College Spending Increases Are Outside of Core Academic Functions

The 2013-2014 school year has begun — unless you’re on a quarter system — and college students are packing into classes and unpacking in their dorms. CSU and UC students can rest assured that tuition hikes aren’t in their near future. The latest state budget allocates $125 million to each system for core functions and institutes a four-year tuition freeze.

So, what do these campuses spend their money on? For the University of California system’s core functions, it spends most on salaries for academics and administration, then financial aid services, retirement benefits, and equipment and utilities. This is 73 percent of the UC system’s budget that is restricted to these functions alone.

The UC system charts out their spending (left) and revenue sources (right) based on the 2011-2012 school year, the most recent data available:

UC Spending
Spending on core functions (left), revenue streams restricted to core functions (right), for the UC system in 2011-2012

Overall, the UC system received $2.37 billion from the state and $2.97 billion from student fees based on the data above. It also received $792 million from outside sources (medical centers, on-campus sales, and government contracts).

The cost to students has steadily increased over time, though. However, data shows that students are forking over a larger portion for the UC’s function while state funding has steadily decreased:

college spending chart
Per Student Average Expenditures for UC Education

The Wall Street Journal interviewed Richard Vedder — a long time academic at Ohio University and director of Center for College Affordability and Productivity — to talk about why college costs so much. The following is an excerpt from the article:

[C]onsider Princeton, which recently built a resplendent $136 million student residence with leaded glass windows and a cavernous oak dining hall (paid for in part with a $30 million tax-deductible donation by Hewlett-Packard CEO Meg Whitman). The dorm’s cost approached $300,000 per bed.

Universities, Mr. Vedder says, “are in the housing business, the entertainment business; they’re in the lodging business; they’re in the food business. Hell, my university runs a travel agency which ordinary people off the street can use.”

Mr. Vedder mainly asserts that private universities are driving up their costs for lavish additions to campuses. The article also asserts that compensation and growth of administration contributes to the cost of these universities.

The Delta Cost Project by the American Institutes for Research provides an overview of national trends in college spending. One study on where universities’ money goes examines spending in the past decade (2000-2010).

Based on Delta Cost Project’s data, Mr. Vedder’s claim does not go unfounded. In that 10-year period, private research universities have increased spending on student services by 34.1 percent, academic support by 29.1 percent, institutional support by 21.5 percent, and operation/maintenance by 35.7 percent.

These are all categories that fall outside of core academic functions; buildings, administrative services, athletics, and student activities. While all important for a university’s purpose, the increased spending falls on students.

Spending on academic instruction and research rose by 19.9 percent and 26.7 percent respectively.

Public universities had external support and services spending increases of around 12 to 17 percent, but operation/maintenance spending has gone down. Research and instuctional spending increased by 20.4 percent and 8.4 percent, respectively.

Data from the National Center for Education Statistics shows that average tuition for both private and public universities increased by over $4,000 per student in the same 10-year period.

Private and public universities face very different dilemmas. Public universities, such as the UC system, have had decreases in state support which leads to increased costs to students. Private universities are shown to expand their services to students and features that fall outside of core academic functions, which also leads to increased costs to students.