Expenditures related exclusively to education are often referred to as education
and related (E&R) expenses, which include spending on instruction
(including faculty salaries and benefits), academic support, student services, and
a portion of general-support and maintenance costs associated with these functions.
E&R expenses also include graduate education and spending on research by the
university that is not sponsored by an external entity.15
Between 2000 and 2012, E&R expenses per FTE student on average across all public
research universities increased from $15,970 to $17,172—a total of $1,202
per student—representing an increase of less than 1 percent annually.16 (Note that at some Very
High Research Activity public universities, such as the University of Michigan and
University of California, Berkeley, E&R expenditures per FTE student were closer
to $28,000 in AY2012.) Even when considering expenditures broadly, as does Chart
1, budgets have been kept under tight control, particularly in light of the fact
that public research universities are serving far more students today than in AY2000.17
Table 1: Spending per
Full-Time Equivalent Student by Standard Expense Category,
AY2002, AY2007 & AY2012 (in 2012 USD)
10-year Change ($)
% Change from 2002–2012
Net Scholarships & Fellowships
Operations & Maintenance
Source: National Center for Education Statistics, IPEDS Analytics:
Delta Cost Project Database 2000–2012, https://nces.ed.gov/ipeds/deltacostproject/.
The five expense categories that have increased most dramatically over the last
decade are 1) academic support; 2) student services; 3) research, with an implied
link to graduate education; 4) net scholarships and fellowships; and 5) institutional
support. Each of these is reflective of the principal activities hosted by public
research universities and of the changing demographics of students being served.
Academic support has drawn more resources because today’s students both require
and expect ancillary technology and services to enhance their educational experience.
Student services have continued to expand as institutions have enrolled increasingly
diverse student bodies with greater need for counseling and support, and as safety
and security for all members of university communities has become a greater priority.18 Additionally,
there are greater demands for accountability from the federal sector than ever before,
often in the form of unfunded federal mandates that lead to increased costs (such
as the Clery Act, which requires colleges to provide and publicize information about
campus crimes). As the nation’s research needs have changed, universities
have continued to compete effectively for federal research dollars from government
agencies across broad categories. Net scholarships and fellowships have increased
to offset rises in tuition. Institutional support has grown modestly and reflects
the imperative for universities to keep classrooms and laboratories updated and
capable of supporting modern instructional strategies.
Policy regulations and expectations about the role of public research universities
have also shifted over time. Since new regulations and legal mandates are almost
always unfunded, the growing web of reporting processes demands increasing financial
resources. Yet calculating the added cost of regulation is difficult and has only
been attempted at a small number of institutions. Most recently, Vanderbilt conducted
an extensive analysis of expenses related to federal mandates and found that eleven
cents of every tuition dollar is spent on compliance with legal and regulatory mandates.19
Compensation and Staffing
Like all colleges and universities, public research universities devote more than
half of their E&R spending to employee compensation.20 Since the core missions of these institutions
include research and graduate instruction, staffing levels are relatively high and
demands on faculty and staff time are intense. However, it is important to note
that faculty salaries have been slow to rise in the last decade. According to the
American Association of University Professors, between AY2008 and AY2012, salaries
at public research universities grew only 1.12 percent annually, well below the
average annual rate of U.S. inflation.21
Popular discussion often inaccurately attributes rising tuition solely to “administrative
bloat” at public universities. However, the Delta Cost Project at the American
Institutes for Research (AIR) found that in 2012, public research universities employed
30 fewer staff per thousand FTE students compared with 2002. In contrast, during
this same time period, private institutions increased staff by 137 employees per
thousand FTE students. Clearly, rising tuition at public research universities is
not due to unrestrained hiring of staff, administrative or otherwise. In Figure
8, the full array of hiring patterns for faculty and staff between 2002 and 2012
Public research universities that host large hospital and medical center operations
are not accounted for in the figure. Source: See National Center
for Education Statistics, IPEDS [Integrated Postsecondary Education Data System]
(U.S. Department of Education, Institute of Education Sciences), https://nces.ed.gov/ipeds/.
Professional staff includes positions such as business analyst, human resources
staff, and admissions staff. Source: National Center for Education
Statistics, IPEDS Analytics: Delta Cost Project Database 2000–2012, https://nces.ed.gov/ipeds/deltacostproject/.
However, the costs of benefits for existing employees and retirees are rising and
have a large impact on the operations budget of public research universities. Such
benefits include medical and dental plans, retirement contributions, Social Security,
unemployment and Medicare taxes, life and disability insurance plans, and, in some
instances, tuition benefits. Depending on the state and the higher education oversight
within that state, universities are often constrained in managing these costs because
they are treated as “fixed” costs within the state budget and are not
under the control of individual institutions.
Adding to the complexity of the costs of benefits is the variation in pension plans
across states and higher education systems. In general, pension plans represent
obligations to retired and current employees that must be met by law.
15 Delta Cost Project,
Trends in College Spending 1999–2009, 20.
16 National Center
for Education Statistics, ipeds Analytics:
Delta Cost Project Database 2000–2012.
17 National Center
for Education Statistics, IPEDS.
18 Robin Wilson, “An
Epidemic of Anguish,” The Chronicle of Higher Education, August 31,
19 Vanderbilt University,
The Cost of Federal Regulatory Compliance in Higher Education: A Multi-Institutional
Study (Nashville, Tenn.: Vanderbilt University, 2015).
20 Delta Cost Project,
Labor Intensive or Labor Expensive? Changing Staff and Compensation Patterns in
Higher Education (Washington, D.C.: Delta Cost Project, 2014), 15.
21 John Barnshaw and
Samuel Dunietz, Busting the Myths: The Annual Report on the Economic Status of the
Profession, 2014–15 (Washington, D.C.: American Association of University
Professors, 2015). Inflation data are based on the Consumer Price Index; see The
World Bank, “Inflation, Consumer Prices (Annual %),” http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG.