Quality Endeavors Issue No. 127
Cost Savings Approaches in Higher Education
As Penn State implements its strategic plan in the current economic environment, it may be helpful to look at how some other institutions of higher education are approaching similar situations.
The Economic Context
The Association of Public and Land-grant Universities surveyed its 188 member institutions in August – September 2009, with a 46 percent response rate representing 41 states. As reported in the resulting document, “Coping Strategies of Public Universities During The Economic Recession of 2009”, appropriations for higher education decreased in 32 states and 50% of institutions reporting indicated revenues declined. In response to these reductions, over 75% of those institutions reporting reduced both permanent and temporary staff positions, with 50% also reporting permanent staff layoffs. Federal stimulus funds were used by 70% to manage some of the budget gaps, but the State Higher Education Executive Officers note that funds from the American Recovery and Reinvestment Act to stabilize state support for education are only available through 2011. NACUBO reports in “Buffeted by Economic Headwinds” in the March 2009 issue of Business Officer that endowments at all institutions fell by an average of over 18% for the one year period ending June 30, 2009.
Whether through state shortfalls that impact what public universities receive in state appropriations, decrease in the value of endowments that impacts both public and private institutions, or decline in revenue, across the country colleges and universities are looking for ways to continue their core mission with fewer resources.
Penn State’s Strategic Plan
Penn State’s strategic plan includes several goals and strategies related to increasing efficiencies while maintaining excellence: Goal 2: Advance Academic Excellence and Research Prominence, Strategy 2.4: Consolidate Academic and Administrative Programs through Targeted Reviews, and Goal 7: Control Costs and Generate Additional Efficiencies. To further these goals and strategies, in October 2009 President Spanier charged an Academic Program and Administrative Services Review Core Council chaired by Executive Vice President and Provost Rodney Erickson and comprised of 13 faculty, staff, and administrators from University Park and the campuses to provide analysis of programs, find efficiencies, and free resources for strategic investments in the University’s future. The work of the Core Council is supported by three coordinating committees: University Park Academic Review, Campus Academic Review, and Academic and Administrative Services Review. The Core Council is expected to work for about 18 months, with a goal of identifying permanent cost savings or non-tuition revenue enhancements of $10 million annually for each of the next few years.
Many other universities are also reviewing academic and administrative programs in order to find opportunities for cost savings or cost avoidance in these tight financial times. As you read through what some other institutions are doing, you may note that many of the ideas being explored or pursued at other universities are also part of Penn State’s strategic plan strategies, the implementation process, and the work of the Core Council.
The Big Ten: Michigan State University and the University of Iowa
Michigan State University has identified a number of issues for review and development of plans in the 2009 – 2010 time frame, including academic programs, curricular reform, energy conservation and sustainability, health care, both for employees and on campus for students, research infrastructure, and institutes and centers. As a result of the academic program review, recommendations were made for discontinuation of four doctoral programs and two specializations, 15 masters programs and three specializations, and 21 undergraduate majors and three specializations, and for 12 proposed departmental reorganizations. Colleges also identified opportunities for effectiveness and efficiency, such as requiring that a program become self-supporting to continue, eliminating low-enrollment courses, discontinuing some certification programs, centralizing administrative services across departments, and moving publications and forms from paper to the Web. The goal is a more focused university that “invests resources in ways that benefit the greatest number of students” (‘From the Provost’s Desk’).
In April 2009 the Provost at the University of Iowa charged the Task Force on Graduate Education: Selective Excellence (Final Report 2/12/10) to address issues including review of over 100 graduate programs, to recommend either enhanced investment, support at current level, or downsizing or phasing out, as well as improvement of recruitment, retention, and time to degree. The Task Force developed a self-study assessment guide to be completed for each program, providing information about admissions criteria, program outcomes, and program characteristics, and also obtained data such as program size, number of applicants, and time to degree from the Graduate College. The Task Force held open forums, met with the deans to discuss the programs, and provided the programs the opportunity to review and comment on the Task Force’s draft findings. The Task Force classified each of the programs into one of five categories:
- Exemplary: stand out in overall quality
- High Quality: strong, but with some opportunities for improvement
- Good: doing well, but with some area(s) of relative weakness
- Additional Evaluation Required: significant problems related to mission size, structure, admission process and criteria, program outcomes, or program characteristics
- Too New to Assess: programs in place less than five years, or having recently made significant changes
The Task Force also made recommendations for relocation and restructuring of some programs. The next steps will involve addressing the individual issues that have been identified.
The University of North Carolina
The University of North Carolina (UNC) (Narrative from the Chancellor) set as its objective to “…identify options to improve Carolina’s operating cost structure through more efficient and effective operations.” Five guiding principles were identified, including maintenance of academic quality and preservation of UNC’s reputation. In early 2009 UNC contracted with an external consulting organization to review operations and expenses in university administration and all 14 of UNC’s schools. The consulting organization spent five months on the first stage - building a diagnostic - of a four stage process. Inputs were received through e-mails, data analysis and research, and interviews. A long list of ideas was generated. The five guiding principles were used to review the ideas and identify those with highest potential for value when compared to cost. The consulting organization then provided UNC with a list of possible options. These options covered 10 topics, including organizational redesign to reduce organizational levels, consolidating the information technology infrastructure, creating standardized policies for start-up, funding, and review of centers and institutes, decreasing energy consumption, and better utilizing classroom space. In the next steps in this process, UNC will select the options to pursue, develop detailed designs for execution, and implement the changes.
Faced with a more than 26% decrease in its endowment, in spring 2009 Brown University (Letter from the President) charged the University Resources Committee with financial planning to identify ways to save $16 million, and the Organizational Review Committee (ORC) to save $14 million through improved efficiency and cost reduction resulting from administrative restructuring. Guidelines to the ORC included “think[ing] strategically about how Brown is organized” and “seek[ing] to improve services and support while reducing costs.” The ORC established teams to review 14 areas, including administration in academic and administrative departments, auxiliary service units, continuing education, events, information technology, library operations, and student services. ORC teams gathered information from stakeholder groups, ad hoc groups, senior officers, and topic experts. Some recommendations included consolidating and centralizing some support staff, instituting or increasing some fees, realigning the model for custodial services, optimizing the use of facilities, including for external events, centralizing graphic and Web design services, and centralizing general information technology support.
The West: University of Nevada, Reno and University of Idaho
Faced with a 6.9% ($11 million) cut in its state funded budget, which followed an earlier 15.5 % ($33 million) cut, the University of Nevada, Reno initiated the Academic Planning Process/Curricular Review prescribed by the Nevada System of Higher Education. Based on review of degrees granted, enrollment in the major, student full-time equivalent enrollment, scholarship, grants awarded, and other measures, the Provost developed proposals for review. These proposals, presented on March 1, 2010, include closure of one college and restructuring of another, as well as closure of some undergraduate degree programs. Units, colleges, and the Faculty Senate have an opportunity for review and response. A final decision by the President and Provost must be presented to the Board of Regents by May 14, 2010. The goal of the university is to “…narrow its scope by closing some programs completely to protect the current size and quality of remaining programs.”
In 2009, through collaborative work, the University of Idaho identified 35 programs to cut, but avoided closing or merging departments. Faced with continuing financial issues in 2010, the University of Idaho instituted a tiered furlough plan for spring 2010. The amount of furlough to be taken is determined by salary, with those earning more required to take more furlough time. Almost all faculty and staff are included. Individuals can schedule when they will take their furlough time, thought it must be taken by June 25, 2010, and the university will not close.
These are only some of the examples of how institutions are dealing with the current economic environment. The range of these examples indicates the scope of the financial situation and that this is a longer term rather than short term challenge. How institutions address these issues in the short term may vary based on differences in organizational culture as well as their individual factors and the environment. Over the long term, how an individual institution addresses their particular issues may also evolve and adapt to situational changes.
Check for updates to Penn State’s progress.
Submit your ideas for effectiveness and efficiencies at Penn State.
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