A while ago I stumbled upon the the Commonfund Institute’s Higher Education Price Index (HEPI), which is self described as:
Compiled from data reported by government agencies and industry sources, HEPI measures the average relative level in the price of a fixed market basket of goods and services purchases by colleges and universities each year through current fund educational and general expenditures, excluding research. A more accurate indicator of cost changes for colleges and universities than the Consumer Price Index (CPI), HEPI is used primarily to project future budget increases required to preserve purchasing power.
And thought that it would be a good measure of how much exactly state funding has declined over the years. As nice as it is for the state to fund such things as increased research expenditures, the HEPI should help tell what the minimum amount the state needs to increase funding by each year in order to keep the same level of support for basic university functions. While it would never be a good idea to say that just because state funding has increased by the same amount as the HEPI that it is acceptable, it is a good approximate standard by which to guess the minimum increases the state should be making every year. It is a better standard against which to measure state funding than percent of the total budget. As we have gained more and more federal research money (we currently get the 5th most of any school) and solicit more and more private donors the state funding cannot reasonably be expected to keep increasing with these added sources of revenue.
In order to compare the HEPI to the UW budget and state funding I consulted the UW-Madison Data Digests, a great source of a wide variety of information about the UW. I entered all the data into spreadsheets and generated a couple of graphs displaying data from the years 1990 to the present. The years displayed on the graphs represent the budget years starting with the given year. Hence 1990 means 1990-1991 and 2007 represents the recently completed 2007-2008 school year. The choice of the year 1990 is really just an arbitrary year and chosen because that is as far back as the numbers available from the data digests go. The way I chose to compare the numbers was to graph the cumulative percent increases* over the 1990 level. The number on the left side of the graph is then the sum total percent increase since 1990. For example if 40 in 1999 means that the total has grown by 40% since 1990, so if the budget or value of the HEPI was 100 in 1990 it would be 140 in 1999. Thus the changes from year to year can be directly compared even though they differ in magnitude by hundreds of millions of dollars (sometimes even a billion). I would also like to point out that the HEPI is based of fiscal years, which are not the same as the budget years for the UW which cover the standard school year. The fiscal years used by the HEPI start and end October 1st of each year. As a result the dates are off by a couple of months and because the 2008 HEPI (corresponding to the 2007-2008 school year) won’t end until this upcoming October, I am using the preliminary estimate.
*calculated by taking the value subtracting the 1990 value then dividing by the 1990 level and multiplying by 100
The most striking thing that I first saw when looking at the graph was the dip in state funding starting in 2002. That’s right, state appropriations to UW-Madison actually went down for 3 straight years from 2002 until 2004. Up until that point they had stayed fairly even with the increases in the HEPI, with the exception of a slight dip in the mid to late 90’s. Another thing to note is that state funding in recent years has begun to catch up to the HEPI in recent years. The gap decreased from 36.02% of the 1990 levels in 2004 to 25.57% of the 1990 levels in 2007. Meaning that over those 4 years the increase in state funding actually outpaced growth in the HEPI by 10.45% of the 1990 levels.
Another aspect of the graph that struck me was that despite decreases in state funding, the growth of the total budget of the UW continued to out pace the growth of the HEPI. Two of the biggest increases in UW funding have been in increased money brought in from federal programs and through increases in private gifts and grants. The largest increase percent wise was clearly in gift money. The 2007 levels show an almost 300% increase from 1990, meaning the total money brought in has increased almost 4 fold ($116.4 million to $436.9 million).
I think the growth comparisons used in these graphs put a little bit more perspective on the shortage of state funding than percent of the UW’s budget. With such huge increases in private money and with federal money coming in a levels that out pace even the growth of the total UW budget, it is unrealistic to expect that money from the state ought to make up a constant percent of the total UW budget. Instead the HEPI provides a better of a reference point by which to gauge support from the state legislature. And so what is the answer to the original question posed by this post? Well, the model I have chosen makes the assumptions that state funding levels in 1990 were perfect and that the HEPI perfectly measures increases in the cost of higher education and thus increases in total state appropriations since 1990 ought to grow by the same amount each year as the HEPI. The first assumption is fair because increases in state funding mirrored those in the HEPI for most of the 1990’s and never truly deviate very far until the 2002 budget. Using the HEPI is justified by its description above and is certainly better than expecting state funding levels to maintain a constant percentage of the total UW budget as argued above. Now for the dramatic conclusion, based off of this prediction method, for the 2007-2008 budget year, state appropriations should have totaled $536.2 million or $75.1 million more than the $461.1 million we did receive. I certainly would like to see that number be even higher in reality, and it definitely should be considering that undergraduate enrollment has increased since 1990, but I think this clearly demonstrates that the state is failing to provide tens of millions of dollars for basic educational functions.
7 responses so far ↓
Curt // June 3, 2008 at 12:48 pm |
Amazing the differences in perspectives. I’m guessing the writer here is associated with the UW. My first thought on looking at the graphs in question was why was the UW budget growing at such a higher rate than the the index in question. I would have started from the position that if 1990 was a reasonable baseline, that someone needs to explain the roughly 300 Million in EXCESS spending at the UW in the current budget, and that we should be looking at ways to decrease the funding to the UW.
Fearless Sifting // June 3, 2008 at 1:57 pm |
The difference in perspectives is remarkable and I am a UW-Madison student. The second graph is an attempt to explain where some of that extra money to fund the increases is coming from. There is federal money being spent on research and the UW is doing a better and better job of being on the receiving end of that money. In fact we are now get more federal money than any other public school in the country. Increases in private donations also have funded a large part of the increase.
Using the UW budget may have been slightly misleading also as it includes university expenditures that don’t relate to academics at all, like the athletic program. I would venture to guess that the massive increases in TV money coming to college football and a better football team has meant an increase in spending on athletics. There has also been a roughly 2,000 student increase in enrollment that would be reflected in the increases in the UW budget, but not in the HEPI.
And I don’t know much you know about UW funding issues, but if you think decreasing funding for the UW might be a good idea, you should read my blog more often.
Peter Gruett // June 3, 2008 at 2:07 pm |
An explanation for Curt:
The University of Wisconsin is not a giant high school. Just as money comes in from different sources, it goes to different things, things often determined by the party providing the money. Massive increases in research funding go to research. Private donations are usually for high-profile projects like new buildings. State money, on the other hand, usually goes into the base-budget and covers things like salaries for the majority of UW’s instructional and support staff, materials and maintenance. Nobody wants to endow a janitorial position and research funds can’t be used directly for instruction. If the state wants to maintain an accessible, top notch educational institution for its sons and daughters, it’s going to have to pay for it itself.
Curt // June 3, 2008 at 5:02 pm |
I wasn’t actually trying to say it was that easy or that we should cut 300Million from the UW funding. What I was trying to point out that this set of charts and data no more supports my quick and dirty analysis, than it does the one presented in the article. Although I will say that my silly question is actually better supported by the accompanying data than the argument laid out in the article. All you can really take from this is that the UW Budget is growing at a fast clip (you can read that as a good or a bad thing) and that the funding mix is changing. (I’d have liked to see tuition laid on that graph too)
The notion that spending for our higher education should be indexed to some arbitrary index (and of course one that is rising at a rate that dwarves the CPI) is just silly. The budget and funding need to be addressed by determining whether the UW is meeting the goals we set out for it, not by blindly following some biased, and poorly thought out formula.
Fearless Sifting // June 3, 2008 at 6:56 pm |
Before I respond, I have to ask: is Curt perhaps an alias for Steve Nass? or on his payroll? Your comments sound strangely like something he would say.
I may have made a mistake in placing the total UW budget on the graph. It was placed there merely for reference. The first chart includes 3 lines. I focused on the comparison of 2 of them. You want to talk about a comparison of the other two. As for what you take away, that depends on which two you compare and what obligations you think the state has to fund UW-Madison. That is an different debate entirely, one that I would be happy to have I might add.
You, however, fail to make any arguments about how the state has a decreasing obligation to pay for the basic education expenses of the university or how the HEPI is a “biased and poorly thought out formula” and thus shouldn’t be used. Before dismissing the HEPI as some “arbitrary index” maybe you should make an argument about how it is irrelevant to the discussion or at least dispute my analysis about how it is relevant. I think the idea that increases in state funding for high education ought to correlate to the increases in the costs of higher education is a pretty logical one.
I’ll let my arguments stand for themselves, but as for you, you don’t really have any. You make a number of claims, but fail to have any warrants to support them.
Curt // June 4, 2008 at 10:36 am |
I’ve made no claims. Other than that the budget for UW is going up at a high rate (the data for which you’ve so kindly provided, and that the funding mix has changed. ) Your nice long article is the one making the baseless claim. You could tie the funding to UW to any number of metrics and I’d say the same thing. Should UW funding grow at the same rate as the CPI, the HEPI, or the birth rates of the siberian YAK.
Yes costs for higher education have been going up at a higher rate than the CPI. On the other side we are in the midst of a low point in the college age population, based on the lower enrollments at the high school level. What I was saying is that pegging funding to any index is both lazy and foolish. There are way to many variables in play. Look at the QEO for public schools. An arbitrary number that can be either a windfall or cause major structural deficits depending on inflation, enrollment etc. As you pointed out in your graph, the funding mix for UW is moving, and other factors such population trends, other budget priorities, structural issues within the UW all would have impact on the overall budget for UW. And you made no mistake in leaving the budget for UW on the graph. Saying a funding source should grow at a certain rate, independent of the actual budget would stretch your argument even further. I’ve not tried to make an assertion that funding for UW should be increased or decreased. (actually you’d might be surprised at what my actual opinion is.) I just don’t like to see such lazy analysis passed off on either side of the argument. Doesn’t mean more than don’t raise funding my taxes are too high (they are by the way
Or look at how much the budget has increase over CPI, we need to cut the budget to the bone. The bigger question is the one you alluded to, and that is the debate we should be having. What is the obligation, we as a community believe we have to the UW. Do we fund it to make it an affordable option for any resident to take care of, or do we shrink funding to the point where it has to fund itself, or is there a happy medium. The result of our commitment will define the cost, not some metric.
Fearless Sifting // June 4, 2008 at 1:39 pm |
I think our basic disagreement is over the usefulness of the HEPI. I think there is some merit in comparing it to the level of state funding. You don’t.
If you reread what I originally wrote, I never said that funding should be pegged to the HEPI. I merely think that comparing them can provide us some insight into state funding levels for the UW. Obviously those in the state legislature and in the UW administration should be doing a much more thorough job when they actually determine the budgets. The only comparable analysis I have ever read has been people citing that the percentage of the UW budget funded by the state has declined, which as I pointed out doesn’t really tell us anything about the state’s financial commitment to the university and is definitely lazy analysis. While mine is far from perfect, I feel it definitely has something useful to contribute to the discussion.
If you read through some of my older posts, the obligation the community has to the UW is a topic I have dealt with and will continue to discuss. The point of this post was to show that the commitment of the state to funding basic educational expenses of the university has been declining.