Examining Institutional Priorities

by Daniel L. Bennett

Some economists believe that we can accurately judge one's priorities by evaluating how they spend their money. Another way of looking at it is assuming that people and organizations put their money where their mouth is. The Department of Education (ED) released a report this week that gives us a glimpse of how colleges spent their money in fiscal year 2008, presumably showing their priorites. ED notes that the various sectors use different accounting rules (most publics use GASB, while everyone else uses FASB) and thus, the results across categories aren't exactly an apples and oranges comparison. Despite this caveat, we can gain some sense of institutional priorities by examining the spending categories of the various sectors. In the table below, I calculated expenditures of 4 main categories (in some cases, the figures were disaggregated in ED's report) by sector, and included the percentage of total expenditures  for each category.

Table: Fall 2008 Institutional Expenditures by Category and % of Total Expenditures, by Sector

The expenditure data tells us about how institutions prioritize their spending. A few generalizations include:

• 2-year and less schools spend a greater portion of their resources on instruction, regardless of sector, suggesting that 2-year and less schools place a higher priority on teaching than do 4-year schools
• Among 4-year institutions, private not-for-profits spend the highest percentage of their funding on instruction, although it should be noted that the 4-year for-profit sector uses online courses to a greater extent than the other sectors and this likely produces lower instructional costs
• Public institutions spend the biggest share of their budgets on research and public service, while the for-profit sector spends virtually nil, indicating that research and public service are a high priority at public and not-for-profit institutions, but less so at for-profit schools (note: he figures for the for-profit sector were aggregated for these 2 categories, while they were disaggregated for the other 2 sectors)
• The for-profit sector spends significantly more than the other sectors on student services, academic and institutional support, suggesting that it places a higher priority on providing services to students than do other school types (note: the figures for the for-profit sector were aggregated for these 3 categories, while they were disaggregated for the other 2 sectors)