Does your institution allocate resources in a way that encourages student achievement and that is fiscally sound? The first step to answering that question is to calculate the revenue each program generates.
CHICAGO — Does your institution allocate resources in a
way that encourages student achievement and that is fiscally sound? The
first step to answering that question is to calculate the revenue each
In a recent session
hosted by the annual convention for the Society for College and
University Planning, James Liszka, Ph.D., provost and vice president of
academic affairs; and Robert Karp, Ph.D., director of institutional
effectiveness, from the State University of New York in Plattsburgh
discussed the challenges and financial benefits their university saw
after they undertook a cost-effective-based program planning operation
on campus, using student transcripts and data to calculate how much
money each campus program generated. The campus was facing declining
enrollment, a lack of resources to develop new programs that might bring
in students due to budget cuts and inefficient usage of current
resources, and a campus curriculum that was not always well-aligned with
student needs and demands. Using the Delaware Study of Instructional
Costs and Productivity, as well as a “catalog method” developed by Nate
Johnson, associate director of institutional planning and research at
the University of Florida, officials at SUNY Plattsburgh were able to
determine how to best utilize financial resources to support their most
valuable departments and programs on campus.
SUNY Plattsburgh is one of SUNY’s 64 campuses.
Plattsburgh serves 5,900 students, houses 34 buildings on campus, and
offers 60 programs for undergraduate and graduate study. Liszka said
that before implementing their cost-effective program planning
measurements, it was difficult to determine exactly who was teaching
what to whom and at what cost for the university. “We didn’t have a very
good measurement tool for determining internal and external data on
faculty teaching loads and instructional costs,” Liszka explained. After
undertaking their program project, Liszka and Karp were able to map out
exactly how much each credit hour for each student, both graduate and
undergraduate, was costing SUNY Plattsburgh.
Determine how to measure your campus
Liszka and Karp defined cost-effectiveness as “based on direct institutional cost, not the full cost
of the academic programs” and further defined direct institutional
costs as “those costs, such as faculty salaries, benefits and costs
other than personnel costs, directly tied to a program or department’s
operating budget.” Liszka and Karp used four measures to determine the
cost-effectiveness of each campus program:
- Cost per student credit hour. This serves as an index of
efficiency for delivery of instruction, and serves as an equalizer
between large and small programs.
- Cost per student credit hour as benchmarked by the Delaware
Study. This provides a baseline to determine whether SUNY Plattsburgh’s
programs were in line with national peer averages.
- Annual net tuition revenue. This determines the net tuition revenue generated through the department or program offerings only.
- Net revenue based on the cost of degree delivery. This
calculates the net revenue generated in offering the entire degree
program, including general education, cognate requirements and
However, Liszka and Karp also endeavored to determine
program cost and future planning with an eye toward maintaining
university strengths and mission — the programs that were found to be
not as relatively cost-effective were not necessarily cut or reduced
just because of their bottom line. “If you’re just basing [program
planning] on cost-effectiveness, you’re going to run into trouble,” Karp
said. “We also wanted to emphasize that this is not just cutting costs —
this is working to make sure we are allocating resources to the right
Create department profiles to establish baseline and review yearly
First, Liszka and Karp created academic department
profiles for each department on campus. These profiles serve four main
- They provide key data to measure resource needs, particularly faculty positions.
- They provide data to measure academic program performance, including cost-effectiveness.
- They provide transparency for performance evaluations and any resource decisions made.
- They help to change the culture of the institution toward data-driven decision-making.
profiles include information on how each department figures into the
institution’s mission, applications to the department and enrollment in
the department, the student demographics, majors offered within the
department, degrees awarded each year, recommendations from program
accreditation and review, tables indicating the faculty-to-student
ratio, and tables on instructional cost and effectiveness. Liszka and
Karp also culled student credit hour information from student
transcripts for several years for each program, breaking out
lower-division, upper-division and graduate credit hours completed
within the department. The academic department profiles also noted what
support each department lends to other departments on campus and to
general education credits.
These profiles are updated yearly and circulated to each
department chair for review and edits. Liszka and Karp recommended that
these profiles be kept confidential within the university to discourage
competition between department programs, although that’s a decision
that can be made on a campus-by-campus basis. Using these data and
comparing credit hours, students enrolled, and full-time faculty and
adjunct instructors, Liszka and Karp were able to determine a cost per
student credit hour for SUNY Plattsburgh, which they then compared to
the Delaware Study numbers for reference to a national peer average.
Liszka and Karp noted that the information from the
academic department profiles is used “primarily for purposes of resource
allocation” and included a chart showing what each data type meant in
terms of performance and in terms of resources needed. For example, the
number of majors offered in each department demonstrates what the
student demand is for that department. Growth in that area can trigger
new faculty resource allocation if needed.
Calculate cost-effectiveness using student credit hours
Liszka and Karp
wrote that calculating “cost per student credit hour is an index of
efficiency in delivery of instruction and is an equalizer between small
and large programs.” However, even this benchmark might favor larger
departments over smaller departments because the calculation comes from
the number of student credit hours produced. To neutralize this, Liszka
and Karp suggested going one step further with the academic department
profiles and calculating the net tuition revenue per student.
According to Liszka and Karp, the easiest way to
calculate cost per student credit hour is to use the Delaware Study. A
campus can participate in that for somewhere between $1,000 and $2,000.
More information about participating in the Delaware Study can be found
However, Liszka and Karp also provided guidelines for
calculating student credit hours if participating in the Delaware Study
is not a suitable solution for your campus. To calculate your campus
student credit hours on your own, you will need to:
1. Calculate student credit hours produced by degree
program or department for a year. Depending on your campus needs, this
may involve breaking down hours by undergraduate and graduate or by
upper- and lower-division classes.
2. Add together all the direct instructional costs for
the department for a year, as defined by the Delaware Study in this
3. Divide the direct instructional costs by the student credit hours. This provides the cost per credit hour.
4. To calculate the
annual net tuition revenue of a program, determine total tuition
actuals per category (undergraduate, graduate, lower and upper
divisions). This is the gross revenue.
Subtract the direct costs of instruction (see step 2) to determine the net annual tuition revenue.
5. To determine the
net revenue per credit hour, divide the gross revenue (see step 4) by
the total number of credit hours (see step 1). The figure that results
is the gross revenue per credit hour. Subtract the cost per credit hour
(see step 3) to determine the net revenue per credit hour.
6. To determine the net tuition revenue generated by a
four-year degree for each program, Liszka and Karp using the Excel steps
below. The calculations assume that the average student in each program
enrolls with no transfer hours, completes his general education
requirements by his junior year, and completes his degree in four years,
- Create a table that culminates in formula cell E, total degree cost, the summation of the following cells:
- Cell A: general education costs.
- Cell B: department requirement costs.
- Cell C: cognate requirement costs.
- Cell D: elective costs.
- Next, create formula cell G, which is the net four-year revenue
per student, by subtracting cell E from cell F, the four-year tuition
- Formula cell I is the net revenue for a four-year degree
program, which is found by multiplying cell G (net four-year revenue per
student) by cell H, the average number of majors within a department.
With these tables in hand for each department, Liszka
and Karp were able to determine the cost-effectiveness of each program,
benchmarking against the Delaware Study, and determining how best to
allocate resources across campus.
You can contact James Liszka and Robert Karp at James.Liszka@plattsburgh.edu and firstname.lastname@example.org.