Cost Efficiency Lee Holcombe Director

2 Cost Efficiency in Higher Education  Maintaining current level of productivity with fewer resources  Increasing productivity with current level of resources  Decreasing cost/FTE and  Reducing cost of degree completion results in  Increased capacity to achieve CTG goals in era of rapidly increasing population  Transitioning from cost accounting to cost accountability Higher Education Policy Institute

3 Outcomes-Based Funding  As a general rule, the evidence shows that attaching incentives to outcomes increases the production of the outcomes  Impact on cost-efficiency is less clear  Targeted incentive funding  Transition from to enrollment-based formula funding to completion-based formula Higher Education Policy Institute

4 Types of Incentives  Institutional level (Indiana): Increase in  Overall number of degrees  On-time degrees  Pell Grant degrees  Leadership level (Minnesota): Base + incentive pay for chancellor  Student level (North Dakota):  State splits cost savings with students who enter with college credit earned in high school (assuming complete college with fewer than minimum hours required) Higher Education Policy Institute

5 Concern about Incentives  Evidence shows that incentives are susceptible to changes in leadership and budget constraints  Sustainability is a key consideration Higher Education Policy Institute

6 Completion-Based Formula Funding  Current formula funding distributes money based upon number of students enrolled  Completion-based formula distributes money based upon number of completers  Theory: Incent institutions to increase course-completion rate  increase in productivity with same amount of funds  increase in cost efficiency  “Institutionalizes” imbedded incentives for course- completion  Ohio: First and only state to implement policy  No evidence of effectiveness  Additional changes to formula to increase cost-efficiency incentives Higher Education Policy Institute

7 Progress Through Education Pipeline  Goal: Reduce student load on system  College Readiness  Only 21% of ACT takers in Texas are college-ready  High school to college transition  Need based, early-commitment financial aid program for K12 students that promotes and rewards academic preparation for college  Financial aid, need, and potential to succeed in college  Does profile of students enrolling at four-year institutions match institutions’ capacity to serve them? Higher Education Policy Institute

8 Progress Through Education Pipeline  Two-year to four-year transition  Guaranteed admission to students who complete transfer focused associate’s degrees  Create easy-to-use and widely advertised web portal with comprehensive information on transfer  Create incentives for both two- and four-year institutions to promote transfer  Indiana : Rewards community colleges for each FTE transferred, will expand to receiving institutions next biennium Higher Education Policy Institute

9 Technology in Instruction: Course Redesign  Example: General Chemistry at UW Madison  Substitute one lecture/discussion with individualized computer-based instruction and assessment  Expect to reduce per student cost by ~28% ($257  $185)  Improved student learning, increased attendance and retention  Short-term strategy appropriate for large-enrollment courses  Medium term: Statewide Developmental Education in Tennessee Higher Education Policy Institute

10 Long Term: Centralized Technology Backbone  Florida Community College Distance Learning Consortium  50% savings in licensing costs of instructional content  Savings in training costs for IT platforms  Investigate opportunities to transfer large initial technology investments to state level  Develop a common cost-accounting model for instructional technology  Consider statewide quality standards for development and delivery of online content Higher Education Policy Institute

11 Long-Term: Texas Public Online Institution  Number of options  Consolidation of existing online learning models at Texas IHE’s into one  University of Phoenix  Western Governors University  Attractive to adult students Higher Education Policy Institute

12 Additional Campus Alternative: No Frills Education  Campuses without sports, extracurricular activities, “super” gymnasiums, etc…  Southern New Hampshire University offering courses at no-frills campus at 50% regular tuition  Analysis suggests that an Ivy-League education could be offered at $7,376 per year Higher Education Policy Institute

13 Faculty Teaching Load  1992 analysis in Arizona  Increasing average faculty teaching load from 2.5 to 3 courses per semester  increase of ~2,000 student capacity at a 10,000 student campus  University of Maryland System and increased teaching load  Received well among faculty  Department-level review of faculty allocation of time towards instruction, research, and service  Course redesign: reduced costs and improved student learning Higher Education Policy Institute

14 Course/Program Elimination  Prioritize courses/programs in terms of internal and external demand as part of the regular THECB academic review  A 1% decrease in number of courses statewide  $7 million savings (1995 analysis)  Reduction in number of courses that satisfy general education requirements.  Increased efficiencies due to lower administrative costs  Results in more large-enrollment courses that could be considered eligible for course redesign Higher Education Policy Institute

15 Operations  Additional economies of scale  Midwest Higher Education Compact institutions savings in insurance  Statewide utility costs  Statewide licensing of instructional technology  Energy-efficiency standards in approval of new buildings  Report and quantify effectiveness of cost management efforts related to operations and maintenance  Realized cost savings can be presented longitudinally in terms of annual unit expense Higher Education Policy Institute

16 Use of Data  Extend previous work looking at productivity measures  Focus on macro-level cost efficiency measures: cost/FTE and cost to degree  Example of transition from cost accounting to cost accountability  In medium- to long-term, develop cost-efficiency measures for each study area  Ultimate cost-efficiency measure: cost of student learning outcomes Higher Education Policy Institute