Higher Education

Why cost control should be the new normal in Higher Education


Since the recession of 2008, the promise of higher education as an avenue to better economic and social opportunities for graduates has faded in recent years. Despite a trend in growing student populations, universities and colleges have been hampered by a decline in state and federal funding. As a result, tuition has increased and shifted the cost of higher education to students and their families. As the demand for more courses, facilities and services grows colleges and universities are facing financial stress like never before. Further, schools are contending with a rising call from stakeholders and students urging them to be more fiscally accountable and transparent. Confronted with these challenges, how can your university or college keep the promise of providing value and opportunities to graduates?


Higher education revenue comes primarily from state tax and non-tax appropriations, local appropriations, and tuition revenue. In 2017, money from state and local appropriations made up 54% of the funds universities and colleges used for instruction. A 2018 report by the State Higher Education Executive Officers Association (SHEEO) indicates that overall educational appropriations increased by 2.5 percent in 2017; however, in five years of increases, educational appropriations per full-time equivalent enrollment remain $1,000 below 2008 levels. Overall state funding for universities and colleges for the school year ending in 2018 was more than $7 billion below the 2008 levels, after adjusting for inflation.


An article by Douglas Webber, an Economics professor at Temple University, points out that state governments aren’t spending less on higher education. The problem is that student populations have been rapidly increasing in the last three decades while support from state governments has been reduced in favor of spending on K-12 education and public welfare programs. When universities and colleges depend on state and local funds, deep cuts to educational appropriations mean schools have to turn to alternative revenue streams to make up for the rise in student enrollments. Most schools will choose to increase tuition. In addition, less funding results in schools hiring less staff, offering fewer courses and closing campuses. Professor Webber states that a tuition increase, along with any reduced spending by the school, has shown to negatively impact student outcomes.


A closer look at school fees reveals net revenue from tuition increased by 0.4% from 2016 to 2017, and is up 34.4% since before 2008. Besides serving a larger population of students, some of the reasons universities and colleges have to raise tuition include rising labor costs and the maintenance of school buildings. With a four-year program currently costing approximately $10,230, post-secondary education is now less affordable at a time when more young people, especially from racially and economically diverse backgrounds, are interested in pursuing a degree. However, when parents struggle with stagnated or decreased wages, as well as personal debt, higher education becomes less attractive to the families of potential students.


Consequently, the change in revenue and student enrollment has put financial pressure on universities and colleges who now must rethink their business models in order to ensure sustainability. In the 2018 Survey of College and University Business Officers by Inside Higher Ed, only 44% of chief financial officers are confident their university or college will be financially stable over the next 10 years. To continue their mission, universities and colleges need to develop reliable revenue streams if they want to remain competitive. Most importantly, to become accountable and more transparent with families and students willing to pay for tuition increases, schools need to reconsider how they allocate their limited funds, and be prepared to clearly communicate their decisions. Without making substantial changes, universities and colleges risk their ability to weather any future volatile economic conditions.


To maintain their viability and continue their mission, universities and colleges need to ensure they are budgeting and forecasting with strategies that are aligned with their school’s long-term strategy. Budget cutting is an unpleasant task, but implementing cost control measures should become the new normal if higher education schools are going to survive. To ensure your university or college continues to grow and prosper, a budget preparation and management software solution that automates your operating, salary and capital budgets while providing insight into future plans will keep your school on the right track. In particular, Questica Budget will help you manage your financial information in one place to create multi-year budgets, as well as forecast, analyze, report and create what-if scenarios and funding models. Questica’s OpenBook transparency and data visualization tool can help you communicate budgeting decisions by translating the budget into a visually appealing format. With charts, tables, descriptive text and informational pop-ups, stakeholders and students can drill down into your school’s financial information for a deeper understanding of allocations and trade-offs.


Since the recession of 2008, times have been tough for universities and colleges, but you don’t have to steer away from your mission of providing an education that expands opportunities for your graduates. When government funding doesn’t keep pace with growing student populations, higher education schools need to develop alternative revenue streams and control spending. To stay on course to becoming a fiscally responsible and transparent school, a dynamic budgeting solution can help your university or college align the budget to long-term strategies. Controlling costs will require fundamental changes at your school, but can result in a brighter future for your and your students.


Questica Budget

Questica Budget is a powerful, multi-user budget preparation and management software suite that helps your higher education school run operating, salary and capital budgets with accuracy and efficiency. Integrating with dozens of financial systems, Questica Budget has everything you need in one place to develop, track, monitor and adjust your budget, plus generate custom reports and create what-if scenarios. Imagine no longer having to enter data into error-prone Excel spreadsheets, and having time to analyze and plan for the budget. In addition, Questica’s OpenBook transparency and data visualization software makes sharing financial information effortless. Your stakeholders will have a better understanding of your budgeting goals when the budget is brilliantly visualized with descriptive text, informational pop-ups, charts and tables. To learn more about Questica’s products and how our software solutions can help you manage the budget with confidence – watch a product video, read one of our case studies/white papers or request a demo today!