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CBA of the MS3 Program

CBA of the MS3 Program. Public Expenditure Analysis Spring 2003 Trey Carlson Mike Kaufman Manos Kranidis. Outline. Methodology/Statistical Info Costs Benefits Model Possible Solutions. Number of applicants Per Student education cost Per student scholarship amount or percentage

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CBA of the MS3 Program

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  1. CBA of the MS3 Program Public Expenditure Analysis Spring 2003 Trey Carlson Mike Kaufman Manos Kranidis

  2. Outline • Methodology/Statistical Info • Costs • Benefits • Model • Possible Solutions

  3. Number of applicants Per Student education cost Per student scholarship amount or percentage Total Donations Aggregated value of salaries Unable to obtain Unable to obtain Unable to obtain Unable to obtain Unable to obtain Acquisition of Information

  4. Survey Pt 1 What program you are currently in: A. MS1 B. MS2 C. MS3 How many graduate schools did you apply to? A.1-3 B. 4-6 C. 7+ From how many graduate schools did you receive acceptance letters?__________ Did you apply to any program that was less than 4 semesters? Yes or No Were you accepted? Yes or No Would you attend a three semester Masters Program? Yes or No Would you attend a four semester Masters Program? Yes or No

  5. Survey Pt2 Would you prefer to be in a 3 or 4 semester Masters Program? Why did you pick the Heinz School? How would you rate the availability of courses accessible to you? (scale 1 to 10 with ten = excellent and 1 = very poor) ___ Did you apply for the MS3 program? Yes or No If the MS3 program didn’t exist, would you attend Heinz? Yes or No If the MS2 program didn’t exist, would you attend Heinz? Yes or No Have you switched programs at Heinz? Yes or No Do you feel the MS3 program enhances the prestige of the Heinz School? Why? A. Yes B. No C. I have never thought about it

  6. Key Assumptions • Discount Rate*= 5% • Growth Rate = 5% • Alumni giving rate/yr = 20% of total alumni at $150 avg. • Alumni giving effective period= 30 yrs • School revenue composition*: Tuition $ = 42% of revenues Research $ = 58% of revenues • Scholarship per student = 30% of tuition *Source: CMU Annual Report 2001-02

  7. Key Assumptions Cont’d • 20 MS3’s per class • (x -20) MS2’s per class • Faculty to Staff Ratio: 1 to 1.2 • Faculty to Student Ratio: 1 to 2.6 • MS2/MS3 analysis 10 year period • MS3’s effect on reputation = 10 years

  8. Costs Introduction • Cost of Scholarship • Cost of Staffing Incremental classes of MS3 • Reputational Costs • Total Costs

  9. Scholarship Cost of MS3 3rd Semester • 20 students on average/yr • Scholarship = (30% x MS3 tuition) = $4,440 • Total Scholarship Costs = $88,800

  10. Cost of Staffing *Salary estimated

  11. Total Faculty Salary at Heinz Salary Estimated

  12. Cost of Staffing Incremental MS3 Classes • MS3 program requires additional 8.5 classes • Requires: 3 faculty and 2 staff • Total Cost: $240,000 + $104,000 = $344,000

  13. Current Heinz MS3 Staffing Procedures • Relieve faculty of research responsibilities and increase teaching load • Average research grant per faculty member 130 students*(0.7*$28,000)*1.4/50 faculty =$71,350 • Total Staffing Cost =$71,350*3=$214,050

  14. Effects on Reputation “Congratulations to all of the Heinz School faculty and staff members who worked so hard to bring these significant funds to the Heinz School to support our research, outreach and teaching missions! They are a significant factor in our success in the most recent US News & World Report's graduate school rankings.” * *Source: Heinz School Alumni Website. http://www.heinz.cmu.edu/fyi/may01/fyi/grants.html

  15. Reputation Average GRE score: MS2 2002=1245, 2003 = 1250 MS3, 2002=1250, 2003 1250

  16. Cost of Reduced Prestige • 4000 alumni • Average salary $65,000 • After 5 years, reduction in prestige results in .1% decline in salary for next 5 years • NPV Per year reduction in combined MS2 alumni salary = $130,000

  17. Total Costs • Scholarship Costs: $88,800 • Staffing Costs : $214,050 • Reduced Prestige Cost: $130,000 • Total Cost: $432,850

  18. Benefits • Cash Inflow due to 3rd semester of MS3 during calendar year • Predictors of future Alumni giving

  19. Cash Inflows from Entering MSPPM 1yr Class Total annual revenues from 1 year program:$43,000/student-year

  20. Income generated from 3rd semester of MS3 ($14,800 *20) = $296,000 Extra Income Generated due to MS3 Program

  21. Predicting Alumni Giving

  22. Predicting Alumni Giving cont’d

  23. MS3 Alumni Giving • Increased number of alumni: 20 MS3’s/yr – 20 MS2’s/(2*yr) = 10/yr • Average MS3 rate that gives drops from .2 to .15 • Average donation =$150/yr-alumni • Total increase in Alumni giving= $6,750

  24. Total Benefits • Income from Tuition = $296,000 • Income from Alumni = $6,750 • Total Benefits = $302,750

  25. NPV Benefits - Costs = 302,750 - 432,850 $-130,100/yr 10 year lifespan = $-1,301,000

  26. Recommendations • Faculty should be doing research • Faculty utilization can only be optimal with an MS2 program or MS3 program, not both

  27. Heinz Most Wanted

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