A Plea for Help and Anecdotal Evidence about US University Teaching Costs

A reader was curious where the money in US universities is going. The perception is that they have huge budgets that increase faster than inflation. The problem with providing insight into this is that I am not an accountant. So this post is part plea for help part anecdotal evidence contradicting the impression. 

Plea for help: I like to consider myself a reasonably intelligent person with a reasonable head for numbers, but I really find the financial statements of many US universities too difficult to understand. There are exceptions. For example, the Massachusetts  Institute of Technology  does a pretty good job, as does the University of Washington, but many State supported Universities, I simply can’t get my head around.

So help please. The 2011/12 annual report for UCLA  is here (useful part starts on page 24). The 2010/11 equivalent for UC Berkeley is here (useful part starts on page 18). If anyone can provide the following for US State supported Universities including any substantiating links, it would be appreciated: 

      1)      Total income and expenditure

a.       Broken down by: teaching, research, and other.

b.      Broken down by State funds and other.

      2)      The total number of full time equivalent students.

Anecdotal evidence that university education costs are not increasing in excess of inflation: The first page of the University of Washington report is great. Using this as an example:

      1)      State appropriations supporting the University have declined over the period 2000/1 to 2010/11 both in terms of absolute dollars and even more precipitously in terms of dollars per student. In 2000/2001, net appropriations for operating expenses were $341.5 Million ($8,699/student). In 2010/11, the equivalent figures were $296.8 Million ($6,051/student).  

  

      2)      Overall per student cost (assuming the cost to students is the state appropriations plus tuition and fees) increased from $15,482 (2000/1) to $18,181 (2010/11). This corresponds to a yearly increase of 1.6%/year over the decade. According to the data here, the average rate of inflation over the period was in the range of 2.4%/year to 2.5%/year. 

 

       3)      The perception of increase cost relative to inflation is due to the state providing less support to education and shifting the cost onto parents and students. For example, between 2005/6 ($8,255/student) and 2010/11($12,130/student) there was an 8%/yr increase in tuition and fees (the part students and families see). However, overall the University lost substantial ground to inflation. 

This particular case is anecdotal (only one university in a very large number of state run universities). Looking at broad numbers can mask many trends and this does not take into account any changes in the distribution of out of state students. However, it illustrates a general problem of perception. The teaching mission of universities is being squeezed at the same time that cost to students and families is increasing. (Note: the UK situation is more nuanced – some subject areas are seeing an increase per student).

Any assistance with the more complex balance sheets would be appreciated.

If I have misinterpreted the UW figures or made any computation errors, please correct me.

Would You Give Someone £10,000 to Do Nothing for You

The Open University in the UK is a fascinating experiment that by and large has gone well. Your colleagues and friends may be working on OU degrees. Academics take OU courses. People in traditional industries take OU courses. I like OU because it has served people who otherwise might not get degrees. No, it is not perfect, but in my view makes the grade as a University. 

I like the University of Phoenix less. I wanted to like the University of Phoenix, but cannot. I like Kaplan Higher education less. I like EDMC less. None of these imitators lives up to OU. Why don’t I like them? I don’t like them because they are inefficient. Let’s look at the balance sheets for OU, University of Phoenix, Kaplan Higher Education (as presented by the Washington Post financial reports), and EDMC (look to the bottom right of the page). 

Let’s also make a quick stop to look up today’s exchange rate: $1.56/£1. This is relatively close to the $1.6/£1, I have used previously. 

I don’t like the US for-profits and like the OU because...

... the OU taught 246,626 students and had a net income of £453.6 Million with approximately 57% from government teaching grants. They had an operating surplus of £37 Million. This is £1839/student. For OU we have another bit of information: the 246,626 represents 86,173 full time equivalent students. Using this number, you will get £5263/student. Note: I could not find FTE information for the others. 

... the University of Phoenix taught  380,800 students and had a net income of £2,842.1 Million ($4,322,670,000). This is £7463/student.

... Kaplan Higher Education taught approximately 74200 students[i]  and had a net income of £897.2 ($1,399.6 Million). This is £12,091/student.

... EDMC taught  142,100 and had net income of £1769.9 Million  ($2,760,967,000). This is £12455/student.

Would you sign up for OU and send £2,000 (lowest estimate) to £10,000 to one of these bloated money wasters for doing nothing for you? Of course you wouldn’t.

Any questions?

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[i] Note: I find the Washington Post Financial report quite vague about the number of students. The number here may be somewhere from 5800 too low to 24,400 too high. See pages 13 and 14 of the 2011 statement. The 2012 statement was not available at time of writing.