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Higher Education Administrative and Student Services Spending:
Technical Colleges, Community Colleges, and State Universities

Summary

March 1992


Over the past 30 years Minnesota has established a wide network of higher education institutions in four systems: the University of Minnesota, and the state university, community college, and technical college systems. Not including the University of Minnesota, Minnesota has 62 campuses that are part of 52 colleges and universities. In recent years, higher education enrollments have grown at the same time that the number of high school graduates was decreasing. This partially explains why appropriations for higher education increased 28 percent in constant dollars over the past decade.

With the growth of higher education spending has come increased legislative scrutiny. The Legislature has taken a variety of actions designed to reduce duplication among institutions and to differentiate the missions of Minnesota's four higher education systems. In 1991, the Legislature mandated the merger of the technical college, community college, and state university systems by 1995. In May of 1991, the Legislative Audit Commission, responding to a request from the House of Representatives Appropriations Committee, authorized a study of administrative and student services spending over the past decade. Specifically, we asked:

  • How has spending for administrative and student services changed since 1981 in the technical college, community college, and state university systems? What categories of spending have changed the most?
  • How do expenditures per student for administrative and student services compare among the higher education systems?
  • How do administrative and student service costs vary by the size of the institution?
  • What are the cost implications of different forms of higher education administrative organization?

Overall, we found that administrative and student services spending per student increased by about 30 percent since 1981 in each system, after adjusting for inflation. The proportion of total institutional costs devoted to administrative and student services purposes increased, while the proportion devoted to instruction decreased. There are many reasons for these changes: the increasing number of part-time and non-traditional students; expansion of extension and remedial education programs; salary and fringe benefit increases above the inflation rate; investment in computer systems; more state mandates; and the addition of marketing and development staff.

Of the three systems we studied, state universities had the lowest administrative cost per student and technical colleges had the highest. However, economies of scale and differences in mission explain most of the difference in cost per student. The report recommends that the Higher Education Board consider multi-campus administrative arrangements, but cautions that regional administrative structures have not significantly reduced spending in the technical and community college systems.

Methods

We examined spending in the state universities, technical colleges, and community colleges for a common set of administrative and student services functional categories, listed on the next page. We visited 34 colleges and universities and had telephone discussions with officials at most campuses in order to learn more about each system's administrative and student services spending. Our efforts were complicated by three different accounting and personnel systems, different and inconsistent categorization of costs, and different degrees of data availability among systems. We have corrected and made adjustments for these constraints, but detailed cost comparisions among systems should be made with caution. The three systems' institutional missions differ considerably in ways that affect administrative spending.

Full-year-equivalent (FYE) enrollment rose 46 percent in the community college system and 31 percent in the state university system between 1981 and 1991. Technical college enrollments increased two percent overall, reflecting a 9 percent decrease in continuous student enrollment and a 95 percent increase in extension students. Many types of higher education spending and staffing are directly related to the number of students enrolled. Thus, in order to examine trends in spending, we report most comparisions on a cost per student basis. We also adjusted spending for the effects of inflation in years prior to 1991.

Administrative and Student Services Spending and Staffing Trends

Spending Trends

Administrative and student services spending per student increased in each of the three systems between 1981 and 1991. We found:

  • After adjusting for inflation, spending per student for administrative and student services increased 32 percent in the community colleges, 31 percent in state universities, and 27 percent in the technical college system since 1981.

Another way to examine spending trends is to express administrative costs as a percent of total operating expenditures. Administrative and student services spending as a percent of total expenditures increased in each system since 1981. We found:

  • Technical colleges' administrative and student services spending increased from 20 percent of total expenditures in 1981 to 24 percent in 1991. During the same period, administrative spending in state universities increased from 20 percent of the total to 22 percent, and community colleges' administrative spending increased from 26 percent of total spending to 28 percent.

Trend comparisons are subject to the base year chosen for comparison. In 1981, spending per student was at a relative low point. We found that virtually all of the increase in technical college and state university spending occurred between 1981 and 1986.

  • The state universities' spending per student did not increase between 1985 and 1991, after adjusting for inflation.

*Technical colleges' administrative and student services spending per student went up only 3 percent between 1986 and 1991, after adjusting for inflation.

Spending increased more than average in certain expenditure categories. Measured in inflation-adjusted dollars, the technical colleges' spending in student services categories increased by 64 percent since 1981, while spending in other administrative categories increased by 16 percent. State university spending increased 110 percent for development activities, 55 percent for admissions, 44 percent for student services/counseling, and 37 percent for academic affairs and administration.

Community college spending for marketing and public relations staff grew 148 percent since 1981, and expenditures for continuing education administration staff increased 118 percent. Community college institutional service staff expenditures per student increased 46 percent, and there also were large increases in expenditures for computer equipment. In contrast to the state universities and technical colleges, student services spending accounted for a small portion of community college cost increases. Counseling expenditures per student actually decreased five percent between 1981 and 1991 while other student service spending increased 15 percent. Again, all of our comparisons are adjusted for the effects of inflation.

Staffing Trends

The total number of community college administrative and student services staff grew 67 percent between 1981 and 1991, compared to a 46 percent enrollment increase. In the community college system, unlike the other systems, we were able to track the trends for particular categories of staff. We found that most of the staff increases occurred in middle and lower level management and professional positions, not in upper level positions. For example, the number of middle managers increased by 443 percent, and the number of lower level professional staff increased 432 percent. In contrast, the number of top administrators (presidents, provosts, vice-provosts, and deans) decreased 17 percent. Salaries for the middle and upper level managers at community colleges increased faster than inflation.

Technical college administrative and student services staffing data are not as reliable as expenditure data, but they suggest that the number of full-time-equivalent staff in administrative and student services increased by about 3 percent and average salary increased by about 8 percent in constant dollars. Fringe benefits increased from 16.6 percent of salary to 21.7 percent of salary, reflecting increases in social security taxes, retirement contributions, and health insurance costs. Other important factors explaining the technical colleges' spending changes from 1981 to 1991 include an increase in purchased services of 79 percent, and an increase in equipment purchases of 125 percent. Purchased services include services purchased from local school districts (including business office, school board, and superintendent office expenses), professional and technical services, data processing services, and printing services. Equipment increases probably reflect greater use of computers by office staff.

The state universities' administrative and student services full-time equivalent staff increased 17 percent since 1981. State university staffing increased the most in admissions, development, and academic administration. As in the other two systems, personnel became more expensive as fringe benefits increased from 20 percent of total salary to 25 percent.

  • Why has spending increased?

Administrative spending is influenced by a wide variety of factors including institutional mission, student demographics, students' preparation for college, institutional enrollment size, and the total resources available. Differences in organizational mission probably have the most important impact on costs for instruction and research, but they also affect administrative costs. State universities, because they are four-year institutions, support a wider diversity of institutional functions than the two-year technical and community colleges. National data shows that four-year universities tend to spend 20 to 25 percent more on administration than two-year colleges of the same size.

Differences in mission also translate into a different type of student attending two-year and four-year schools. Because there are no admission standards, technical and community colleges serve greater numbers of students with poor records of academic achievement who require more student services support. Technical and community colleges have a higher percentage of part-time students who require counseling, tutoring, and financial aid services, and the percentage of part-time students has increased in each system. The number of students with disabilities also increased in each system. Spending for administrative and student services has increased in total dollars and as a percent of total spending in each of the three systems. What factors account for the increase? The most important component of higher education spending is salaries. Each system has added administrative and student service staff over the decade.

Colleges and universities have added staff for several reasons. First, we have noted the dramatic increases in enrollment in the state universities and community colleges. The workload of many administrative and student support functions is directly related to the number of students. System and campus administrators cited a number of additional state and federal mandates that have been imposed in the last decade. There has been an increase in the number of legislatively mandated studies and coordination efforts that systems offices are required to conduct. Each system has hired new personnel in the central office to assist with these required reporting activities.

Federal mandates have had a relatively minor impact on administrative workloads in the community colleges and state universities. Recent federal legislation has required the systems to report annually on campus crime rates and athlete graduation rates, to provide services for students with disabilities, and to demonstrate compliance with civil rights laws. Ongoing changes in federal financial aid laws have required close monitoring by college staff.

The federal government has required technical colleges to conduct institutional planning and to develop programs for students with special needs. While up to five percent of federal vocational education funds can be spent for administrative purposes, the technical colleges spend more funds on federal mandates than is provided by the federal appropriation.

College and university officials also cited a number of administrative requirements that have been common to all state agencies. For example, the systems have developed policies and educational materials for employees relating to sexual harassment, drug abuse, AIDS, and smoking. Other factors contributing to increased workloads include more complicated employee contracts and benefit packages, and the introduction of new payroll options such as direct deposit of checks.

Central Office Staffing

Different functions and services are performed by each of the three system central offices. The community college central office provides more direct services to campuses than the technical colleges or state universities. More than one-half of community college central office staff directly provide fiscal, personnel, or computer services to campuses. The technical college and state university central offices provide few direct services to campuses. The technical colleges provide some central services, such as curriculum development and facilities management. The state universities' central office manages the international program in Akita Japan, facility construction and inspection, and most Revenue Bond Fund activities.

The number of staff grew in each system office since 1981. Staffing grew 16 percent in the technical college central office, 40 percent in the state university office, and 84 percent in the community college office. Most of the community college central office staff growth (21 of 37 new positions) was in computer services and executive management positions. This staff growth reflects increased demands for information from colleges and outside groups, such as the Legislature, and the in-house development and maintenance of fiscal and student information computer systems.

State university central office staff increased from 39 to 55.5 full-time-equivalent (FTE) positions. The staff increases are largely due to: (1) increased demands for information from the Legislature, HECB, and other interested citizens, (2) the institution of a "system advancement" effort in the central office, and (3) increased responsibilities delegated by the Legislature. The 1984 Legislature transferred responsibility for construction management and inspection from the state architect's office to the central office. In 1989 and 1990, the Legislature transferred responsibility for retirement planning from the Teacher's Retirement System to the state university and community college systems. The technical college central office staff increased from 81.5 FTE positions in 1981 to 94.5 positions in 1991. Staff increased most in the chancellor's office (5 FTE), and in internal personnel, licensure, and fiscal services (6.25 FTE). New positions have also been added for marketing (1.5 FTE), telecommunications (1.5 FTE), civil rights enforcement (1.5 FTE), computer support (1.75 FTE), and technology preparation (1 FTE). The number of staff performing curriculum development functions decreased by about 7 positions. Technical college staff reported the same increased demands for external information as the community college and state university systems.

Spending per Student in 1991

Spending per Student

In 1991, total administrative and student services expenditures ranged from $1,181 per full-year-equivalent (FYE) student in the state university system to $1,487 per FYE student in the technical college system. As the table shows, the state universities spend the lowest amount per FYE student for financial aid and student services, but spend the most on institutional services. The community colleges fall between the other two systems in every category except development and public relations and instructional administration, where expenditures are the lowest.

Officials who we interviewed disagreed on the administrative and student services costs associated with part-time students. State university officials and some technical college presidents felt many part-time students were less costly, while community college officials felt part-time students required the same amount of services as full-time students. If the costs of financial aid <R>administration and student services are calculated based on the total number of students rather than FYE, the average cost per student is $217 in community colleges, $246 in state universities, and $346 in technical colleges. National higher education researchers have found that administrative spending is closely related to the type and size of institutions. We believe that:

  • Economies of scale and differences in the three systems' missions explain much of the variation in spending per full-year-equivalent student.

The highest cost system, technical colleges, has the smallest average enrollment per college (1,365 FYE in 1991). Each small campus requires a minimum number of administrative staff, including a president and support staff, which increases the cost per student. The technical colleges' mission requires more course development and lower student to staff ratios, both of which tend to raise administrative costs. The state universities' average enrollment was almost 8,000 FYE in 1991. Each state university has more administrative staff than any of the technical or community colleges, but administrative costs are lower on a per student basis because of the higher enrollment levels. While economies of scale help keep state university costs per student down, the universities are also much more complex institutions than the technical or community colleges. The state universities are four-year residential institutions with a wider array of programs, student services, research, public service, and ancillary activities than in the two-year colleges. The increased complexity of the universities tends to increase costs. State universities also incur many administrative expenditures that have no counterparts in the other two systems. This may account for the state universities spending more in some functional areas such as institutional services.

Economies of Scale

Many national studies have shown that there are substantial economies of scale in administrative and instructional costs. For two-year colleges, national studies have shown that administrative unit costs decline up to 1,500 FYE enrollment. Studies have shown that administrative costs per student declined an average of 34 percent when enrollment increased 200 to 300 percent. In comprehensive four-year schools comparable to Minnesota's state universities, research has indicated that most economies of scale occur up to enrollments of 4,000 FYE, although for some administrative and support functions unit costs continue to decline up to 20,000 students. It is important to note that colleges can have high costs due to their small size, yet still spend available funds wisely. Conversely, larger colleges with inefficient operating practices can have relatively lower costs due to size-related efficiencies. We examined economies of scale between the campuses in the three Minnesota systems we studied. We found that:

  • Economies of scale appear in each system. Expenditures per student for most administrative functions are strongly related to campus size.

The figure shows the relationship between total administrative and student services spending and campus size for each system. Our analysis indicates that doubling enrollment was associated with a decrease in per student spending of 12 percent in technical colleges, 15 percent in community colleges, and 25 percent in state universities.

The relationship between size and the per student costs of services is especially strong in certain expenditure categories. In the technical college system, the larger colleges tend to spend less per student on the president's office, financial aid administration, and marketing. Larger community colleges tend to spend less per student on the president's office, institutional services, student services, and financial aid administration. Larger state universities tend to spend less per student for finance-related functions, development, student services and counseling, the president's office, admissions, and personnel/affirmative action.

These figures suggest that smaller campuses are less efficient than larger ones. However, in order to conclusively determine whether one school was more efficient than another, more information would be needed about the services provided. That is, a school that spends less per student may be providing fewer services, or services of lesser quality, than a more expensive school.

State University Interstate Spending Comparisons

Interstate spending comparisions are difficult to make. We were not able to find reliable information to compare Minnesota technical colleges or community colleges with institutions in other states. We were able to compare state universities with their counterparts in other states for fiscal year 1989. We looked at three different measures of administrative spending both as a percent of total instructional expenditures and on a dollars per student basis. We found:

  • In 1989, Minnesota state universities, except for Southwest State, spent less on administrative and student service functions than comparable institutions in other states.

Alternative Administrative Arrangements

The 1991 Legislature mandated important changes in the governance structure for the higher education systems. Effective in 1995, the governing boards for the state university, community college, and technical college systems will be replaced by a single Higher Education Board. Legislative advocates for the Higher Education Board suggested that a single board would save money by eliminating program duplication, improving credit transfer, making better use of existing facilities, and merging central office administrative positions. Opponents suggested that a single board would be tempted to cut technical college programs, which tend to be more expensive than general education programs, and that the costs of reducing salary and workload differences between staff in the three systems would outweigh any cost savings.

We looked at potential administrative cost savings from merging co-located community and technical colleges. There are 10 sites in the state where community and technical colleges are located relatively close to each other. Based on 1991 staffing levels, we determined that:

  • $3.0 to $4.0 million in administrative and student services costs could be saved by merging co-located colleges.

However, technical colleges have recently started merging on a regional basis, and the efficiencies that result from these mergers might reduce the savings possible from subsequent mergers of co-located technical and community colleges. We think the Legislature and Higher Education Board should consider factors in addition to administrative costs--such as the potential for improved student services and reduced course and program duplication--when deciding whether to merge these colleges. We recommend that:

  • If the Legislature proceeds with merger of the state university, community college, and technical college systems in 1995, it should require the Higher Education Board chancellor to review the merits of merging co-located technical and community colleges. In early 1994, the chancellor should present the Legislature with a plan for multi-campus administrative structures that indicates (1) which, if any, co-located colleges should be merged, and (2) any realignment of current multi-campus administrative structures necessary to provide services in the most cost-effective manner possible.

It would be difficult to merge co-located colleges before 1995 because there would be separate boards for community and technical colleges. We think that merging or sharing administrative services at co-located colleges is practical only if the combined institution reports to a single board that provides unified direction and priorities. There is little potential for combined services and administrative cost savings when institutions report to two different boards and have two different systems for admissions, registration, financial aid, computer services, and almost every other educational and student service.

We made a separate cost estimate for the co-located technical and community colleges because they offer the most obvious potential for staff consolidation. However, cost savings should be possible with other types of multi-campus administrative arrangements, such as the regional service centers recently suggested by the Commission on Post-Secondary Education. For example, it might be possible to have regional supervisors for functions such as financial aid, payroll processing, public information, and personnel. To maximize savings, it would be best for regional centers to serve campuses of different types, not just the campuses of a single higher education system. As with the mergers of co-located campuses, savings from regional administrative structures would depend on the development of common administrative procedures and information systems.

Many of the costs and benefits of the merger would be in instruction, not administration. The Higher Education Coordinating Board has estimated that net costs from the merger could range up to $18 million annually, not including one-time costs. HECB has estimated that one-time costs could be as much as $29 million, including one to five million for legal fees and integrating management information systems. We believe it is likely to cost more than five million to integrate the three systems' widely varying information systems.

The costs of the merger will be much lower if the Higher Education Board and the Legislature maintain distinct bargaining units for community college, technical college, and state university faculty. According to HECB, there could be additional costs of as much as $59 million annually if faculty bargaining units were consolidated and instructional loads and other contract provisions equalized.<$FEqualizing faculty instruction time between technical colleges and community colleges could cost as much as $34 million per year, according to HECB. HECB estimates that equalizing state university and community college faculty workloads could cost as much as $25 million. HECB did not estimate the cost of equalizing technical college and state university faculty workloads. HECB emphasizes that these are rough estimates that deserve further study.>

Until the Legislature and the Higher Education Board make additional decisions about the new structure, it is difficult to estimate its costs with any precision. Also, there have been no estimates of potential cost savings from less instructional duplication, faster degree completion, and better use of facilities. Without estimates of these savings, it is impossible to conclusively judge the cost-effectiveness of a merged system. Nevertheless, it appears to us that:

  • The administrative cost savings from a merger would likely be small compared to other costs and benefits.

Administrative cost savings would result primarily from merging co-located technical and community colleges, consolidating central office functions, and possibly providing some institutional services regionally or centrally.

With or without a merger of the governing bodies, we think that long-term cost savings could result from consolidation of the information systems used by the state university, community college, and technical college systems. We recommend that:

  • Before the higher education systems proceed with significant revisions to fiscal, student, personnel, financial aid, and other information systems, the Higher Education Board should investigate ways to consolidate these systems.

Finally, we looked at the potential cost implications of developing multi-campus administrative arrangements. Minnesota has more higher education campuses than most states, so finding ways to consolidate administration on a regional basis might save money. In January 1992, the Governor's Commission on Post-Secondary Education recommended developing post-secondary districts throughout the state to provide services to institutions in each region. We examined the experience of the technical and community college systems with regional offices and found that:

  • Multi-campus administrative arrangements have provided member colleges with benefits, but have not reduced administrative and student services spending significantly.

This may change in the technical colleges since cutting administrative costs is a focus of the technical college mergers scheduled for later this year. A <R>recently-developed multi-campus college in southeastern Minnesota projects that its 1992 administrative and student services staff costs will be about ten percent lower than costs at its member colleges in 1991. However, a multi-campus technical college created in 1985 in southwestern Minnesota did not reduce administrative and student service costs. It continues to have higher administrative and student services costs than other comparably sized technical colleges.

In the community college system, the Arrowhead region consolidated several positions, but the savings have been used to strengthen student services. The colleges in this region continue to have higher costs than the states' other small community colleges. In northwestern Minnesota, three community colleges eliminated two positions by merging in 1984, but constant dollar spending for top administrative positions is about the same as before the merger. Based on our analyses of economies of scale, we think that administrative savings from regional administrative structures should be possible, but savings have been limited to date.

Finally, we think that each institution and campus should periodically review the way it provides administrative and student services. Several colleges and universities have used the approach known as "total quality management" to assess their services. Such a customer-based service review can highlight efficiencies and improvements that are not apparent in the type of broad expenditure study that we conducted.

 

 

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