South Carolina Commission on Higher Education:South Carolina Commission on Higher Education:Mike RaleyMike Raley, FIPSE Grant Project Director , FIPSE Grant Project Director

Tajuana MassieTajuana Massie, FIPSE Coordinator , FIPSE Coordinator Lynn MetcalfLynn Metcalf, Director, Finance, Director, Finance

Accountability & Cost Containment in Higher Education

BEST PRACTICE DEFINITIONBEST PRACTICE DEFINITION

Direct Linkage to Mission, Strategic Plan, and Policy Goals: Direct Linkage to Mission, Strategic Plan, and Policy Goals: The perfect The perfect indicators should incorporate and reinforce institutional missions and strategic plans, indicators should incorporate and reinforce institutional missions and strategic plans, as well as broad state policy goals.as well as broad state policy goals.

Broad Stakeholder Involvement and Consensus: Broad Stakeholder Involvement and Consensus: The performance indicators The performance indicators should be developed through negotiation and consensus among key internal and should be developed through negotiation and consensus among key internal and external stakeholders at all steps in the process.external stakeholders at all steps in the process.

Simplicity in Presentation: Simplicity in Presentation: The performance indicators should be simple to convey The performance indicators should be simple to convey and broadly understood.and broadly understood.

Reliant on Valid, Consistent, and Existing Information: Reliant on Valid, Consistent, and Existing Information: The performance The performance indicators should be based on data that are valid and consistent and that can be indicators should be based on data that are valid and consistent and that can be verified by third parties when necessary. The indicators should also be based on verified by third parties when necessary. The indicators should also be based on established data sources, where possible, in order to maximize credibility and established data sources, where possible, in order to maximize credibility and minimize additional workload.minimize additional workload.

Avoidance of “False Precision” in Measurement: Avoidance of “False Precision” in Measurement: The performance indicators The performance indicators should be established with wide recognition that there are certain unavoidable ranges should be established with wide recognition that there are certain unavoidable ranges of error in any measurement activity; imposing a false sense of “precision” is counter-of error in any measurement activity; imposing a false sense of “precision” is counter-productive.productive.

Adaptable to Special Situations: Adaptable to Special Situations: The system of performance indicators The system of performance indicators should accommodate special circumstances (e.g., unique institutional should accommodate special circumstances (e.g., unique institutional missions) where possible.missions) where possible.

Avoidance of Indicator “Proliferation”: Avoidance of Indicator “Proliferation”: The performance indicators The performance indicators chosen should be kept to the smallest number possible in order to minimize chosen should be kept to the smallest number possible in order to minimize conflicting interactions among the indicators and to maximize the conflicting interactions among the indicators and to maximize the importance of each indicator.importance of each indicator.

Reflects Industry Standards: Reflects Industry Standards: The performance indicators chosen should The performance indicators chosen should reflect “industry” norms and standards, where possible, in order to allow for reflect “industry” norms and standards, where possible, in order to allow for benchmarking and peer comparisons.benchmarking and peer comparisons.

Incorporates Input Process, Output, and Outcomes Measures: Incorporates Input Process, Output, and Outcomes Measures: The The performance indicator system developed should have a balance of performance indicator system developed should have a balance of measures related to inputs, processes, outputs, and outcomes, with some measures related to inputs, processes, outputs, and outcomes, with some emphasis on outputs and outcomes.emphasis on outputs and outcomes.

Incorporates Quantitative and Quality Measures: Incorporates Quantitative and Quality Measures: The performance The performance indicator system developed should incorporate both quantitative and indicator system developed should incorporate both quantitative and qualitative measures in order to present the most complete picture of qualitative measures in order to present the most complete picture of performance possible.performance possible.

ATTRIBUTES OF EFFECTIVE INDICATORSATTRIBUTES OF EFFECTIVE INDICATORS

Appear clear credibleAppear clear credible Exhibit validity and reliabilityExhibit validity and reliability Show internal consistencyShow internal consistency Seem fair and equitable to all institutionsSeem fair and equitable to all institutions Evaluate only performance influenced by institutional effortsEvaluate only performance influenced by institutional efforts Rely more on outcomes and outputs than on inputs or processesRely more on outcomes and outputs than on inputs or processes Produce measurable and auditable data, not subject to Produce measurable and auditable data, not subject to

manipulationmanipulation Use available, or economically collectable, dataUse available, or economically collectable, data Relate to planning goals and strategiesRelate to planning goals and strategies Allow differences in institutional missions and typesAllow differences in institutional missions and types Remain stable long enough to give institutions time to respondRemain stable long enough to give institutions time to respond

**Joseph C. Burke and Associates (2002). Joseph C. Burke and Associates (2002). Funding Public Colleges and Universities for Performance: Funding Public Colleges and Universities for Performance: Popularity, Problems, and ProspectsPopularity, Problems, and Prospects. The Rockefeller Institute Press: Albany, New York: 40-. The Rockefeller Institute Press: Albany, New York: 40-41.41.

COST CONTAINMENT DEFINITIONCOST CONTAINMENT DEFINITION

Cost containment is the systematic process of continuously Cost containment is the systematic process of continuously exploring and implementing opportunities to efficiently exploring and implementing opportunities to efficiently manage the cost of institutional operations within the manage the cost of institutional operations within the context of the institutional mission. It is not a “cutting context of the institutional mission. It is not a “cutting back management” (e.g., any strategy intended by back management” (e.g., any strategy intended by officials to freeze hiring or reduce the frequency or officials to freeze hiring or reduce the frequency or quality of services simply to save money during a budget quality of services simply to save money during a budget crisis). Cost containment strives to maintain and crisis). Cost containment strives to maintain and increase the quality of academic programs, student increase the quality of academic programs, student outcomes, and services provided while eliminating outcomes, and services provided while eliminating unnecessary or avoidable costs. unnecessary or avoidable costs.

PROJECT STRATEGIESPROJECT STRATEGIES

Document analysis of policy and practicesDocument analysis of policy and practices

Ethnographic analysis of focus groups and Ethnographic analysis of focus groups and interviewsinterviews

Data analysis of state level information to Data analysis of state level information to determine data most vital to monitor for a determine data most vital to monitor for a particular best practiceparticular best practice

Survey analysisSurvey analysis

DOCUMENT ANALYSISDOCUMENT ANALYSIS

Accountability reports developed by state Accountability reports developed by state agencies and institutions of higher learningagencies and institutions of higher learning

Reports and studies developed by other Reports and studies developed by other national organizations national organizations

Scholarly publications pertaining to the Scholarly publications pertaining to the issues of cost containment and issues of cost containment and accountability in higher education accountability in higher education

FOCUS GROUPSFOCUS GROUPS

Participants (Five Groups)Participants (Five Groups) Three: Institutional EffectivenessThree: Institutional Effectiveness One: Financial Officers One: Financial Officers One: Public Affairs One: Public Affairs

RESULTS OF FOCUS GROUPSRESULTS OF FOCUS GROUPS

Cost Containment Strategies:Cost Containment Strategies: Deploying technology to reduce paper Deploying technology to reduce paper Reviewing the curriculum for relevance and Reviewing the curriculum for relevance and efficiency, leading to elimination of efficiency, leading to elimination of

nonessential programs nonessential programs

Improvement Opportunities for Cost Containment:Improvement Opportunities for Cost Containment: Enhanced institutional cooperation and Enhanced institutional cooperation and

collaboration collaboration Deregulation of operations Deregulation of operations

INTERVIEWSINTERVIEWS

Respondents:Respondents: Four sectors of higher education Four sectors of higher education

State government (legislators and administrators)State government (legislators and administrators)

Private sector (represented by the South Carolina Private sector (represented by the South Carolina Chamber of Commerce)Chamber of Commerce)

Lobbyists responsible for liaison with elements of the Lobbyists responsible for liaison with elements of the higher education systemhigher education system

Institutional presidents who are participating in the Institutional presidents who are participating in the revision of the state’s higher education accountability revision of the state’s higher education accountability system system

INTERVIEW DEMOGRAPHICSINTERVIEW DEMOGRAPHICS

GroupGroup PotentialPotential CompletedCompleted

Research UniversitiesResearch Universities 10 10 10 10

Teaching UniversitiesTeaching Universities 9 9 8 8

USC Regional Campuses USC Regional Campuses 3 3 3 3

Technical CollegesTechnical Colleges 11 11 11 11

State GovernmentState Government 9 9 9 9

Private SectorPrivate Sector 2 2 2 2

LiaisonLiaison 55 44

TotalsTotals 49 49 47 47

RESULTS OF INTERVIEWSRESULTS OF INTERVIEWS

Single “system-wide” model vs. “Sector-Single “system-wide” model vs. “Sector-specific” modelspecific” model

Return on InvestmentReturn on Investment

Cost Effectiveness/Cost Containment/Cost Cost Effectiveness/Cost Containment/Cost ReductionReduction

NATIONAL SURVEYNATIONAL SURVEY

RespondentsRespondents: : SHEEOs SHEEOs SHEFOs SHEFOs

Sample: Sample: Fifty State sampleFifty State sample Forty states respondedForty states responded

Methods:Methods: Mailed survey with return envelopeMailed survey with return envelope E-mail and telephone follow-upE-mail and telephone follow-up

*Administered by The University of South Carolina Institute for Public *Administered by The University of South Carolina Institute for Public Service and Policy Research, (Director: Dr. Robert Oldendick).Service and Policy Research, (Director: Dr. Robert Oldendick).

CATEGORIES OF COSTCATEGORIES OF COST

AffordabilityAffordability

Cost MeasuresCost Measures

Resource UtilizationResource Utilization

OutputsOutputs

Return on InvestmentReturn on Investment

AFFORDABILITYAFFORDABILITY

Tuition and fees per undergraduate credit hour Tuition and fees per undergraduate credit hour

Average loan amount undergraduate students borrow Average loan amount undergraduate students borrow each year each year

Average loan amount graduate students borrow each Average loan amount graduate students borrow each year year

Percent of income needed to pay for college expenses Percent of income needed to pay for college expenses minus financial aid at community (2-year) colleges minus financial aid at community (2-year) colleges

Percent of income needed to pay for undergraduate Percent of income needed to pay for undergraduate college expenses minus financial aid at public 4-year college expenses minus financial aid at public 4-year colleges/universities colleges/universities

AFFORDABILITY (Cont.)AFFORDABILITY (Cont.)

State grant aid targeted to low-income families State grant aid targeted to low-income families as a percent of federal Pell Grant aid to low-as a percent of federal Pell Grant aid to low-income families income families

Share of income the families in the lowest Share of income the families in the lowest income quartile need to pay for undergraduate income quartile need to pay for undergraduate tuition at lowest priced colleges tuition at lowest priced colleges

State average tuition and fees compared to the State average tuition and fees compared to the average of regional peer institutions average of regional peer institutions

COST MEASURESCOST MEASURES

Administrative expenditures (not including capital Administrative expenditures (not including capital expenditures) per credit hour expenditures) per credit hour

Expenditures on sponsored research as a percent of Expenditures on sponsored research as a percent of total budget total budget

Percent of state appropriations for higher education Percent of state appropriations for higher education

State appropriation per credit hour State appropriation per credit hour

Percentage of budget for capital expenditures Percentage of budget for capital expenditures

COST MEASURES (Cont.)COST MEASURES (Cont.)

Deferred maintenance liability as a percentage Deferred maintenance liability as a percentage of budget of budget

Energy per cost per square foot Energy per cost per square foot

Ratio of institutional capital expenditures to Ratio of institutional capital expenditures to deferred maintenance liability (annual basis) deferred maintenance liability (annual basis)

Instructional cost per undergraduate credit hour Instructional cost per undergraduate credit hour

RESOURCE UTILIZATIONRESOURCE UTILIZATION

Average number of hours per week classroom is Average number of hours per week classroom is used for instruction used for instruction

Percent of classroom stations occupied per Percent of classroom stations occupied per weekweek

Number or percent of total of undergraduate Number or percent of total of undergraduate students enrolled per major students enrolled per major

Number of academic programs terminated in Number of academic programs terminated in

past three years past three years

RESOURCE UTILIZATION (Cont.)RESOURCE UTILIZATION (Cont.)

Number of new academic programs implemented in past Number of new academic programs implemented in past three years three years

Ratio of newly implemented academic programs to Ratio of newly implemented academic programs to terminated academic programs within the past three terminated academic programs within the past three yearsyears

Energy cost per credit hour Energy cost per credit hour

Cost per undergraduate degree (by major)Cost per undergraduate degree (by major) Cost per graduate degree (by major) Cost per graduate degree (by major)

OUTPUT MEASURESOUTPUT MEASURES

College graduation rates (GRS) College graduation rates (GRS)

Mission specific indicators Mission specific indicators

RETURN ON INVESTMENT (ROI)RETURN ON INVESTMENT (ROI)

Percent of students who remain in state Percent of students who remain in state after graduation after graduation

Percent of budget appropriated by state Percent of budget appropriated by state

Percent of graduates employed or Percent of graduates employed or pursuing further education in state within pursuing further education in state within one year of graduation one year of graduation

RETURN ON INVESTMENT (Cont.)RETURN ON INVESTMENT (Cont.)

Percent of graduates employed in the Percent of graduates employed in the state in state-defined critical needs areas state in state-defined critical needs areas within one year of graduationwithin one year of graduation

Economic impact Economic impact

Quality of life Quality of life

AFFORDABILITY (Essential)AFFORDABILITY (Essential)

Tuition and fees per undergrad credit hrTuition and fees per undergrad credit hr

Percent of income needed minus aid (4 yr)Percent of income needed minus aid (4 yr)

Percent of income needed minus aid (2 yr) Percent of income needed minus aid (2 yr) Share of income needed Share of income needed

State average of tuition and feesState average of tuition and fees

Average loan amount-UndergradAverage loan amount-Undergrad

COST MEASURES (Essential)COST MEASURES (Essential)

Percent of state appropriationsPercent of state appropriations

Instructional cost – Undergraduate Instructional cost – Undergraduate

RESOURCE UTILIZATION (Essential)RESOURCE UTILIZATION (Essential)

Cost per undergrad degree Cost per undergrad degree

OUTPUT MEASURES (Essential)OUTPUT MEASURES (Essential)

College graduation ratesCollege graduation rates

Mission specific indicators Mission specific indicators

RETURN ON INVESTMENT (Essential)RETURN ON INVESTMENT (Essential)

Percent budget appropriated by state Percent budget appropriated by state

Percent students who remain in statePercent students who remain in state

Economic impactEconomic impact

Percent graduates employed Percent graduates employed

Percent graduates employed-critical needPercent graduates employed-critical need

INDICATORS IN RANK ORDER INDICATORS IN RANK ORDER OF IMPORTANCE OF IMPORTANCE

Tuition and fees per undergrad credit hrTuition and fees per undergrad credit hr College graduation ratesCollege graduation rates Percent of income needed minus aid (4 yr)Percent of income needed minus aid (4 yr) Percent budget appropriated by statePercent budget appropriated by state Mission specific indicatorsMission specific indicators Percent of income needed minus aid (2 yr)Percent of income needed minus aid (2 yr) Percent of state appropriationsPercent of state appropriations Instructional cost – UndergradInstructional cost – Undergrad

INDICATORS IN RANK ORDER INDICATORS IN RANK ORDER OF IMPORTANCE (Cont.)OF IMPORTANCE (Cont.)

Percent students who remain in statePercent students who remain in state Share of income needed Share of income needed Economic impactEconomic impact Percent graduates employed Percent graduates employed Percent graduates employed-critical needPercent graduates employed-critical need Cost per undergrad degreeCost per undergrad degree State average of tuition and feesState average of tuition and fees Average loan amount-UndergradAverage loan amount-Undergrad

OTHER ESSENTIAL MEASURESOTHER ESSENTIAL MEASURES(AFFORDABILITY)(AFFORDABILITY)

Net price paid after all forms of aid, separated by Net price paid after all forms of aid, separated by

income levels income levels

Proportion of undergraduates receiving aid Proportion of undergraduates receiving aid and and proportion of state grant aid targeted to proportion of state grant aid targeted to lowlow income families income families

Indebtedness of graduates Indebtedness of graduates

Affordability by race (Access)Affordability by race (Access)

OTHERS – COST MEASURESOTHERS – COST MEASURES

Degree production as percent of total public Degree production as percent of total public funds, compared to benchmark peer funds, compared to benchmark peer institutions in U.S institutions in U.S

Educational cost per FTE student (compared to Educational cost per FTE student (compared to peers)peers)

Growth in educational cost per FTE compared to Growth in educational cost per FTE compared to inflationary index inflationary index

Student service cost per FTE Student service cost per FTE

OTHERS –OTHERS – RESOURCE UTILIZATIONRESOURCE UTILIZATION

Faculty Production: Faculty Production: Percent tenure or tenure track over time Percent tenure or tenure track over time Student-faculty ratio Student-faculty ratio Hours faculty spend in classroomHours faculty spend in classroom Credit hour production per full and FTE facultyCredit hour production per full and FTE faculty Research funds per faculty memberResearch funds per faculty member

Average class sizeAverage class size

Administrative (institutional support) expenditures as Administrative (institutional support) expenditures as percent of total expenditures, compared to peerspercent of total expenditures, compared to peers

OTHERS –OTHERS – RESOURCE UTILIZATION (Cont.)RESOURCE UTILIZATION (Cont.)

Average credit hours taken to degreeAverage credit hours taken to degree

Average classes taught per professor per yearAverage classes taught per professor per year

Percent of remedial hours to total undergraduate credit Percent of remedial hours to total undergraduate credit hourshours

Net square feet to gross square feet ratioNet square feet to gross square feet ratio

Pattern of use of classrooms (e.g., evening versus day, Pattern of use of classrooms (e.g., evening versus day, weekday versus weekend, summer versus weekday versus weekend, summer versus fall/winter/spring)fall/winter/spring)

OTHERS- OUTPUT MEASURESOTHERS- OUTPUT MEASURES

Degree production as percent of FTE Degree production as percent of FTE Degree production compared to benchmark peers per Degree production compared to benchmark peers per

funding levelsfunding levels Credit hour production Credit hour production Sponsored research Sponsored research Expenditures in sponsored research Expenditures in sponsored research Pass rates on professional exams Pass rates on professional exams Total cost per credit hour producedTotal cost per credit hour produced License and certification exam performanceLicense and certification exam performance Employment rate of graduates Employment rate of graduates Employer satisfaction rates Employer satisfaction rates Retention rates.Retention rates.

OTHERS- OUTPUT MEASURES (Cont.)OTHERS- OUTPUT MEASURES (Cont.)

Retention (persistence) rates Retention (persistence) rates

Transfer rates for 2-year schools with a transfer missionTransfer rates for 2-year schools with a transfer mission

Retention rates and number of graduates in fields Retention rates and number of graduates in fields addressing the state’s needsaddressing the state’s needs

Persistence and graduation rates by ethnicityPersistence and graduation rates by ethnicity Time to degreeTime to degree

Graduation rates for transfer studentsGraduation rates for transfer students

OTHERS- RETURN ON INVESTMENTOTHERS- RETURN ON INVESTMENT

Contracts for applied research Contracts for applied research Business startupsBusiness startups Graduate satisfaction Graduate satisfaction Sponsored research Sponsored research Sponsored research per capita.Sponsored research per capita. Income of college graduates vs. high Income of college graduates vs. high

school graduates.school graduates.

METHODS OF COMMUNICATING METHODS OF COMMUNICATING PERFORMANCEPERFORMANCE

Audiences:Audiences: Governor/Legislature Governor/Legislature EducatorsEducators General Public General Public

METHODS OF COMMUNICATING PERFORMANCEMETHODS OF COMMUNICATING PERFORMANCE

Strategies:Strategies:1.1. Including in agency reportsIncluding in agency reports

2.2. Posting information on the agency’s websitePosting information on the agency’s website

3.3. Including information in the agency’s budget requestIncluding information in the agency’s budget request

4.4. Including information in oral presentationsIncluding information in oral presentations

5.5. Providing information in a press releaseProviding information in a press release

6.6. Providing information in a separate brochureProviding information in a separate brochure

NEXT STEPSNEXT STEPS

Selection and/or Definition of IndicatorsSelection and/or Definition of Indicators

Pilot-TestPilot-Test

Electronic Survey of Usefulness and Long-Electronic Survey of Usefulness and Long-term Effectsterm Effects

Publication of ResultsPublication of Results