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 program generates.

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 electives.

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 places.”

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 purposes:

  • 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.

These academic 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 at http://www.udel.edu/IR/cost.

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 link: http://www.udel.edu/IR/cost/form.html.

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 (s
ee 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 revenue.
  • 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 karprm@plattsburgh.edu.