Latest News and Comment from Education

Wednesday, November 16, 2011

The Wrong Thinking about Measuring Costs & Efficiency in Higher Education (& how to fix it!) « School Finance 101

The Wrong Thinking about Measuring Costs & Efficiency in Higher Education (& how to fix it!) « School Finance 101:

The Wrong Thinking about Measuring Costs & Efficiency in Higher Education (& how to fix it!)

There is a movement afoot to reduce the measurement of the value of public institutions of higher education to a simple ratio of the revenue brought in by full time faculty members divided by the salaries and benefits of those faculty members. That is, does each faculty member “pay” for him or herself, on an annual cash flow basis?[1]

Even some of the finest major public colleges and universities have recently succumbed to reporting such information, arguably, in an effort to appease politically motivated critics.[2] This seemingly simple ratio of the “net cost” of faculty salaries and benefits is presumed representative of the relative efficiency of higher education institutions and/or entire public systems of higher education.

This is a dreadfully oversimplified if not simply wrongheaded approach to measuring the cost of providing public