1. www.inquiry2improvement.com Dr. Rob Johnstone New Jersey CC Student Success Summit Mercer County CC, New Jersey April 16, 2014 The Economics of Innovation in the Community College: Exploring the Fiscal Considerations of Doing Things Differently

2. www.inquiry2improvement.com National Center for Inquiry & Improvement Agenda The Backdrop & Doing Things Differently Fiscal Considerations of Innovative Programs Demonstrating The ROI Approach in Action Demonstrating the Cost Efficiency / Cost Savings Metrics Approach Final Thoughts

3. www.inquiry2improvement.com Part 1: The Backdrop & Doing Things Differently Fiscal Considerations of Statway & Quantway – July 2013

4. www.inquiry2improvement.com National Center for Inquiry & Improvement Data Backdrop CC Completion rates for URM students 34%; non- URM closer to 50% 55%-85% of FTF require Dev Ed; average of 25% to 35% ever complete transfer-level course 80% of High-Income Students enter college; 29% of Low-Income Students enter college College Graduation Rates by income (next slide)

5. www.inquiry2improvement.com National Center for Inquiry & Improvement College is a Meritocracy, Right?

6. www.inquiry2improvement.com National Center for Inquiry & Improvement Innovative Approaches Programs and structures exist on every campus IR data has demonstrated many as effective Tend to be small in scope, serving relatively small numbers of students Why?

7. www.inquiry2improvement.com National Center for Inquiry & Improvement Why are Non-Traditional Programs Isolated and Small? Limited awareness about the research literature Need for paradigm shifts in thinking of campus administrators, faculty & staff Organizational change issues Lack of IR resources to provide local data “Pilot” mentality – w/o scaling plan Perhaps the single biggest reason? Perceived Cost of scaling these programs to many / most / all students

8. www.inquiry2improvement.com National Center for Inquiry & Improvement Other Motivations for Change Student wage gains through higher education attainment – access to family sustaining wages Workplace needs – 80% of 21 st century jobs need advanced skills Societal implications – lack of skilled workforce, competition in global economy Equity & Moral Imperative – achievement gap vs. educational debt Improvement Science Tenet: Every system is perfectly designed to achieve exactly the results it gets

9. www.inquiry2improvement.com National Center for Inquiry & Improvement It’s Our Moral Imperative It’s easy to blame the student, blame K-12 preparation, blame parents, or blame the social, political, economic and educational conditions that create the systems that produce the inequities Story on central line infections from healthcare (30,000 – 60,000 deaths per year to essentially zero) Economic sustainability, social mobility and a living wage are on the line

10. www.inquiry2improvement.com National Center for Inquiry & ImprovementBut… Community Colleges have to pay their own bills. Thus, we are left with a situation where: Society and our moral imperative demand that we succeed in our mission of developmental education…. But our funding system seems to suggest that we at the CCs can’t afford to do so

11. www.inquiry2improvement.com Part 2: Fiscal Considerations of Innovative Programs & Approaches

12. www.inquiry2improvement.com National Center for Inquiry & Improvement Fiscal Approaches to Consider 1.Cost analysis 2.Cost effectiveness / ROI 3.Cost efficiency / Cost per Completer 4.Cost reductions per student 5.Wage gains per student 6.Economic impact for communities

13. www.inquiry2improvement.com National Center for Inquiry & Improvement 1. Cost Analysis Approaches An analysis of what it costs to “do things differently” vs. the traditional model Can include costs such as: incremental salaries release time for faculty stipends IR support tutors travel supplies facilities* Note: colleges are often good at identifying incremental costs…

14. www.inquiry2improvement.com National Center for Inquiry & Improvement 2. Cost Effectiveness Approaches An investigation of not only the incremental costs to the college but also the potential for incremental revenue that may be generated at the college to offset costs Also referred to as return-on-investment or ROI analyses Fairly uncommon in higher ed until recently Challenges of differential costs / returns by programs, interdependency with level of efficiency of college / departments, enrollment caps, state funding questions

15. www.inquiry2improvement.com National Center for Inquiry & Improvement 3. Cost Efficiency Approaches An analysis of the effect of the program and its incremental costs on key outcomes such as completion, transfer or graduation Also called “cost per graduate”, “cost per transfer”, “cost per completer”, etc. Good when accountability calls for improvement in key outcomes – or determines incremental funding by them Challenge that incremental costs still may go up, even when cost per completer goes down

16. www.inquiry2improvement.com National Center for Inquiry & Improvement 4. Cost Savings Per Student As colleges become more efficient at creating structures that enable students to finish their degrees more quickly, there are direct cost savings for the student, including: Tuition savings Books cost per semester

17. www.inquiry2improvement.com National Center for Inquiry & Improvement 5. Wage Gains for Students As more students finish degrees, the college’s net return on wage gains for their students will increase As this is starting to be emphasized / measured, colleges are very likely to have key performance indicators / accountability measures based on such outcomes Also, as an individual student finishes more quickly, she will experience the increased wages that a completion grants them earlier, producing a net wage gain for the student.

18. www.inquiry2improvement.com National Center for Inquiry & Improvement 6. Economic Impact to Community With more students getting credentials / degrees / completions, the local, state, and national economies are catalyzed Challenge is that this often hard to estimate, but important to call out as a fiscal impact of innovative programs that produce higher completion rates

19. www.inquiry2improvement.com Part 3: Demonstrating a ROI Approach for Statway / Quantway

20. www.inquiry2improvement.com National Center for Inquiry & Improvement Traditional CC Economic Reality Community Colleges and Four-Year Colleges are set up to think in terms of fiscal periods (usually fiscal years) Simplistically, this year’s salaries, fixed costs, & variable costs seemingly need to be offset by this year’s revenues from tuition, FTES apportionment, and other sources of revenue

21. www.inquiry2improvement.com National Center for Inquiry & Improvement A Different (?) Way of Thinking As has become common in industry, we could think about deviating from our “traditional” model toward a return-on-investment (ROI) approach Under this approach, we use our “traditional” model as the baseline for costs and revenue

22. www.inquiry2improvement.com National Center for Inquiry & Improvement Incremental Costs We first account for the additional costs associated with the aforementioned more successful alternative programs. Examples: Incremental salaried faculty/staff Hourly personnel costs (tutors, etc) Stipends Equip / Supplies / Facilities Note: We are quite good at assigning incremental costs to non-traditional programs!

23. www.inquiry2improvement.com National Center for Inquiry & Improvement The Flip Side – Incremental Revenue Successful alternate programs have the following outcomes: Increased course retention Increased course success rates Increased persistence Increased progression to college-level work Increase in overall units attempted / earned

24. www.inquiry2improvement.com National Center for Inquiry & Improvement What is the coin of the realm? FTES & Tuition As an example, in California, colleges generate $4,361 per FTES in apportionment In most states, colleges also keep tuition and/or fee revenue The incremental FTES apportionment and tuition generated in successful alternative programs can, in many cases, offset the incremental costs

25. www.inquiry2improvement.com National Center for Inquiry & Improvement Caveat before we move on… This approach runs into an issue if a system caps apportionment funding and the college is at or near its enrollment cap To our knowledge, only California does this Somewhat ironic, given that this model was developed in California Further irony - the caps are based at least partially on historical failures in developmental education Could flood the system with successful students

26. www.inquiry2improvement.com National Center for Inquiry & Improvement Incremental FTES $$$ Not Without Costs Instructional costs for students who are retained and progress – may require adding additional sections May fill non-full classrooms especially in productive GE courses Overhead / infrastructure costs Estimating is very complex Taken together, we estimate a range of 40%-75% “profit” from FTES

27. www.inquiry2improvement.com National Center for Inquiry & Improvement What the Model Doesn’t Do This is not a sophisticated economic model It doesn’t take into account economics concepts such as net present value (NPV), economic rates of return (IRR), discounting, etc. Ultimately, it is designed to be an order of magnitude demonstration

28. www.inquiry2improvement.com Part 4: Modeled Outcomes & Other ROI Thoughts

29. www.inquiry2improvement.com National Center for Inquiry & Improvement Modeled Profit Summary

30. www.inquiry2improvement.com National Center for Inquiry & Improvement Modeled ROI Rate Summary

31. www.inquiry2improvement.com National Center for Inquiry & Improvement The Bottom Line (Literally) In many cases, supposedly expensive programs such as Statway / Quantway do pay for themselves Real-world examples from Cerritos, Chaffey, De Anza & Foothill in “Economics of Innovation” section of CA BSI paper on Developmental Education Examples also applied to Illinois, Kansas, New York, Ohio, and Texas funding structures In many cases, these programs produced a net financial benefit for the college Can estimate 3-year incremental FTES for SW / QW now; will have real-world data in 2014/2015

32. www.inquiry2improvement.com National Center for Inquiry & Improvement The Soap Box We should be looking to expand these more successful non-traditional basic skills programs for moral, ethical, and societal reasons This approach suggests colleges also may have a financial incentive for doing so

33. www.inquiry2improvement.com National Center for Inquiry & Improvement Growing Pains As programs are expanded past their current small reach, they will likely experience some decrease in incremental success Flip side is that costs do not scale up proportionally – and this usually is a good thing as economies of scale emerge May balance each other out?

34. www.inquiry2improvement.com Part 5: Demonstrating Cost Efficiency & Cost Savings Per Student Metrics for Statway & Quantway

35. www.inquiry2improvement.com National Center for Inquiry & Improvement Cost Efficiency Description Uses the incremental cost summary from used in the ROI Model Calculates the incremental spending increase per student as a percentage increase Assumes a decrease in time to degree (modeled at 1 semester or 1 year until real- world data is collected)

36. www.inquiry2improvement.com National Center for Inquiry & Improvement Cost Efficiency Description (2) Uses the 3 rd semester persistence rate and 2-yr, 3-yr, 4-yr, and 5-yr graduation rates Uses Control Group spending and SW/QW spending to estimate overall costs / group Produces a net savings per SW / QW completer

37. www.inquiry2improvement.com National Center for Inquiry & Improvement Student Cost Savings Description With decreased time to degree, student savings in tuition and books are estimated Uses customized local tuition and average books cost

38. www.inquiry2improvement.com National Center for Inquiry & Improvement Student Wage Gains Description Students will also experience a wage gain based on the incremental value of their completion vs. wages while in college (often only PT wages). This incremental year may occur directly after the AA for terminal degree completers, or after the completion of BA either way it’s a 1-year wage gain increase

39. www.inquiry2improvement.com Part 6: Early Modeled Outcomes on Cost per Completer, Student Tuition & Books Savings, and Wage Gains

40. www.inquiry2improvement.com National Center for Inquiry & Improvement Modeled Cost Per Completer Summary

41. www.inquiry2improvement.com National Center for Inquiry & Improvement Modeled Student Tuition & Books Savings Summary

42. www.inquiry2improvement.com National Center for Inquiry & Improvement Modeled Student Wage Gains Summary

43. www.inquiry2improvement.com Part 7: Final Thoughts

44. www.inquiry2improvement.com National Center for Inquiry & Improvement Summary Numerous ways to estimate the fiscal impact of innovative programs on colleges and students ROI analyses best for estimating net revenue impact to colleges; also tricky as it bumps up against state funding issues, college enrollment trends & capacity issues Cost efficiency analyses useful for demonstrating effects of improved completion / time to degree

45. www.inquiry2improvement.com National Center for Inquiry & Improvement Resources The downloadable Excel Model and accompanying white paper are available at: http://www.inquiry2improvement.com/publicatio ns-resources http://www.inquiry2improvement.com/publicatio ns-resources While examples use SW-QW, have also developed similar models for tutoring, supplemental instruction, structured pathways – can be customized to most situations Completion by Design? Completion by Accident?

46. www.inquiry2improvement.com National Center for Inquiry & Improvement Find Out More 46 The National Center for Inquiry & Improvement website www.inquiry2improvement.com Dr. Rob Johnstone, Founder & President rob@inquiry2improvement.com Carnegie Foundation for Advancement of Teaching’s Statway & Quantway: http://www.carnegiefoundation.org/developmental-math http://www.carnegiefoundation.org/developmental-math