Friday, October 13, 2006

Michigan vs. Illinois: What Can We Learn

By Matthew Denhart

In the age of high-cost colleges one must wonder, “Where does all my money go?” What justifies charging such high tuition rates? Is there any way to reduce spending? Considerable disparity in spending statistics among similar universities suggests that definite inefficiencies exist.

Athletic conferences are a good method of grouping similar universities. Generally, schools in the same conference are similarly sized, in the same region, etc. Thus, they allow for a good basis of comparison of statistical data. I have examined the Department of Education’s IPEDS 2003 data of spending in four major categories: Instruction, academic support, student services and Institutional support. Even among members of the same athletic conferences, there are alarming spending differences.

Take for example two Big Ten schools, the University of Michigan and the University of Illinois. Beyond sharing an athletic conference, these two universities share many other similarities. The states themselves are similar in population, economic characteristics and location. Both institutions are the premier public university in their respective state. Statistical categories show even more similarities. Both have enrollments around the 40,000 mark and graduation rates above 80 percent. Each grants similar numbers of Doctor’s, Master’s and Bachelor’s degrees each year. Both universities are continually found among the top of national college rankings such as the US News and World Report. It seems that these two Big Ten schools are nearly identical except in one important regard: spending.

Michigan far out-paces every other Big Ten school (Northwestern has been excluded from this study) in instructional spending with $14,759 per student in 2003. In contrast, Illinois allotted $6,419—less than half that of Michigan. Michigan outspends Illinois in academic support and student services by around $500 per FTE in each category. While this disparity is less, the spending for institutional support also shows tremendous disparity. Michigan spends $2,427 compared to Illinois’s $608. As expected, the sum totals for spending per FTE in these four categories between Michigan and Illinois is immense. Michigan ranks as the highest spender in the Big Ten with $22,296, and Illinois the lowest with $11,037.

The biggest question is why does such a large disparity exist? On the one hand, it may seem noble to have higher spending, especially on instruction and academic support. But why are there such large differences? If both universities are so similar and provide a similar and prestigious education, why should Michigan have to spend twice the amount, in these core categories, of Illinois to reach the same end? All this seems to hint at a good deal of inefficiency and squandered resources, at least at the University of Michigan.

Unfortunately, this is not an isolated example. Data shows the same trends exist across the country, for example in the Big Twelve Conference. This leads to an interesting thought experiment: what if we created a new university from the various spending categories of schools in an athletic conference? We could take the best spending element from each school – for the Big Twelve conference, we would choose Nebraska for instruction, Colorado academic support, Kansas for student services, and Oklahoma for institutional support. Each of these schools has among the lowest spending in the conference in the given categories. The money saved by this new university could be used to freeze or, God forbid, lower tuition!

To be sure, one caveat is in order. The IPEDS data are not perfect, and schools have different ideas about how to categorize certain forms of spending (an argument for moving to a more uniform national data retrieval system). Nonetheless, the differences between schools are often so great to explain merely by different ways of categorizing spending efforts.

Overall, this data suggests that inefficiencies exist in spending by universities. The extra spending of University A relative to the similar University B does not seem to yield greater output. It’s a waste of precious resources that could be employed elsewhere to help solve the broader problems of affordability in higher education.

7 comments:

superhiker said...

On the face of it, a disparity of greater than 2:1 in the key category of "Instructional expenditures" seems suspicious, especially between two seemingly well-matched universities like Michigan and Illinois.

It would seem a rudimentary point to inquire of the institutions as to the reasons for the disparity. Was this done?

If not -- and there's no indication that any inquiry was made -- it's hard to take this kind of "analysis" seriously.

Even someone who is not a Distinguished Professor of Economics Emeritus can understand this.

TC said...
This comment has been removed by a blog administrator.
superhiker said...

Well, exactly. Shouldn't someone be suspicious that Michigan is really not that much more inefficient? That there is something he doesn't understand about the data? That it might at least be worth asking?

Big Blue said...

So there’s this Buddhist man at Coney Island; and he is waiting in a long line to get a “Coney-dog”. Well, time passes and the Buddhist guy gets his turn to order. So the man asks him what he would like… And the Buddhist says, “I’d like you to make me one with everything.” HA HA HA!!!

TC said...
This comment has been removed by a blog administrator.
superhiker said...

Cowboy: Nothing personal, but from your photo, it looks like you maybe could use a little less time in the saddle, mosey on over to the fitness center at one of your fine public institutions of higher learning out there in Montana, spend some time in the weight room. I'm sure you will find many fitness-trainers-in-training to help you, including maybe some cute coeds, and you'll get to hang out with pampered, overpaid professors like the Doc.

TC said...
This comment has been removed by a blog administrator.