Administrative Cost Analysis

Richard Barrett
Economics
University of Montana

The argument that the Montana University System is burdened by excess administrative cost is one that will no doubt appeal to many faculty members in the system as well as the general public. In advancing that argument, Governor Racicot and Budget Director Lewis have relied on evidence of recent increases in the share of unit budgets going to administration. Another way of looking at the problem, however, is to compare the administrative share of the budgets at Montana's colleges and universities with those of comparable institutions throughout the country. That is the purpose of this note.

There are two definitions of administrative cost employed here. One of these is the total of reported "Institutional Support" and "Academic Support" expenditures per FTE student, the latter excluding library costs. This is the measure of administrative costs suggested by Barbara Bergmann in the AAUP bulletin, Academe. The second of these equals the first plus "Student Services" expenditures. This was the measure used by Taryn Purdy, of the Montana Legislative Fiscal Analyst's office, in an August 1992 report.

The data for this analysis are published by Research Associates of Washington in a data file entitled "NCHENS NCES IPEDS Enrollment and Finance Database 1989-1990" and refer to the corresponding academic year. In this data base institutions are classified according to the Carnegie Institution scheme, which includes four classes of universities, five classes of four-year colleges, and two-year colleges. In the tables that follow, Montana's institutions are compared to all others in their class throughout the nation. The data for Montana State University is incomplete and therefore excluded.

Northern Montana College

The tables list administrative costs, under both definitions, for each Montana institution and the means for its national counterparts. Also listed is the ratio of these costs to instructional expenditures and total expenditures per FTE student and the rank of each Montana institution among its counterparts and the ratio of the Montana value to the counterpart mean for each measure.

What conclusions can be drawn from these tables?

With only one exception and by either definition, administrative expenditures per student at Montana institutions are lower than they are at the counterparts. This, given our funding history, is to be expected.

University of Montana

If student services are excluded from administrative cost, then, without exception, Montana's institutions have lower administrative costs per dollar of either instructional expenditures or total expenditures than their national counterparts.

Including student services in administrative cost reverses this conclusion. With few exceptions, on this definition Montana's institutions have higher administrative costs, when compared to either instruction or total expenditures, than their national counterparts.

Eastern Montana College

Which definition of administrative cost is most appropriate? Since student services clearly include non-administrative functions, especially intercollegiate athletics, they should probably be excluded. Nevertheless, the question remains: whether treated as administrative costs or not, why do student service costs capture such a large budget share at Montana's colleges and universities? The answer resides in part in our inclusion of athletics in the student services budget. Many institutions take athletics off the general fund budget. In a small number of cases, athletics are truly self supporting and do not compete for tax or tuition dollars. In many cases, however, athletics, though nominally self supporting, are financed in part through compulsory student fees. If these fees, and the corresponding athletic expenditures, were included in the institutions' general fund budgets under student services, those budgets would look more like Montana's than they do now.

Montana Tech

Governors and legislators are always inclined in hard times to demonstrate their fiscal responsibility and realism by starving the budgets and expecting the campuses to live on stored up fat. That is Governor Racicot's approach. But as these figures demonstrate, after a decade of starvation, the layer of fat is pretty thin and everyone, including the Governor, should know that.

Western Montana College