An Analysis of Functional Budget and Expenditure Patterns and Rev

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Recommended Citation

Jordan, Charles J., "An Analysis of Functional Budget and Expenditure Patterns and Revenue Sources of Tennessee's Public

Community Colleges from 1988 1989 Through 1997 1998" (1999) Electronic Theses and Dissertations Paper 2928.

https://dc.etsu.edu/etd/2928

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A N D R E V E N U E SOURCES OF T E N N E S S E E ' S PUBLIC COMMUNITY C O L L E G E S FROM 1988-8 9 T H R O U G H 1997-98

A Dissertation Presented to

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This is to c e r t i f y that the G r a d u a t e C o m m i t t e e of

C Julian J o rdan

me t on the

1 2 th d a y of July, 1999.

The c o m m i t t e e read a n d examined his disse r t a t i o n ,

s u p e r v i s e d his d e f e n s e of it in an oral examination, and

d e c i d e d to r e c o m m e n d that his study b e s u b m i t t e d to the Grad u a t e Council, in p a r t i a l fulfillment of the

r e q u i r e m e n t s for the d e g r e e of Doctor of Education.

AM M lU/lf,

Chair, G r a d u a t e C o m m i t t e e

Signed on b e h a l f of the G r a d u a t e Co u n c i l

G r a d u a t e Studies

ii

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AN A N A L Y S I S O F FUNCTIONAL BUDGET AN D E X P E N D I T U R E PATTERNS

A N D R EVENUE SOURCES O F TENNES S E E ' S PUBLIC

on the 14 Te n n e s s e e Board of Regents (TBR) c o m munity coll e g e s and the internal allocation of expenditures by

fu n c t i o n from 1988-8 9 through 1997-98 A l i m i t e d functional

e x p e n d i t u r e comp a r i s o n was made with data f r o m the National

A s s o c i a t i o n of Co l l e g e and U n iversity Business Officers' (NACUBO) c o m p a r a t i v e financial analysis for fiscal years 1993-94 and 1994-95 as well as w i t h the I n t e g r a t e d

P o s t s e c o n d a r y E d u c a t i o n Data S y s t e m (IPEDS) s u r v e y for the 1996-97 fiscal year.

The s t u d y e x a m i n e d whether the T B R c o m m u n i t y colleges were

a p p o r t i o n i n g a larger percentage of their b u dgets for direct i n s t r u c t i o n and less for a d m i n i s t r a t i v e support serv i c e s in 1997-98 versus 1988-89 The analysis also

e x a m i n e d staf f i n g patterns relative to FTE enrollment, changes in revenue patterns for the four m a j o r sources of

u n r e s t r i c t e d E&G funds, and tu i t i o n increases A portion of the a n a l y s i s i n c l u d e d comparisons be t w e e n c u rrent and

c o n s t a n t dollars to measure the real gain or loss in

f i n a n c i a l resources after allowing for i n f l a t i o n as

m e a s u r e d by the C o n s u m e r Price Index (CPI).

A p r i m a r y r e s e a r c h question unde r l y i n g this stu d y sought to

d e t e r m i n e if the p u b l i c two-year colleges in Tennessee were

o p e r a t i n g m o r e e fficiently at the end of the research

p e r i o d r e g a r d i n g the internal a l l o c a t i o n of b u d g e t e d funds

It was a s s u m e d that efficiency c o u l d be m e a s u r e d in terms

of an i n c r e a s e in the percentage a l l o c a t i o n of funds to direct i n s t r u c t i o n and a decrease in the p e r c e n t a g e

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In spite of a r e d u c t i o n in the s h a r e o f state

a p p r o p r i a t i o n s p r o v i d e d to h i g h e r e d u c a t i o n d u r i n g t h e pa s t decade, the T B R c o m m u n i t y colleges a p p o r t i o n e d a l a r g e r

p e r c e n t a g e o f t h e i r budgets for i n s t r u c t i o n a l cost in 1997-

98 than in 1988-89 Conversely, t h e s e colleges e x p e n d e d a

Co m p a r i s o n s w i t h n a t i o n a l and S o u t h e r n R egional E d u c a t i o n

B o a r d data a r e a l s o desirable P u b l i c p o l i c y m a k e r s a r e

e n c o u r a g e d to m o r e c r i t i c a l l y e x a m i n e t h e l o n g - r a n g e bene f i t s of a n e d u c a t e d p o p u l a t i o n a n d the forecast for

t e c h n i c a l ski l l s r e q u i r e d of the w o r k f o r c e in the 2 1 st century.

CHAIR: Terrence Tollefson, Ph.D.

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I dedicate th i s d i s s e r t a t i o n to m y wife a n d children

M y wife, Nadine, s u p p o r t e d me u n c e a singly in this e n d e a v o r for the past four a n d o n e - h a l f years She alw a y s o f f e r e d

e n c o u r a g e m e n t and support My daughter, Dr K i m J o r d a n Absher, p r o v i d e d t h e e n c o u r a g e m e n t and stimulus to c o n s i d e r

e n r o l l i n g in the d o c t o r a l program Chris in his o w n q u i e t

w a y m o t i v a t e d me to fulfill this goal.

M y boss, mentor, and friend Dr Jack C a m p b e l l m a d e this trip possible He has e n c o u r a g e d and m o t i v a t e d m e by

s e r v i n g as an e x e m p l a r y e x a m p l e for the past 30 years Dr Bill Locke has b e e n a fri e n d and confidant He alw a y s

p r o v i d e d words of w i s d o m wi t h encouragement.

The Walters S t a t e cohort was there from b e g i n n i n g to end Visitors to W a l t e r s State p o sitively r efer to the

f a m i l y and open e n v i r o n m e n t as one of the u n i q u e a s p e c t s of

t h e college No w h e r e is this c u l ture more o b v i o u s than

w i t h this cohort T h a n k each of you for your a s s i s t a n c e and friendship Gary, Lynn, and R o s e m a r y have p r o v i d e d n e e d e d assurance, m o t i v ation, a n d encouragement d u r i n g the highs

a n d lows t h r o u g h o u t the program A special t h a n k s is d u e to

e a c h of these friends.

v

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A p p r e c i a t i o n is e x t e n d e d to the f a c u l t y of the Department of E d u c a t i o n a l Leadership a n d P o l i c y Analysis at East Tennessee S t a t e U n i v e r s i t y for m a k i n g the doctoral

c o hort p r o g r a m accessible You have t r u l y n u r t u r e d the

p h i l o s o p h y of " l i f e long learning." You are a caring but per s i s t e n t and d e m a n d i n g faculty Y ou a r e a f aculty who commands respect b y your a c t i o n s

I wish to t h a n k the members of m y committee, Dr

Terrence Tollefson, Dr L o uise MacKay, Dr No r m a MacRae,

an d Dr Russell West Each one has p r o v i d e d e n c ouragement

a n d unselfishly s h a r e d t h e i r insight a n d knowledge You have most g r a c i o u s l y acc o m m o d a t e d the s c h e d u l e s of wo r k i n g adults Dr Tollefson, y o u r caring an d w a r m t h as an

e ducator is unsurpassed You unself i s h l y gave of your time

a nd energies w h e n e v e r a s s istance was needed You are

b l e s s e d with the a b i l i t y to filter t h r o u g h volumes of

m a t e r i a l and r e a d i l y d i s c e r n fact You h a v e the gift of a teacher I a m p r o u d that you served as m y chai r m a n a nd to know you as a friend.

A special n o t e of appreciation is d u e to Melissa Shelton W ithout h er a s s i s t a n c e and g e n t l e prodding, this document w o u l d not have b e e n completed She is the most

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be associated.

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A P P R O V A L ii

A B S T R A C T iii

DE DICATION v

A C K N O W L E D G E M E N T S vi

LIS T OF T A B L E S x

L I S T OF F I G U R E S x i v LI S T OF A P P E N D I C E S xv

C h a p t e r 1 I N T R O D U C T I O N 1

St a t e m e n t of the P r oblem 4

Purpose of the S t u d y 5

S i g n i f i c a n c e of the S tudy 6

L i m i t a t i o n s of the Study 8

De f i n i t i o n s 9

O v e r v i e w 15

2 REVIEW O F THE L I T E R A T U R E 18

Brief H i s t o r y of Public T w o - Y e a r Colleges 18 Trends and Issues R elative to Finance of H i g h e r E d u c a t i o n and Public T w o - Y e a r Col l e g e s in Particular 25

Public Perception of H i g h e r E d u c a t i o n 32

F u n d i n g a n d B u d g eting P r o c esses 41

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I n t r o d u c t i o n 53

Q u e s t i o n s 54

M o d e l D e s i g n 59

Data C o l l e c t i o n 64

A n a l y s i s 67

C o n c l u s i o n 7 0 4 A N A L Y S I S OF D A T A 72

B u d g e t e d Ex p e n d i t u r e A n a l y s i s 73

P e r s o n n e l a n d FTE E n rollment Anal y s i s 97

S t u d e n t Fees A n a l y s i s 98

R e v e n u e A n a l y s i s 98

5 C O N C L U S I O N S A N D R E C O M M E N D A T I O N S 110

C o n c l u s i o n s 110

R e c o m m e n d a t i o n s 122

R e c o m m e n d a t i o n s for Future S t u d y 125

R E F E R E N C E S 129

A P P E N D I C E S 140

Ap p e n d i x A: B u d g e t e d E xpenditure A n a l y s i s 141

A p p e n d i x B: S t a f f i n g and FTE E n r o l l m e n t Ratios 193

Ap p e n d i x C: R e v e n u e Analysis 196

V I T A 208

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Table Page

AND PUBLIC COLLEGES A N D UNIVERSITIES IN C U R R E N T

PRIVATE A N D PUBLIC C O L L E G E S AND U N I V E R S I T I E S

DATA A P P O R T I O N E D BY % A N D BY FUNCTION IN C U R R E N T AND CONSTANT DOLLARS, T B R COMMUNITY COLLEGES, CONSOLIDATED FOR FISCAL YEARS 1988-89 T H R O U G H

TBR CO M M U N I T Y COLLEGES, DIFFERENCES IN T HE C H ANGE FROM CURRENT TO C O N S T A N T DOLLARS BY F U N C T I O N FOR

CO M M U N I T Y COLLEGES, FISCAL YEARS 1988-8 9

DATA A P P O R T I O N E D B Y % AND BY F UNCTION FOR INSTITUTIONS W I T H SMALL, MEDIUM, A N D L A R G E FTE ENROLLMENTS, T B R C O M M U N I T Y COLLEGES, C O N S O L I D A T E D

DATA COMPARISON O F FUNCTIONAL E X P E N D I T U R E PATTERNS OF T E C H N I C A L INSTITUTIONS V E R S U S C O M M U N I T Y COLL E G E S C O N S O L I D A T E D FOR FISCAL Y E A R S 1988-89

FISCAL YEARS 1988-89 THROUGH 1997-98 S O R T E D IN

A S C E N D I N G O RDER BY % G R O W T H 89

DATA A P P O R T I O N E D B Y % AND BY FUNCTION

C A T E G O R I Z E D FOR INSTITUTIONS W I T H M O D E R A T E A N D HIGH FTE GROWTH, T B R COMMUNITY COLLEGES, FI S C A L

COMMUNITY COLLEGES, FISCAL YEARS 1988-8 9

IN CURRENT A N D C O N S T A N T DOLLARS, TBR COMMUNITY COLLEGES, FISCAL YEARS 1988-89

Figure Page

PATTERNS BY FUNCTION, TBR C O M M U N I T Y COLLEGES,

T B R C O M M U N I T Y COLLEGES, FISCAL YEARS

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U N R E S T R I C T E D ED U C A T I O N A L A N D G E N E R A L

E X P E N D I T U R E D A T A A P P O R T I O N E D BY % A N D BY FUNCTION IN C U R R E N T A N D C O N S T A N T DOLLARS, TBR C O M M U N I T Y COLLEGES, FISCAL Y E A R 198 9-90

U N R E S T R I C T E D ED U C A T I O N A L A N D G E N E R A L

E X P E N D I T U R E D A T A A P P O R T I O N E D BY % A N D BY FUNCTION IN C U RRENT A N D C O N S T A N T DOLLARS, TBR C O M M U N I T Y COLLEGES, FISCAL Y E A R 1990-91

U N R E S T R I C T E D ED U C A T I O N A L A N D G E N E R A L

E X P E N D I T U R E D A T A A P P O R T I O N E D BY % A N D BY FUNCTION IN C U R R E N T A N D C O N S T A N T DOLLARS, TBR C O M M U N I T Y COLLEGES, FISCAL Y E A R 1991-92

U N R E S T R I C T E D ED U C A T I O N A L A N D G E N E R A L

E X P E N D I T U R E D A T A A P P O R T I O N E D BY % A N D BY FUNCTION IN C U R R E N T A N D C O N S T A N T DOLLARS, TBR C O M M U N I T Y COLLEGES, FISCAL Y E A R 1992-93

U N R E S T R I C T E D E D U C A T I O N A L A N D G E N E R A L

E X P E N D I T U R E DA T A A P P O R T I O N E D BY % A N D BY FUNCTION IN C U R R E N T A N D C O N S T A N T DOLLARS,

U N R E S T R I C T E D E D U C A T I O N A L AND G E N E R A L

E X P E N D I T U R E D A T A A P P O R T I O N E D BY % A N D BY FUNCTION IN C U R R E N T A N D CONSTANT DOLLARS,

T B R C O M M U N I T Y COLLEGES, FISCAL Y E A R 1997-98

U N R E S T R I C T E D E D U C A T I O N A L AND G E N E R A L

E X P E N D I T U R E S P ER FTE C ATEGORIZED B Y I N S T I T U T I O N SIZE O F SMALL, MEDIUM, A N D LARGE ENROLLMENT,

T BR C O M M U N I T Y COLLEGES, FISCAL Y E A R 1988-89

U N R E S T R I C T E D E D U C A T I O N A L AND G E N E R A L

E X P E N D I T U R E S PER FTE CATEGO R I Z E D BY I N S T I T U T I O N SIZE O F SMALL, MEDIUM, A N D LARGE ENROLLMENT, TBR C O M M U N I T Y COLLEGES, FISCAL Y E A R 198 9-90

E XPENDITURES PER FTE C A T E G O R I Z E D BY INSTITUTION SIZE O F SMALL, MEDIUM, A N D L A R G E ENROLLMENT, TBR C O M M U N I T Y COLLEGES, FISC A L Y E A R 1990-91 154

E X P E N DITURES PER FTE C A T E G O R I Z E D BY I N STITUTION SIZE OF SMALL, MEDIUM, A N D L A R G E ENROLLMENT, TBR C O M M U N I T Y COLLEGES, FISCAL Y E A R 1991-92 155

EXPENDITURES PER FTE C A T E G O R I Z E D BY INSTITUTION SIZE OF SMALL, MEDIUM, AN D L A R G E ENROLLMENT, TBR C O M M U N I T Y COLLEGES, FISCAL Y E A R 1992-93 156

E XPENDITURES PER FTE C A T E G O R I Z E D BY I N STITUTION SIZE OF SMALL, MEDIUM, A ND L A R G E ENROLLMENT, TBR C O M M U N I T Y COLLEGES, FISCAL Y E A R 1993-94 157

EXPENDITURES PER FTE C A T E G O R I Z E D BY I NSTITUTION SIZE OF SMALL, MEDIUM, A N D L A R G E ENROLLMENT, TBR C O M M U N I T Y COLLEGES, FISCAL Y E A R 1994-95 158

EXPENDITURES PER FTE C A T E G O R I Z E D BY INSTITUTION SIZE OF SMALL, MEDIUM, A ND L A R G E ENROLLMENT, TBR C O M M U N I T Y COLLEGES, FISCAL Y E A R 1995-96 159

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T B R C O M M U N I T Y COLLEGES, F I SCAL YEAR 1997-98

U N R E S T R I C T E D E DUCATIONAL A N D GENERAL

E X P E N D I T U R E DATA A P P O R T I O N E D BY % AND BY

F U N C T I O N FOR INSTITUTIONS W I T H SMALL, MEDIUM,

A N D L A R G E FTE ENROLLMENTS, T B R COMMUNITY COLLEGES, FISCAL YEAR 1988-8 9 .

U N R E S T R I C T E D EDUCATIONAL A N D GENERAL

E X P E N D I T U R E DATA A P P O R T I O N E D BY % AND BY

F U N C T I O N FOR INSTITUTIONS W I T H SMALL, MEDIUM,

A N D L A R G E FTE ENROLLMENTS, T B R COMMUNITY COLLEGES, FISCAL YEAR 1989-90 .

U N R E S T R I C T E D EDUCATIONAL A N D GENERAL

E X P E N D I T U R E DATA A P P O R T I O N E D BY % AND BY

F U N C T I O N FOR INSTITUTIONS W I T H SMALL, MEDIUM,

A N D L A R G E FTE ENROLLMENTS, T B R COMMUNITY COLLEGES, FISCAL Y E A R 1990-91 .

COLLEGES, FIS C A L YEAR 1996-97 170

A — 30 U N R E S T R I C T E D E D U C A T I O N A L AND G E N E R A L

E X P E N D I T U R E D A T A A P P O R T I O N E D BY % A N D BY FUNCTION F O R INST I T U T I O N S WITH SMALL, MEDIUM, AND LARGE FTE ENROLLMENTS, TBR C O M M U N I T Y

COLLEGES, FIS C A L Y E A R 1997-98 171

A — 31 U N R E S T R I C T E D E D U C A T I O N A L AND G E N E R A L E X P E N DITURE

DATA C O M P A R I S O N OF FUNCTIONAL E X P E N D I T U R E PATTERNS O F T E C H N I C A L INSTITUTIONS VER S U S

C O M M U N I T Y COLLEGES, FISCAL YEAR 1988-8 9 172

A - 3 2 U N R E S T R I C T E D E D U C A T I O N A L AND G E N E R A L EX P E N D I T U R E

DATA C O M P A R I S O N O F FUNCTIONAL E X P E N D I T U R E PATTERNS O F T E C H N I C A L INSTITUTIONS V E R S U S

C O M M UNITY COLLEGES, FISCAL YEAR 198 9-90 173

A - 33 U N R E S T R I C T E D E D U C A T I O N A L AND G E N E R A L E X P E N DITURE

DATA C O M P A R I S O N OF FUNCTIONAL E X P E N D I T U R E PATTERNS O F T E C H N I C A L INSTITUTIONS VER S U S

C O M M UNITY COLLEGES, FISCAL YEAR 1 9 9 0-91 174

A — 34 U N R E S T R I C T E D E D U C A T I O N A L AND G E N E R A L EX P E N D I T U R E

DATA C O M P A R I S O N O F FUNCTIONAL E X P E N D I T U R E PATTERNS O F T E C H N I C A L INSTITUTIONS V E R S U S

CO M M U N I T Y COLLEGES, FISCAL YEAR 1 9 9 1 - 9 2 175 A-35 U N R E S T R I C T E D E D U C A T I O N A L AND G E N E R A L EX P E N D I T U R E

DATA C O M P A R I S O N O F FUNCTIONAL E X P E N D I T U R E

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C O M M U N I T Y COLLEGES, FISCAL YE A R 1992-93 176

D A T A COMPARISON O F FUNCTIONAL EXPENDITURE PATTERNS OF TECHNICAL INSTITUTIONS VERSUS

C O M M U N I T Y COLLEGES, FISCAL YEAR 1993-94 177

DATA COMPARISON O F FUNCTIONAL EXPENDITURE PATTERNS OF TECHNICAL INSTITUTIONS VERSUS

C O M M U N I T Y COLLEGES, FISCAL YEAR 1994-95 178

DATA COMPARISON OF F U NCTIONAL EXPENDITURE

P ATTERNS OF TECHNICAL INSTITUTIONS VERSUS

C O M M U N I T Y COLLEGES, FISCAL YEAR 1996-97 180

COLLEGES, F I S C A L Y E A R 1988-89 182

EXPENDITURE DA T A A P P O R T I O N E D BY % A N D BY FUNCTION C A T E G O R I Z E D F O R INSTITUTIONS W I T H MODERATE A N D H I G H FTE GROWTH, TBR C O M M U N I T Y COLLEGES, F I S C A L Y E A R 1989-90 183

EXPENDITURE D A T A A P P O R T I O N E D BY % A N D BY FUNCTION C A T E G O R I Z E D F O R INSTITUTIONS W I T H MODERATE A N D HI G H FTE GROWTH, TBR C O M M U N I T Y COLLEGES, F I S C A L Y E A R 1990-91 184

EXPENDITURE D A T A A P P O R T I O N E D BY % A N D BY FUNCTION C A T E G O R I Z E D F O R INSTITUTIONS W I T H MODERATE A N D H I G H FTE GROWTH, TBR C O M M U N I T Y COLLEGES, F I S C A L Y E A R 1991-92 185

EXPENDITURE D A T A A P P O R T I O N E D BY % A N D BY FUNCTION C A T E G O R I Z E D F O R INSTITUTIONS W I T H MODERATE A N D H I G H FTE GROWTH, TBR C O M M U N I T Y COLLEGES, F I S C A L Y E A R 19 92-93 18 6

EXPENDITURE D A T A A P P O R T I O N E D BY % A N D BY FUNCTION C A T E G O R I Z E D F O R INSTITUTIONS W I T H

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M O D E R A T E AND HIGH FTE GROWTH, T B R COMMUNITY COLLEGES, FISCAL Y E A R 1994-95 .

UN R E S T R I C T E D E D U C A T I O N A L A N D G E N E R A L

EX P E N D I T U R E DATA A P P O R T I O N E D BY % A N D BY

F UNCTION CATEGO R I Z E D FOR INSTITUTIONS WITH

M O D E R A T E AND HIGH FTE GROWTH, T B R COMMUNITY COLLEGES, FISCAL Y E A R 1995-96 .

U N R E S T R I C T E D E D U C A T I O N A L A N D G E N E R A L

E X P E N D I T U R E DATA A P P O R T I O N E D BY % AND BY

F UNCTION C A T E G ORIZED FOR INSTITUTIONS WITH

M O D E R A T E AND HIGH FTE GROWTH, T B R COMMUNITY COLLEGES, FISCAL Y E A R 1996-97 .

U N R E S T R I C T E D E D U C A T I O N A L A N D G E N E R A L

E X P E N D I T U R E DATA A P P O R T I O N E D BY % A N D BY FUNCTION C A T E G ORIZED FOR INSTITUTIONS WITH

M O D E R A T E AND HIGH FTE GROWTH, T B R COMMUNITY COLLEGES, FISCAL Y E A R 1997-98 191

U N R E S T R I C T E D A N D R E S T R I C T E D E DUCATIONAL A N D

G E N E R A L EXPENDITURE D A T A BY FUNCTION WITH THE

% DISTRIBUTION BY T O T A L PER F UNCTION PER

FISCAL YEAR 1996-97 192

COLLEGES, FISCAL Y E A R S 1988-89 THROUGH 1997-98 SORTED IN A S C E N D I N G ORDER BY FTE

COLLEGES, FISCAL Y E A R S 1988-89 THROUGH 1997-98 SORTED IN A S C E N D I N G ORDER BY FTE FOR

REVENUES BY MA J O R SOURCE, TB R C O M M UNITY

REVENUES BY MA J O R SOURCE, T BR COMMUNITY

REVENUES BY MA J O R SOURCE, T B R COMMUNITY

REVENUES BY MAJ O R SOURCE, T B R COMMUNITY

REVENUES BY MA J O R SOURCE, T B R COMMUNITY

x x i v

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REVENUES BY M A J O R SOURCE, T BR C O M M U N I T Y COLLEGES, FISCAL Y E A R 1993-94 202

MAJOR SOURCE FOR T B R COMMUNITY C O L L E G E S A N D THE N A C U B O MEDI A N SURV E Y DATA FOR T HE 1993-94

A ND 1994-95 FISCAL YEARS 20 7

X X V

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o v e r the past 15 years, the i m p o r t a n c e of u n d e r s t a n d i n g the

f a c t o r s associated w i t h h i g h e r e d u c ation f i n a n c e a n d the

a l l o c a t i o n of re s o u r c e s has i n c r e a s e d d r a m a t i c a l l y (Miller & Salem, 1995) A p u b l i c o u t c r y has occurred b e c a u s e of the

e s c a l a t i n g costs of h i g h e r education Numerous r e p o r t s no t e

t h a t for the past 10 to 15 years, student fees h a v e

i n c r e a s e d at a rate fas t e r t h a n h o u s ehold i n c o m e a n d the

C o n s u m e r Price Index (CPI) (Klinger, 1996) P a y i n g for a

c o l l e g e education ranks as one of the most c o s t l y

i n v e s t m e n t s for an A m e r i c a n f a m i l y according to a report

p r e p a r e d by the U.S G e n e r a l A c c o u n t i n g Of f i c e (Klinger, 1996).

The importance of s t u d y i n g factors a s s o c i a t e d wi t h

h i g h e r education f i n a n c e has i n c r e a s e d s i g n i f i c a n t l y in

1

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re c e n t years (Miller & Salem, 1995) E v e n w i t h a p u b l i c

o u t c r y for more a c c o untability, however, v e r y lit t l e

r e s e a r c h has o c c u r r e d rel a t i v e to f i n a n c i a l issues and

tr e n d s in higher education The m a j o r i t y of p u b l i c a t i o n s on

h i g h e r e d u c ation f i n a n c e are practice-driven, w i t h l i t t l e

a t t e n t i o n d e v oted to b u d g e t evaluation s y s t e m s and

l e g i s l a t i v e relations (Miller & Salem, 1995) A c c o r d i n g to

B u r d (1998), coll e g e s m a y even be to b l a m e for i n c r e a s e d

p u b l i c suspicions t h a t t h e y are o v e r c h a r g i n g students

In s titutions share so lit t l e i n f o r mation a bout t h e i r finances that few p e o p l e realize that c o l l e g e costs

s i g n i f i c a n t l y e x c e e d wh a t students p a y (Burd, 1998).

C v a n c a r a (as c ited in Tollefson, in press) r e p o r t e d th a t the

A m e r i c a n Council on E d u c a t i o n conducted a n a t i o n a l s u r v e y in

J u l y of 1996 in w h i c h the respondents p e r c e i v e d the cost of

s t u d e n t fees at p u b l i c c o m m u n i t y coll e g e s to be five times

g r e a t e r than actual c o s t s

The N ational C o m m i s s i o n on the Cost of H i g h e r Ed u c a t i o n

w as e s t a b l i s h e d by P u b l i c L a w 105-18 in 1997 (Report of the

N a t i o n a l Commission, 1998) This 1 1 - m e m b e r c o m m i s s i o n was

e s t a b l i s h e d as an i n d e p e n d e n t a dvisory b o d y and was a s s i g n e d

to conduct an e x t e n s i v e rev i e w of c o l l e g e costs a n d prices

T h e comm i s s i o n w a r n e d tha t colleges risk " a n e r o s i o n of

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C o m m i s s i o n m e m b e r s suggested that if p u b l i c concern continues, and if colleges do not take steps to reduce costs, p o l i c y m a k e r s at both the federal a n d state levels will intervene.

H a l s t e a d (1991) no t e d that the only u n i v e r s a l t r e n d in the analysis o f high e r education finance was a gradual

increase in a d m i n i s t r a t i v e costs C o h e n (1993) obse r v e d that

be t w e e n 1977 a n d 198 9, adm i n i s t r a t i v e costs for c o m munity colleges i n c r e a s e d on the average from 45% to 50% while instructional e x p e n d i t u r e s d e c r e a s e d f r o m 52% to 43%.

It is e v i d e n t that public p e r c e p t i o n s regarding h i g h e r

e d u cation costs and the a l location of its resources, c o u p l e d

w i t h a c c o u n t a b i l i t y issues, have d e t e r i o r a t e d in recent years Based on 30 years experience as an instructor, admissions officer, a n d chief busi n e s s of f i c e r in two

c o m m u n i t y c o l l e g e systems, I b e l i e v e that an analysis of

b u d g e t i n g and e x p e n d i t u r e patterns can resolve m a n y of these issues As a c h i e f business of f i c e r in the T e n n essee Bo a r d

of Regents s y s t e m (TBR) for 24 years, I have observed numerous impr o v e m e n t s to enhance b u d g e t c o n s i s t e n c y r e l a t i v e

to the c l a s s i f i c a t i o n of accounts, personnel, and expenditures T h e s e efforts have b e e n d i r e c t e d to ensure that g o v e r n i n g bodies a nd public o f f i cials receive

consistent and a c c u r a t e data and to s t r e n g t h e n s y stem-wide

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college and u n i v e r s i t y busi n e s s officers, r e c e n t l y c o m p l e t e d

an analysis of the institutions' budgets H a v i n g s e r v e d as

c h a i r p e r s o n of this committee, I observed c l a s s i f i c a t i o n changes that were m a d e to institutions budgets, r e s u l t i n g in

a higher deg r e e of bu d g e t consistency M y p e r s o n a l observations are also s u p p o r t e d by the e x p e r i e n c e of h a v i n g

se r v e d as a c o m m i t t e e member, as well as chair, of the Southern A s s o c i a t i o n of C o l l e g e and U n i v e r s i t y B u s i n e s s Officers' (SACUBO) T w o - Y e a r College Committee W h i l e improvements have b e e n m a d e relative to c l a s s i f i c a t i o n issues, ve r y little r e s e a r c h regarding b u d g e t i n g p r o c e s s e s

a n d costs factors has b e e n conducted Since t h e b u d g e t process is but one m eans to achieve i m p r o v e m e n t in the

de l i v e r y of services, m o r e research r elative to h i g h e r education b u d g e t i n g is n e e d e d to produce a h i g h e r d e g r e e of

ef fectiveness in the a l l o c a t i o n of resources in an a t t e m p t

to control costs and a m e l i o r a t e certain p u b l i c criticisms.

S t a t e m e n t of the Problem Public p e r c e p t i o n of hig h e r education has e r o d e d ov e r the past decade, at least in part, b e cause o f the r i s i n g costs of student fees at a rate in excess of the C o n s u m e r Price Index (CPI) (Klinger, 1997) Public a n d e l e c t e d

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officials ha v e d e m a n d e d accountability, a n d this ou t c r y for

a c c o u n t a b i l i t y has resu l t e d in e l e c t e d o f f i c i a l s often

m a k i n g f u n d i n g d e c i s i o n s without s u f f i c i e n t data Since

li mited r e s e a r c h a n d p u b l i s h e d d a t a e x i s t r e g a r d i n g the internal d i s t r i b u t i o n of bud g e t e d funds a n d e x p e n d i t u r e s for

i n s t itutions of h i g h e r education, t h e r e is an a b s e n c e of

h i s t o r i c a l e v i d e n c e to change this p u b l i c p e r c e p t i o n (Miller

& Salem, 1995) One w a y for e l e c t e d o f f i c i a l s in Te n n e s s e e

to learn m o r e a b o u t funding issues r e l a t i v e to h i g h e r

e d u c a t i o n is to learn mo r e about h o w i n s t i t u t i o n s expend their funds (James, 1991).

Purpose of the S t u d y The p u r p o s e of this study was to d e t e r m i n e h o w public two-year c o l l e g e s in Tennessee i n t e r n a l l y b u d g e t e d and

ex p e n d e d t h e i r u n r e s t r i c t e d e d u c a t i o n a l a n d g e n e r a l (E&G) funds f r o m fiscal years 1988-89 t h r o u g h 1997-98 The E&G budget c o m p r i s e s seven m a j o r f u n c t i o n a l c a t e g o r i e s that include instruction, pub l i c service, a c a d e m i c support, student services, institutional support, o p e r a t i o n and

m a i n t e n a n c e of p l a n t (O&M), and s c h o l a r s h i p s and

f e l l o w s h i p s

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Significance of the Study During t h e 1990s, n a t i o n a l l y h i g h e r education has

re c e i v e d a s m a l l e r portion of state government r e v e n u e s than was the case in the early a n d mid-1980s This r e d u c t i o n in state a p p r o p r i a t i o n s was due, in large part, to d e c l i n i n g or stagnant e c o n o m i c conditions a nd to r e venue estimates that

w e r e s i mply u n r e a l i s t i c (Hossler, Lund, Ramin, Westfall, & Irish, 1997) During this time, m o r e competition for state

al l o c a t i o n s f r o m K-12 education, Medicaid, and state

E & G budget b y examining q u e s t i o n s such as: What a c t u a l l y

h a p p e n e d to t h e internal a l l o c a t i o n of funds when f u l l - t i m e equi v a l e n t (FTE) enrollments i n c r e a s e d by moderate o r h i g h amounts; w e r e th e r e any c hanges in the allocation of funds

a m o n g the s e v e n m a j o r f u n ctional c a t e g o r i e s for i n s t i t u t i o n s

w i t h small, medium, or large FTE e n r o l l m e n t s during t he ten-

y e a r p e r i o d o f this study; d i d i n s t i t u t i o n s increase or

d e c r e a s e s t a f f i n g ratios r e l a t i v e to FTE enrollments; d i d an analysis of t he data provide e v i d e n c e that the t w o - y e a r

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colleges in T e n n essee operated more e f f i c i e n t l y regarding resource a l l o c a t i o n s over time; and, specifically, at the end of the s t u d y period, did the four m a j o r sources of revenues change and was there a r e d u c t i o n in the % of revenue c o m p r i s e d of general fund s tate appropriations over the t e n - y e a r p e r i o d of the study?

This s t u d y utilizes financial d a t a for each of the 14 TBR t w o - y e a r colleges over a t e n - y e a r period fr o m the 1988-

89 fiscal ye a r through the 1997-98 fiscal year Analyses were p e r f o r m e d on the data for each y e a r of the study An analysis was also made comparing the T B R institutions with a sample of c o m m u n i t y colleges across the nation regarding the

a l l o c a t i o n of funds among the m a j o r functional categories for the 1993-94, 1994-95, and 1996-97 fiscal years Since TBR i n s t i t u t i o n s have the o pportunity to make functional budget a d j u s t m e n t s at two specified intervals throughout the year, a c t u a l e xpenditure data at the end of each fiscal year were u s e d for this study Functional adjustments during the interim of a budget year are common due to factors such as the a b i l i t y to re-budget carry-over funds from the prior fiscal year, increases or decreases in student fee revenues based on act u a l rather than p r o j e c t e d enrollments, and

changes in ins t i t u t i o n a l priorities Fonte (1993) observed that some local a utonomy in bu d g e t i n g f l e x i b i l i t y was noted

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as a high p r i o r i t y a m o n g t w o - y e a r c o l l e g e s He further

o b s e r v e d that i n s t i t u t i o n s n e e d a u t h o r i t y to change line-

i t e m e x p e n d i t u r e b u d gets in o rder to r e s p o n d to local n e e d s

o f f i cials n e e d to u n d e r s t a n d a n d a p prove of the ways t h e s e inst i t u t i o n s e x p e n d t h e i r funds A n a l y s i s of expenditure

p atterns of t h e p u b l i c t w o - y e a r colleges in Tennessee o v e r

t he past d e c a d e can f a c i l i t a t e this understanding.

L i m i t a t i o n s of the S t u d y This s t u d y focuses on the public t w o - y e a r i n s t itutions

in T e n n e s s e e a n d excludes e x p e n d i t u r e d a t a of public universities W h i l e this q u a n t i t a t i v e s t u d y analyzes

h i s t o r i c a l fi n a n c i a l da t a to facilitate u n d e r s t a n d i n g of college operations, it does not explore innovative

a p p r o a c h e s for i n c r e a s i n g o p e r a t i n g effectiveness, such as

a l t e r n a t i v e r e v e n u e sources a n d imp r o v e d leadership practices In addition, a l t h o u g h this r e s e a r c h a c k n o w l e d g e s

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the n e e d to change p u b l i c o p i n i o n of higher e d u c a t i o n

r e g a r d i n g both q u a l i t y and fiscal matters, it d o e s not

a d d r e s s the process for c o m m u n i c a t i n g s i g n i ficant

c o n c l u s i o n s relative to e x p e n d i t u r e patterns to p u b l i c

p o l i c y m a k e r s

Defini t i o n s

1 The Tennessee B o a r d of R e g e n t s (TBR): T h e T B R serves

as the governing b o a r d for all institutions of p u b l i c higher

e d u c a t i o n in Tennessee, wi t h the e x c e p t i o n of T h e U n i v e r s i t y

o f T e n n e s s e e (UT) system, w h i c h has a separate g o v e r n i n g body The TBR system r e p r e s e n t s six universities, 14 two-

y e a r colleges, and 26 t e c h n o l o g y centers s t r a t e g i c a l l y

l o c a t e d across the state (T.C.A 49-8-101, 1972)

2 The Tennessee H i g h e r E d u c a t i o n C o m m i s s i o n ( T H E C ) :

Th e T H E C serves as the c o o r d i n a t i n g b o a r d for all

i n s t i t u t i o n s of pub l i c h i g h e r e d u c a t i o n in Tenn e s s e e This

c o m m i s s i o n is re s p o n s i b l e for c o o r d i n a t i n g o p e r a t i n g budget requests, capital o u t l a y requests, a n d a cademic p r o g r a m offerings The c o m m i s s i o n is also r e s p o nsible for

r e c o m m e n d i n g to the L e g i s l a t u r e the ne e d for a n d l o c a t i o n of

n e w h i g h e r education faci l i t i e s (T.C.A 49-4201, 1967).

3 F u l l - t i m e - e q u i v a l e n t - s t u d e n t e n rollment (FTE): FTE

st u d e n t enrollment per seme s t e r is calc u l a t e d b y d i v i d i n g

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the total n u m b e r of student semester c r e d i t hours p r o d u c e d

b y 15 (i.e 1,500 student credit hours e q u a l 100 FTE).

A n n u a l o p e r a t i n g appropriations for T B R institutions are

b a s e d on fall a n d summer term FTE enrollments, plus a n u m b e r

of other factors including but not l i m i t e d to square fo o t a g e

of the physical plant, performance indices, federal student

Reporting R e q u i r e m e n t s for Fall, 1997).

4 Fiscal Y e a r (FY): The fiscal y e a r for the State of

represents a 1 2 - m o n t h period of time for r e c o r d i n g and reporting f i n a n c i a l transactions (TBR B u d g e t Guidelines, 1998)

5 Function: The functional r e c o r d i n g a nd reporting of financial data p r o v i d e s for the c l a s s i f i c a t i o n of

expenditures b a s e d on the purpose of the expenditure It is

a homogeneous c l a s s i f i c a t i o n by pu r p o s e (National

As s o c i a t i o n of C o l l e g e and U n i v e r s i t y B u s i n e s s Officers -

N A C U B O - Fi n a n c i a l Acco u n t i n g and R e p o r t i n g M a nual for

H i g h e r Education, 1990).

The seven m a j o r functional areas fo r r e c o rding

e xpenditures e x a m i n e d in this st u d y are:

Instruction: The instruction c a t e g o r y includes

e xpenditures for all activities that are p a r t of an

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institution's i n s t r u c t i o n a l program T h e s e i n c l u d e expenditures f or g eneral academic instruction,

v o c a t i o n a l / t e c h n i c a l instruction, special s e s s i o n instruction, c o m m u n i t y education, a nd p r e p a r a t o r y / r e m e d i a l instruction It includes both credit a nd n o n c r e d i t courses.

Public Service: The p u blic service c a t e g o r y includes funds e x p e n d e d for activities e s t a b l i s h e d p r i m a r i l y to provide n o n i n s t r u c t i o n a l services b e n e f i c i a l to individuals and groups e x t e r n a l to the institutions T h e s e include

activities for c o m m u n i t y service, c o o p e r a t i v e e x t e n s i o n service, and p u b l i c b r o a d c a s t i n g services.

Academic Support: The academic su p p o r t c a t e g o r y includes funds e x p e n d e d to provide s upport s e r v i c e s for the institution's p r i m a r y missions of instruction, research, and public service (Research is not part of t he d e f i n e d m i s s i o n

of public t w o - y e a r colleges in Tennessee a n d is therefore not subject to f urther r e f e r e n c e ) The s e r v i c e s include libraries, mu s e u m s / g a l l e r i e s , educational m e d i a productions, academic c o m p u t i n g support, ancillary support, a c a d e m i c

administration, a c a d e m i c personnel development, and course and c u r r i c u l u m development.

Student S e r v i c e s : T he student services c a t e g o r y includes funds e x p e n d e d for offices of a d m i s s i o n s , records, registrars, an d enr o l l m e n t development It incl u d e s

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