System Finances–Managing Resources Efficiently
- Continuous Improvement System
- Purchasing Aggregation Programs
- Bringing State Support to the National Average
Introduction of Continuous Improvement System
Given the challenge of serving more students in an environment of limited resources, it is incumbent upon public colleges and universities to use their existing resources efficiently and to constantly seek new ways to lower costs and improve productivity. The University System of Ohio will be committed to promoting, monitoring, and rewarding public campuses for their successful efforts to manage their resources, either individually or collectively, and to provide the highest quality service to students, communities, and the state at the lowest possible cost to students and taxpayers. There is no single, “best way” to achieve this goal. Rather, there are a number of existing approaches and ideas - some under-utilized - that will be employed to drive down costs and improve services.
This report has already discussed a number of strategies that have the effect of making the system more cost effective. These include a significant increase in the availability and attractiveness of low-cost education options, including the expanded use of community colleges and regional campuses, early college programs, online learning and student support services, comprehensive course transfer systems, and integrated technology databases.
Two other key strategies that will be pursued are the setting of annual efficiency targets for the system based on an aggressive monitoring of costs and efficiencies with the goal of spreading service and purchasing cooperatives. HB 119 required University System of Ohio schools to demonstrate efficiency savings of 1 percent in FY 2008 and 3percent in FY2009. The goals were “to encourage each campus to improve its productivity, and ultimately use the gains in productivity to make additional investments in ways that promote undergraduate access and success,” and “to promote collaborations among campuses.” All schools met the 1 percent efficiency requirements, and many were able to find additional cost savings, with a reported total of $182.9 million in savings.
This experience suggests that setting targets and linking them to increases in state funding through the biennial budget process is an effective approach. The challenge is identifying appropriate annual benchmarks, and then assisting schools in meeting these benchmarks through examples of best practices throughout the state or nation or through collaborative efforts to achieve savings. Therefore, the Board of Regents will establish an office that continuously monitors spending practices and successful productivity strategies, with the goal of spreading these best practices throughout the system. This office will work closely, as it must, with representatives of all institutions, in developing and implementing its work plan. Through this work, the Chancellor will be able to develop a well-grounded recommendation on annual efficiency targets for the Governor and the General Assembly, and will be able to assist the schools in meeting these targets.
Special attention will be given to advancements in teaching and learning initiatives, such as those developed by the National Center for Academic Transformation, which have been shown to lower the cost of instruction and increase learning.21
Who We Are, The National Center for Academic Transformation, http://www.center.rpi.edu/whoweare.html
This methodology will be particularly useful in meeting the goal of making the combined cost of an associate and bachelor’s degree among the lowest in the nation at the community college and regional branch campuses.Aggregating the purchasing power of large institutions is a well accepted practice in the business community. The University System of Ohio institutions have done so to a limited extent over the years, but the potential for savings is significant. The state is developing aggregated purchasing processes. Joining the University System of Ohio institutions to these processes is good for the system, as it will save money on many common areas of goods and services, but it is also good for the other agencies of state government, since the volume of purchases in the University System of Ohio will also help the rest of state government achieve savings beyond what it could achieve without the participation of higher education. Such savings ultimately benefit the University System of Ohio directly by freeing up other state resources.
The state’s aggregation efforts are not likely to cover all the goods and services that could be efficiently aggregated in higher education. Thus, other cooperative purchasing efforts will need to be supported, as will fuller participation in regional procurement efforts, such as those offered through the Midwest Higher Education Compact. Finally, procurement costs for library resources and online instructional offerings can be reduced through the planned integration of collaborative enterprises such as OhioLINK and the Ohio Learning Network.
Campus energy conservation should also be greatly enhanced over the next 6 years as a result of Sub. H.B. 251 of the 126th General Assembly. This act requires public campuses to adopt energy conservation measures that are aimed at reducing energy consumption by 20 percent by 2014. The University System of Ohio will continuously monitor progress toward achievement of these goals, and promote best practices among campuses. Related to this, the University System of Ohio will consider ways to incorporate LEED (Leadership in Energy and Environmental Design) certified construction methods into all future campus construction projects. LEED-designed buildings, while they may have higher initial costs, can have lower lifetime operating costs through reduced energy and water consumption, the use of recyclable construction materials, longer useful facility lives, and improved productivity.
Bringing State Support to the National Average
KEY STRATEGY: State support per full-time enrolled student will be increased to the national average within the next 10 years. This figure includes state operating support, but not capital funds, which are difficult to compare from state to state.
This plan pursues a wide range of strategies for utilizing the state’s resources efficiently, incentivizing private fundraising, and encouraging students to utilize lower cost options. These steps must be matched by a sustained state commitment to providing our public institutions with the resources they need to build a world-class system. In 2006, Ohio ranked 39th in state appropriations per full-time equivalent student (FTE), approximately $1,100 per FTE, or a total of $420 million, short of the national average.22 This shortfall in state operating support is a major reason why the state’s average tuition is well above the national average.
The average state support per FTE includes basic operating support at the state level, but does not include expenditures on financial aid, capital, research, agricultural experiment stations and cooperative extension, teaching hospitals, and medical schools.
Despite many efforts to gather comparative information on capital expenditures, there is no meaningful comparison available. Best efforts suggest that Ohio’s capital budget is about average among the states, but the number of states in this comparison is not significant.
State colleges and universities own and operate two types of facilities, those used for educational and general purposes, including classrooms, laboratories, and administrative offices, and auxiliary operations, such as dining and residence halls, bookstores, garages and facilities for inter-collegiate athletics. Auxiliary operations are expected to be fully self-financed from user fees. It is not possible to put a cost figure on the capital needs of the system as a whole, because there are too many variables at play. This plan seeks to create a marketplace for educational programs that makes available low-cost associate and bachelor’s degrees to students at community college and regional campus locations, to create Centers of Excellence at university main campuses, and to increase the use of technology for student services and online learning. All these strategies will impact the capital needs of campuses.
We do know that a static look at the picture gives rise for concern. Over the decades, Ohio invested billions of dollars to create a broad array of geographically accessible public community college and university campuses throughout the state. Much of this investment occurred in the last 50 years. Many of the facilities that had served the baby boom generation are nearing the end of their useful lives and now need to be renovated, rehabilitated, or replaced. Building renovations are also needed to accommodate changes in instructional methods and instructional technology.
Until recently, Ohio had not tried to determine the “right amount” of capital appropriations needed for higher education facilities. Campus and Board of Regents’ staff have now been trying to do so. Applying one national standard of building renovation rates would suggest an annual shortfall of about $170 million between the average of recent capital appropriations and the national standard. Taking into account a backlog from years of not meeting this national standard would increase the total annual need by another $100 million. Another factor to consider is the level of accumulated campus debt, which has increased by about $323 million per year since FY1998. It is unclear how campuses will be able to sustain this kind of increase into the future.
As noted, this bleak picture represents what the system currently looks like, as opposed to what it will look like when this plan is fully implemented. Nevertheless, raising the quality of all our facilities will clearly take creativity, bold decisionmaking, and more money, both from the state and the private sector.
In another section, this plan recommends that the state create a matching fund to be used to solicit additional private donations. These funds could be targeted to higher education facilities, among other purposes. State matching funds have been successful in some other states, and could be useful to help state colleges and universities manage their facility challenges better.
It goes without saying that efficiency in the use of existing facilities will help stretch every dollar and help reduce future capital needs. Such efficiency steps include giving campuses greater flexibility to manage costs and sharing purchases, increased use of technology, and collaborative uses of facilities.
