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Reactions to Budgetary Restrictions for Four Year Public Universities

Reactions to Budgetary Restrictions for Four Year Public Universities. Justin Shepherd Vanderbilt University justin.c.shepherd@vanderbilt.edu AERA Presentation Spring 2012. Research Question.

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Reactions to Budgetary Restrictions for Four Year Public Universities

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  1. Reactions to Budgetary Restrictions for Four Year Public Universities Justin Shepherd Vanderbilt University justin.c.shepherd@vanderbilt.edu AERA Presentation Spring 2012

  2. Research Question • How do personnel levels change at four-year public universities as their different funding levels are altered?

  3. Conceptual Framework • How do personnel levels change at four-year public universities as their different funding levels are altered? • Wages & benefits comprise 70-80% of university expenditures (Archibald & Feldman, 2008) • Reduction in state funding explains inequality of faculty salaries between private & public universities (Ehrenberg, 2003)

  4. Conceptual Framework • How do personnel levels change at four-year public universities as their different funding levelsare altered? • 1989-1999: Revenues from state fell from 45.1% to 35.8% of total revenues (Santos, 2007) • Legislators target HE for budget cuts b/c they can offset with tuition & college students aren’t neediest population (Delaney & Doyle, 2007; Hovey, 1999) • 1989-1999: Tuition revenues rose from 14.6% to 18.5% of total revenues (Santos, 2007)

  5. Conceptual Framework • Rising Costs • Bowen’s Revenue Theory of Costs (1970) • Niskanen’s Hypothesis (1971) • Administrative Bloat (Massy & Wilger, 1992) • Cost Disease (Levin, 1991)

  6. Hypothesis • Decreasing funding leads to a loss of personnel, implying one of two things: • There is no more fat to be cut • Administrative bloat and cost disease are prevalent and being addressed

  7. Data • Delta Cost Project • IPEDS from US DOE’s NCES • 1987-2008 • Time Adjusted According to BLS • 489 Public Four-Year Universities • Lagged 1 year • Strict Exogeneity

  8. Variables • Dependent Variables • Faculty • Administrators & Professionals • Total Employees • Independent Variables • State Revenue • Tuition • Federal, Private Gifts, Auxiliary, & Other Revenues • Control Variable • Enrollment

  9. Results • State aid is particularly robust across all model specifications for all groups • Professionals have the highest coefficients for the different job classes

  10. Conclusions • Reductions in revenues results in cuts to expenses • Not enough money from other sources of revenues to make up cuts • Runs counter to Bowen & Niskanen • Professionals having the largest coefficient implies there may be bloat • No insight into cost disease (need salary info)

  11. Policy Implications • Policy Makers • Better understand impact of cuts to HE • Administrators • Possible issue with large middle-management class • Public • Better understand tradeoff between taxes and tuition

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