The academic performance challenges and the funding squeezes facing public higher education are neither short-term nor low stakes. For example, per-student-FTE funding for public institutions, averaged across the states, continues to hover at 27-year historic lows when adjusted for inflation (according to a FY 2007 report from the State Higher Education Executive Officers). Predicting a worsening financial storm for public higher education, a 2006 report from the National Center for Higher Education Management Systems projected structural revenue shortfalls for every state by 2013. One performance compromising implication of these troubling financial trends is that current levels of per-student-FTE state funding, when adjusted for inflation, are not likely to be available to public colleges and universities as they respond to pressing societal and economic development challenges requiring improvements in a) statewide college-going rates, b) enrolled-student graduation rates, and c) affordable access for the most financially and educationally needy populations in a state’s current and future demographic profile. Were public higher education to move forward in a business-as-usual modality, net tuition increases and/or enrollment caps would be the compromised results of the vise-like squeeze between downward pressure on per-student-FTE state funding rates and mounting societal expectations for affordable, equitable, successful access to quality academic programs.
Many institutions are trying to mitigate these compromises by actively identifying and implementing cost-containment strategies in order to reduce their operating costs. According to a recent survey conducted by the American Association of State Colleges and Universities (AASCU) and SunGard Higher Education (SGHE), however, today’s cost-containment strategies rely more on support and business functions than on core academic functions – as would be expected when protecting current academic operating models is a typical goal. Yet core academic functions account for much of annual operating costs. For example, direct instructional costs hover around 45-55 percent of annual E&G operating costs at most public institutions, while instructors and instructional support staffing account for 55-70 percent of annual E&G personnel costs. This “elephant-in-the-room” observation about the role of core academic costs in overall operating costs may account for the large majority of survey respondents who are willing to consider any operational area – even the core academic area – as a potential cost-containment opportunity.
The above observations reveal that public higher education’s most pressing challenge is to increase academic productivity – to reduce or stabilize per-student-FTE cost structures while simultaneously meeting societal demands for equitably increasing educational opportunity, affordable participation, and student academic success, all in the interest of regional and global competitiveness and the nation’s founding democratic principle of equal opportunity for all. The academic productivity challenge also will require developing both academic and financial metrics in order to track and report longitudinal progress publicly and transparently. This requirement for performance reporting aligns with the growing participation of public universities in the development of a “Voluntary System of Accountability” (VSA) and related public reporting template under the aegis of the AASCU and NASULGC membership. Both improving and accounting for academic productivity thus become for the foreseeable future the “grand productivity challenge” facing public universities and public community colleges in every state.