Inside Higher Ed on the report today details the bad habits of institutions of higher education that may have contributed to current budget woes. Among those missteps:

• Colleges spend too much money on administration, including administrative positions and outside accounting and legal positions. Harvard University was the biggest offender, where administrative costs rose by nearly 14 percent from 2007 to 2008.
• Compared to funds allocated to administrators, colleges spend too little on instruction. While funding support grew by 20 percent for administrative support, funding for instruction grew by only 10 percent. According to the report, even in those years when revenues improved, the share of funding going toward instruction did not increase on levels comparable to that of funding set aside for administrative, non-academic costs.
• Spending per student varies dramatically by school. Public research colleges spend about $35,000 per student, compared to about $10,000 per student per year at community colleges, which have seen rapid growth over the last few years. That suggests students at those public colleges are disproportionately subsidized, despite the fact that they typically come from more affluent households than those attending community colleges.
• Colleges rely too much on cost-shifting. Rather than cutting spending in years when budgets were tight, schools raised tuition instead, a move that may not be sustainable in the long run.

As it was around 2008 when colleges began adapting to the worst of new pressures on their budgets, it’s important to consider that the data in this study considers only those years prior to those funding constraints. The following decade will probably look quite different, and priorities may have shifted since. There’s no question that the recession has had a toll on higher education, especially on schools that depend on state funding.

A recent report from the National Conference of State Legislatures described that declining state support for institutions of higher education. Many states have begun to rely on federal stimulus funds to address or prevent major budget cuts across the board, with California hit particularly hard. The report also showed more of a reliance on tuition to cover costs, as state support and school endowments have decreased. Tuition, which increased by about 2 percent between 2008 and 2009, now accounts for about 37 percent of total education revenue. In comparison, about 25 percent of education revenue came from students’ tuition payments in 1984.