Planning & Budgeting

May 5, 2015

Report Affirms State Divestment, Not Administrative Bloat, Largely Responsible Tuition Increases

A report released today by Demos, a New York public policy think tank, attempts to identify the reasons why tuition prices at public four-year institutions have increased over the last decade. The findings reinforce the understanding that declining state support, rather than “administrative bloat,” is the primary cause of tuition increases. Although administrative spending did increase marginally, the authors attribute the slight change to rising health care costs[1]  and to new support services required over the past decade – such as those to support growing technology needs.

The report analyzed data from the Delta Cost Project and examined research institutions separately from institutions that primarily award bachelor’s and master’s degrees.

Between 2001 and 2011, state funding per student fell by $3,081 at research universities and, simultaneously, tuition per student increased “in near lockstep,” by $3,628. Consequently, the majority of funding formerly provided by the state is now borne by students and their families.

The Causes of Rising Tuition at Public Research Universities

(taken from Figure 6 in the report)

Causes of rising tuition - research universities

As seen in the figure above, of the tuition hikes at public research universities:

  • 79 percent is attributable to declining state appropriations,
  • 9 percent is due to higher instruction costs (largely the result of rising health insurance premiums)
  • 6 percent is due to more construction costs, and
  • 6 percent is due to increased administrative spending.

With regards to “administrative bloat” – which some still view as a key driver of tuition increases – the report finds that “the number of executives and administrators has actually slightly decreased relative to the size of the student body” and the average number of total employees per 1,000 students has remained relatively constant over the last decade.

Instead, public institutions are employing more part-time faculty and professional staff (e.g. employees who work in admissions, human resources, information technology, etc.). “All of these things are necessary to support the growing university,” said Robbie Hiltonsmith, the report’s author.  Hiltonsmith also noted that when state funding for higher education declines, colleges can either raise tuition to make up for the forgone revenue or look for ways to trim expenses.  “If there isn’t a lot of fat to cut, then their only option is to raise tuition or lose quality of education.”

[1] On average, the amount spent by public universities to provide health insurance to staff and faculty rose by nearly $2,700 per employee between 2001 and 2011, a 40 percent increase.