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UNION UNIVERSITY SCHOOL OF EDUCATION We hereby recommend that the Dissertation by Gary N. Williams Entitled The Escalating Costs of Higher Education in Faith-Based Institutions: Identification of Challenges and Solutions Be accepted in partial fulfillment of the requirements for the Degree of Doctor of Education In Educational Leadership _________________________________________________________________ Melinda Clarke, Ed.D., Program Director (Date) Dissertation Committee _________________________________________________________________ Michele W. Atkins, Ph.D., Chairperson (Date) _________________________________________________________________ Thomas R. Rosebrough, Ph.D. (Date) _________________________________________________________________ Jimmie Davis, Ph.D. (Date) STATEMENT OF PERMISSION TO USE In presenting this dissertation in partial fulfillment of the requirements for the Doctor of Education degree at Union University, I agree that the Library shall make it available to borrowers under the rules of the Library. Brief quotations from this dissertation are allowable without special permission, provided that accurate acknowledgement of the source is made. Permission for extensive quotation from or reproductions of this dissertation may be granted by my major professor or, in her absence, by the Head of Interlibrary Services when, in the opinion of either, the proposed use of the material is for scholarly purposes. Any copying or use of the material in this dissertation for financial gain shall not be allowed without my written permission. Signature________________________________________________________ Date____________________________________________________________ The Escalating Costs of Higher Education in Faith-Based Institutions: Identification of Challenges and Solutions A Dissertation Submitted in Partial Fulfillment of the Requirements for the Doctor of Education Degree Union University Gary N. Williams July 2010 UMI Number: 3443008 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. UMI 3443008 Copyright 2011 by ProQuest LLC. All rights reserved. This edition of the work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, MI 48106-1346 ii DEDICATION I dedicate this completed manuscript to my dedicated, loyal, and encouraging wife of almost 40 years, Dale, a superior educator in her own right; to my daughter, Bethany Paige Bledsoe and her husband, Brent; and to my grandchildren, Scott Edward and Berkley Elizabeth, the lights of my life and the apples of my eye. I also dedicate this accomplishment to the memory of my mom, Maurine H. Williams, who always encouraged me to be all that I could be in Christ. iii ACKNOWLEDGMENTS There are many individuals to whom I owe an immense debt of gratitude who provided guidance, assistance, and encouragement in the completion of this dissertation. Special, heartfelt thanks to my committee chairperson, Dr. Michele Atkins, for her hours and hours of conference time, her wisdom, expertise, suggestions, constant encouragement, inspiration, and sense of humor. My committee members, Dr. Tom Rosebrough, Dean of the College of Education and Human Studies, and Dr. Jimmy Davis, Vice-President, Union University Germantown Campus, were encouraging and inspirational and lent insight and wisdom into my research. I also want to thank Dr. Linn Stranak, Chair of the Department of Physical Education and Wellness, for his research methods and statistical analysis expertise. My thanks to Dr. David S. Dockery, President of Union University, and Dr. Charles Fowler, Senior Vice President for University Relations, for their ongoing interest and support in my completion of this dissertation and terminal degree. Most of all, my abundant thanks to the Lord, Jesus Christ, for His physical, spiritual, and emotional strength during these days of study, research, and writing in completion of the Doctor of Education in Higher Education Leadership degree. iv ABSTRACT In recent years there has been increased interest and awareness in the cost of higher education. Due to the extended present economic recession, revenues from sales taxes are down considerably. These sales tax revenues are a primary source of support for publiclyfunded, land grant colleges and universities. Similarly, revenues and gifts to higher education institutions have been diminished due to the ailing and slowly recovering economy. Therefore, the primary source of revenue for these institutions has been an increase in tuition to college and university students and their families. This dissertation examined private faith-based institutions to determine if those factors which affected the increased costs of higher education in private, faith-based institutions were similar to those factors which increased costs in publicly-funded, land grant institutions. The purpose of this study was three fold. First, key factors in the escalating costs of higher education at faith-based institutions as perceived by Chief Financial Officers (CFOs) and Chief Advancement (CAOs) at these institutions were examined. Second, potential sources of income and costs savings at faith-based institutions as perceived by CFOs and CAOs at those institutions were examined. Third, similarities and differences in the perceptions of CFOs and CAOs at faith-based institutions regarding escalating costs, potential sources of income, and cost savings were examined. Key factors contributing to escalating costs, potential sources of revenue, and strategies for costs savings identified in the literature by public institutions examined were utilized as a baseline for examination v of factors at faith-based institutions. Forty-nine senior level administrative officers at faith-based institutions that were members of the Council for Christian Colleges and Universities (CCCU) were surveyed to determine their perspectives on factors affecting higher education costs and those factors which affected revenue streams at their institutions. The research revealed that those factors which affected rising costs at public institutions also affected costs escalation at private, faith-based institutions. vi TABLE OF CONTENTS CHAPTER PAGE 1. INTRODUCTION .............................................................................................1 Statement of the Problem .............................................................................2 Justification for the Study ............................................................................5 Purpose of the Study ....................................................................................6 Research Questions ......................................................................................8 Definitions....................................................................................................9 2. REVIEW OF LITERATURE ..........................................................................12 Factors Affecting the Escalating Costs of Higher Education ....................16 Attracting High Quality Faculty ...........................................................16 Technology Issues .................................................................................20 Construction, Renovation, and Maintenance ........................................23 New Programs and Expansion of Existing Programs ...........................32 Student Services ....................................................................................34 Title IX Compliance .............................................................................37 Sources of Revenue and Costs Savings .....................................................41 Cutting Costs as a Management Resource for Facilities ......................41 Contributions from Alumni ..................................................................46 Planned Giving......................................................................................50 Student Paid Tuition .............................................................................53 Endowment ...........................................................................................55 Maintenance of Advancement Staff......................................................60 Conclusion .................................................................................................62 3. RESEARCH METHODS ................................................................................68 Purpose of the Study ..................................................................................68 Population Description...............................................................................69 Research Questions ....................................................................................70 Procedures ..................................................................................................71 Analysis of Data .........................................................................................73 Limitations .................................................................................................75 vii 4. FINDINGS .......................................................................................................76 Participant Demographics ..........................................................................77 Statistical Results .......................................................................................80 5. DISCUSSION ..................................................................................................96 Escalating Costs .........................................................................................96 Solutions………………………………………………………………...100 Perspective Comparison: CFOs and CAOs………………………….….107 Limitations………………………………………………………….…...108 Implications………………………………………………………...……108 Recommendations for Future Research……...………………………….109 REFERENCES……………………………………………………………...…..112 viii LIST OF TABLES TABLE PAGE 1. Time Spent in Current Position........................................................................79 2. Factors that Contribute to Increasing Costs Determined by…………….…….82 CFOs and CAOs 3. Factors Affecting the Costs of Higher Education Determined By……….…..84 CFOs and CAOs Not Listed by Public Institutions 4. Factors Affecting Escalating Costs Beyond Inflation: CFOs ………………..86 5. Factors Affecting Increasing Costs Beyond Inflation: CAOs…………… ….87 6. Factors that Affect Cost Savings and Operating Efficiency: CFOs……….…89 And CAOS 7. Factors That Affect Cost Savings and Operating Efficiency Determined by CFOs and CAOs Not Listed by Public Institutions……...…91 8.. Factors Contributing to Increased Revenue Streams Resulting in Savings to Students…………………………………………………..……..93 1 CHAPTER 1 INTRODUCTION Many high school graduates in the United States today are faced with a challenging situation. Through their secondary education years, students have been encouraged by their teachers, parents, and other mentors to pursue some form of postsecondary education; they have been told that a college degree is essential for success, career advancement, and even parenting. A great number of students from lower economic strata have been taught to expect that the way to higher economic status is by obtaining a post-secondary education degree. As a result, some of these students have worked diligently throughout their secondary education years to prepare for postsecondary education pursuits. Yet, many never gain admission to a college or university due to several factors, including financial issues. Many students who come from lower economic strata have not qualified for academic scholarships because their performance in secondary education schools was not good enough. Furthermore, tuition costs are too high for these students to afford. This reality is disappointing for prospective college students and their families, considering the need for a college degree in today’s job market (Bracey, 2005). 2 Statement of the Problem Escalating tuition costs for students who want to attend a public or private college or university are making it more difficult for them to do so. In an effort to increase budget resources public institutions have unfortunately chosen to increase tuition for prospective students and their families. This is a practice that has been used a great deal recently as institutional support from state legislatures has dwindled due to declining sales tax revenues in an ailing economy. At the same time, private institutions are finding it more and more challenging to raise funds from alumni, friends, corporations, and foundations. Institutions, both private and public, are experiencing shrinking endowments in a volatile stock market. Moreover, according to Czerniewicz (2004), there are multiple factors that contribute to increased costs as institutions struggle with revenue problems. Factors affecting rising higher education costs in public institutions include, but are not limited to, constant updating of technology; new education programs or the expansion of existing programs; and student services, including in some circumstances high-end residence life facilities. Universities also compete for high-profile faculty who are known for their research and publishing capability. The high costs of construction for new facilities or updating and remodeling of aging facilities to meet the needs of contemporary education environments are prohibitive. In addition, federal regulations such as Title IX compliance add to the cost of a college education. These multiple factors, if not balanced with other revenue sources, affect the cost of tuition for students. From the perspective of the student and his or her family, transportation, books, fees, and other miscellaneous 3 expenses can easily push the cost of a four-year baccalaureate degree to over $100,000.00 at the most prestigious public schools. Costs are prohibitive to those who are accepted; however, many are denied admission. According to Gardner (2004), an estimated 250,000 prospective students were turned away from college in 2003-2004 due to a reduction in admissions or increased tuition. Factors which are contributing to this access denial include growth in numbers of students seeking a college education, state budget cuts, tuition increases, merit-based programs, and recruitment of out-of-state students. One factor that affects accessibility is income. For example, in 2006 the median annual household income was determined to be $48,201.00, according to the U.S. Census Bureau (2007). The Bureau also found that 12.7% of households fell below the poverty level while another 20% earned less than $20,000.00 per year. Low or inadequate family incomes coupled with rising costs and tuition increases made it difficult for prospective students to gain admission to many colleges and universities, both public and private. Inadequate academic performance at the secondary level also prevented prospective students from qualifying for the most significant scholarships dollars. College students of today are parented by the group known as baby boomers who attended college in the late 1960’s and the 1970’s when tuition costs were low. The vast difference in tuition costs over the past 30 years creates a situation much like sticker shock. Flower (1998) explained that even over a decade ago, during the college cost scare of 1996, the United States Congress actually considered price controls whereas college 4 presidents and financial officers frantically sought to justify price structures to their publics, boards, and state legislatures. Even today, institutions of higher education are reviewing their programs, revenue streams, and problems that arose and are arising out of this crisis. Student-paid tuition is one source of revenue and accounts for only a portion of the costs of educating today’s students. Clotfelter (2006) explained that new and innovative ways of raising money from alumni and friends of universities, corporations, and foundations are emerging. Faculty and staff campaigns to raise money for capital improvements as well as operations is a part of the comprehensive plan to raise funds for colleges and universities, in addition to increasing endowments and pursuing revenue possibilities from federal and state governments. However, government funding sources are not often realistic for faithbased institutions because of state and federal regulations that threaten the rights of these institutions related to hiring practices and campus initiatives. Institutions, especially public, but also private, are adopting an almost entrepreneurial behavior as they are forced to raise their own funds, facing the reality that block grants from the state are less likely than ever. There appears to be a wealth of literature exploring the factors that affect the costs of higher education and, likewise, the sources of revenue to offset these costs, in public institutions. Furthermore, there is some literature, although limited, exploring cost and revenue factors in secular private institutions. However, there is scant research, if any, exploring the factors affecting the escalating costs of higher education and sources of revenue in private, faith-based institutions. Whereas private, faith-based higher education 5 institutions have similar characteristics of public institutions, they have unique characteristics as well. Therefore, this study examined the factors affecting the escalating costs of higher education in private, faith-based institutions. Furthermore, this study examined the solutions available for private, faith-based institutions to increase revenue streams, thus diminishing the rate of increase in tuition costs for students and their families. Justification for the Study The relevance of this issue is timely as college costs and accessibility for future students is at stake. Operating costs for higher education institutions continue to rise, which is a challenge for colleges and universities. Access to higher education is difficult for students because of declining family income due to job losses and a struggling economy. Revenue streams for public higher education institutions are stagnant or declining in an economy where state income from tax revenues continues to dwindle. The literature, while comprehensive in its research of these issues in publiclyfunded institutions, is scant when relating to private, faith-based institutions. This research study examined issues and factors that contribute to escalating costs in the 105 schools that are members of the Council for Christian Colleges and Universities (CCCU). This research examined solutions that are available to private, faith-based institutions that could lead to increased revenue streams and costs savings to the institution as well as students and their families. In addition, this research study examined the similarities and differences between public institutions of higher education and private, faith-based institutions of higher education concerning factors which affect escalating costs and 6 available solutions to the issue. The results of this study contribute to the literature and provide administrators in private, faith-based institutions a resource of research-based ideas regarding operational efficiency and fundraising that will assist in diminishing the rate of costs escalation at their institutions. Purpose of the Study The purpose of this study was three-fold. First, key factors in the escalating costs of higher education at private, faith-based institutions as perceived by Chief Financial Officers (CFOs) and Chief Advancement Officers (CAOs) at those institutions were examined. Second, potential sources of income and cost savings at private, faith-based institutions as perceived by CFOs and CAOs at those institutions were investigated. Third, similarities and differences in the perceptions of CFOs and CAOs at private, faithbased institutions regarding escalating costs, potential sources of income, and cost savings were examined. Key factors contributing to escalating costs, potential sources of income, and potential strategies for cost savings identified by public education institutions of higher education in the literature were utilized as a baseline for examination at faith-based institutions. The issue of escalating costs in private, faithbased institutions is a concern for students and their families as costs continue to rise above the annual rate of inflation (Bracey, 2005). A review of the literature indicates that college costs, of which tuition is only a part, have escalated rapidly. The faith-based institutions examined are members of the Council on Christian Colleges and Universities (CCCU). The CCCU (2009) is an international higher education organization, founded in 1976 with 38 members of intentionally Christian 7 colleges and universities. At the time of this study, the CCCU had 105 members in North America (102 in the U.S. and 3 in Canada) with 74 affiliate institutions in 23 countries. The CCCU is a tax-exempt 501(c)(3) non-profit organization headquartered in Washington, DC. The CCCU has a stated mission of advancing the cause of Christcentered higher education and helping member institutions transform lives by faithfully relating scholarship and service to the truths of the Bible. Around 900 of the approximately 4,000 degree-granting institutions of higher education in the United States are self-defined as religiously affiliated. However, only 102 intentionally Christ-centered institutions in the U.S. who have chosen to apply meet the qualifications for membership in the CCCU. Members of the CCCU must meet the following minimum criteria: 1. Strong commitment to Christ-centered higher education 2. Located in the U.S. or Canada 3. Full regional accreditation for U.S. campuses 4. Primarily four-year comprehensive colleges and universities 5. Broad curricula rooted in the arts and sciences 6. Christians hired for all full-time faculty and administrative positions 7. Sound financial status The literature review that follows examines the plethora of issues which higher education institutions are experiencing as they face rising costs along with diminished revenue sources. Colleges and universities, in an attempt to solve rising costs, utilize tuition increases as the primary source of new revenue. However, the research indicates that rising tuition and other costs affect those who can least afford these increases, 8 making the achievement of an American dream, a college degree, less affordable and accessible. This topic and potential solutions to this dilemma is of crucial importance, both to the higher education community and to its customers, potential students. Research Questions The following research questions were addressed: 1. What variables identified by public colleges and universities that contribute to the increasing costs of higher education are also identified by CFOs and CAOs at CCCU institutions? 2. Among variables affecting the increasing costs of faith-based higher education identified by CFOs and CAOs at CCCU institutions, how do they contribute? 3. What are the factors that CFOs and CAOs perceive to contribute to the escalating costs of higher education in faith-based institutions that are beyond costs related to inflation? 4. What solutions do CFOs and CAOs at CCCU institutions identify as available to faith-based higher education institutions that can facilitate more efficient operation that result in savings to students? 5. What solutions do CFOs and CAOs at CCCU institutions identify as available to faith-based higher education institutions that can facilitate an increase in revenue streams that result in savings to students? 6. What solutions do CFOs and CAOs at CCCU institutions identify as available to faith-based higher education institutions that can assist in diminishing the rate of costs escalation? 9 7. Is there a difference in perceptions of CFOs and CAOs concerning the factors that contribute to the increasing costs of higher education at faith-based institutions? Definitions For the purpose of this research, the following definitions were utilized: Council on Christian Colleges and Universities (CCCU). The CCCU is an international higher education organization founded in 1976 comprised of colleges and universities with a mission of Christian higher education (CCCU, 2009). Institutional Chief Financial Officer (CFO). The CFO is the administrator on the university or college campus who has responsibility for administration of the budget of the institution. Institutional Chief Advancement Officer (CAO). The CAO is the administrator of the college or university campus who is responsible for the procurement of outside funds to support the mission of the institution. Escalating costs of higher education. Escalating costs is that increase in cost of higher education operation as it relates to colleges and universities. Efficient operation. Efficient operation is the effective management of a higher education institution that results in a low costs-to-results ratio. Revenue streams. Revenue streams are sources of college or university income. Inflation. Inflation is defined as the rate of producing a higher education component related to increasing costs. Technology. Technology encompasses computer purchases and maintenance, teaching resources, information management, and communication systems. 10 Construction, renovation, and maintenance. This category involves activities which are required on the college or university campus to provide facilities (construction of new and renovation of old) and maintenance to provide facilities for new or existing programs such as academics, athletics, housing, and student services. New programs, expansion of existing programs. This category consists of courses of study offered to students to help them achieve their higher education and professional goals. Student services. Student services are those activities designed to meet the needs of students while obtaining a higher education including housing, food, entertainment, mental and emotional support, and health services. Title IX compliance. Title IX is a provision by the Federal Government that requires colleges and universities to maintain athletic programs that meet the needs of female students consistent with the male/female ratio on the college or university campus. Sources of revenue. Sources of revenue involve income which enables the college or university to sustain its operation. Cutting cost as a management resource for facilities. Cutting cost is a strategy to provide more efficient operational use of college or university facilities. Contributions from alumni. Contributions are funds given by alumni of the university usually in the form of an annual, either designated or undesignated, gift. 11 Planned giving. A planned gift is a gift by a university constituent that results in a future gift to the college or university, usually through a will. Examples include real estate, stocks, bonds, and trusts. Endowment. An endowment is funds raised by the college or university which are permanently set aside by the institution. Income generated by the endowment is used for a variety of purposes, usually designated by the donor. Student paid tuition. Tuition is a source of institutional income paid by the student for the cost of his or her higher education experience. 12 CHAPTER 2 REVIEW OF LITERATURE According to Bracey (2005), the “hereditary privilege” that most college-bound students feel that is theirs is not that simple. Students who expect a reasonably easy transition from high school to college are sometimes finding something different. Students are being turned away at the college door because there is no room or because they cannot accumulate enough money to meet the rising cost of tuition and related costs like books, room, and board. Operating costs at colleges and universities are at an all-time high; however, sources of revenue for both public and private institutions are suffering due to the lagging economy, loss of state revenue, and the challenges of raising money in a diminished job market. The relevance of this issue is undeniable as college costs and accessibility for future students is at stake. A review of the literature reveals that colleges are struggling to balance their rising costs with reasonable tuition rates. Moreover, costs to students especially affect accessibility for low-income and middle-income prospective college students who are least likely to afford the rising expense. Household income tends to rise at a slower pace than higher education tuition. Real median household income in the United States climbed only 1.3% between 2006 and 2007, reaching $50,233, according to a report from the U.S. Census Bureau. Meanwhile, the nation’s official poverty rate in 2007 was 12.5%, not statistically different from 2006 (U.S. Census Bureau, 2007). 13 During this same time period, tuition increases at public higher education institutions averaged 9%, outpacing household income increases at a 7:1 ratio. Czerniewicz (2004) randomly selected 280 public universities to determine the factors that most effected rising costs at these selected institutions. The 280 institutions were not named but reflected institutions from various parts of the country: the northeast, southeast, mid-west, southwest, and western portions of the United States. No international institutions were selected. Data collection was accomplished through the responses of 132 institutions to a survey electronically transmitted by the researcher. Respondents were able to respond to objective as well as subjective inquiries. Responses were grouped into the following areas: technology purchases and upgrades; new educational programs or expansion of existing programs; and student services, including in some circumstances high-end residence life facilities. In addition, results showed that universities in the study also competed for high-profile faculty who are known for their research and publishing capability. The high costs of construction for new facilities or updating and remodeling of aging facilities to meet the needs of contemporary education environments were prohibitive (Czerniewicz, 2004). In addition, federal regulations such as Title IX (Education Amendments of 1972 to the Civil Rights Act of 1964) compliance added to the cost of a college education. All of the aforementioned factors affect the cost of tuition. These factors present not only financial challenges for potential college students as they progress through the college educational experience, but also many times lead to post-baccalaureate student debt. 14 Moreover, publicly-funded higher education institutions face large cutbacks in funding from state legislatures due to recessionary influences. Due to lagging sales tax revenues, states forced to balance their budgets are implementing cutbacks in their higher education resources. According to Hebel (2010) Nevada universities are preparing to close colleges, departments, and programs; demoralized professors are leaving the state; and thousands of students are being denied access from courses. According to the chancellor of the Nevada higher education system, the prospect of shutting down an entire institution remains a “distinct possibility” for the future. California, which faced the largest shortages of any state, has drawn much of the attention as tens of thousands of students were turned away from public higher education institutions as tuition rose by more than 30%. Although all institutions of higher education have faced hardships, private colleges and universities have and will be especially stressed compared with public and community colleges. Even as public institutions are reducing their budgets significantly, private colleges and universities have experienced a decline in constituent support as well due to the poor economy. Furthermore, private institutions depend on income from their endowments to fund programs and scholarships. The depressed stock market over the past few years caused a significant decrease in earnings as well as losses to endowment principals. Further, Goodman (2009) stated that credit rating agencies issued a first-time negative outlook for all sectors of higher education since the inception of their published higher education outlooks in the mid-1990’s. 15 Goodman (2009) argued that higher education institutions face risks to revenue in four crucial areas. First, there is increasing pressure on tuition and financial aid due to declines in household income, investments, and home equity. With the deflation of housing values predominantly in the fall of 2008 and winter of 2009, homeowners found their property less valuable and often less than the mortgage held on the property. Loss in investments and jobs provided less income from which parents might support their college-bound students. Moreover, access to loans was limited. Second, higher education institutions are experiencing a major loss in endowments, the largest in recent decades. With the sharp decline in the stock market, institutions are not only losing much needed income, but are suffering losses to their endowment principals. Third, many colleges are facing pressure on liquidity of their investments. Investments in hedge funds, private equity, and other investments are generally proving to be less dependable and more risky than originally thought. Therefore, institutions are seeking more security from their investments, thus, generating more confidence from their donors. Finally, many institutions are exposed to volatility in variable-rate debt markets. Institutions are more likely than ever to be exposed to high risk due to the great variability in investment income from stocks, real estate, and foreign investors in U.S. debt. Colleges and universities plan years in advance. However, in this volatile economy, if colleges enter a new year’s budget cycle without some type of contingency plan, if enrollment drops and tuition income shrinks below expectations, there would be reason for extreme caution, even alarm. 16 The review of the literature examines critical issues relating to this crisis of escalating costs in higher education and potential solutions to the crisis. Furthermore, while attempting to solve rising cost dilemmas, colleges and universities are faced with tuition increases as the primary source of new revenue. First, literature exploring factors affecting the rising costs of higher education is discussed. Second, literature examining various revenue sources is explored. Factors Affecting the Escalating Costs of Higher Education Numerous factors affect the escalating costs of higher education. Public and private institutions are faced with the dilemma of how to pay for high quality faculty to attract the best students, fund construction costs of new facilities and maintain existing facilities, and meet the expectations of students who may be accustomed to the comforts of private bedrooms and bath facilities. This section of the literature review will examine those factors identified by public institutions that most affect the rising costs of higher education. Attracting high quality faculty. According to King (2000), the key to attracting the best and brightest students to any campus is to provide the programs in which they choose to study and to provide high quality faculty in those programs. In general, if liberal arts-based institutions are to attract high quality, research-oriented, publishing faculty, it will require high dollars. These dollars are not limited to salaries and must include provisions for research facilities, auxiliary staff, benefits, and technology. To underscore this dilemma, King (2000) argued that the capacity of world renowned institutions such as Oxford and Cambridge to compete on equal terms with 17 Harvard, Yale, or Princeton diminishes by the day. Based upon their observations, three primary areas have evolved in the academic labor market. First, in today’s global economies, pursuing high quality academic scholars is not limited to state, regional, or national borders. Second, the disparity in the ability of institutions to expend educational resources is ever widening between public and private universities. This disparity is related to diminishing resources of public institutions due to a decline in resources from state budgets and an increase in the ability of private institutions to raise their own funds. These trends directly correlate with a university’s ability to compete for high quality faculty. Third, current institutional expenditures demonstrate that many of the world’s best public universities are in danger of declining in relative academic and research quality, status, and prestige (King, 2000). It is critical to note that King’s (2000) contributions are more than a commentary about the current academic market or faculty quality that is negatively impacting only Oxford and Cambridge. University leaders in the United States are expressing similar concerns that the increasing disparity in faculty compensation that favors private universities is leading to a departure of faculty from public universities to more generously-funded private institutions. Private institutions have the flexibility and latitude to set their own tuition rates and raise their own funds without the restrictions that are placed upon public institutions by their state legislatures. King observed that relative fiscal compensation in private universities has increased at a much faster rate than in public universities since 1980. 18 Ehrenberg (2004a) stated that the objective of being the most desirable academic institution is accomplished by striving for excellence in every aspect of the institution’s functioning. Ehrenberg continued, “They aggressively seek out all possible resources and put them to use, funding things they think will make them better, ‘better than their competitors, especially as it relates to faculty” (p. 189). To be better than their competitors, colleges and universities will spend more to attract the best and brightest faculty, including provision of research opportunities and improvement of facilities, student services, and instructional technology. In the meantime students and their families increasingly want the best possible education. In fact, Ehrenberg noted that the number of our nation’s top students who choose to enroll in selective private institutions has increased substantially in recent years. Ehrenberg (2004b) explained the influence of academic governing processes by administration and trustees in private institutions and their relationship to rising college costs. Trustees and administrative leaders at private institutions can set their own tuition and fees whereby public institutions cannot. He pointed out that faculty preferences affect development policies, how money is raised and spent, program rankings, pricing that is indicative of high quality, and financial aid policies that are often based on student test scores rather than student need. Furthermore, there exists a dilemma. In order for high quality private institutions to maintain superiority among their peers, these institutions are choosing to maintain and increase quality largely by spending more, not by increasing efficiency, reducing costs, or reallocating funds (Ehrenberg, 2004c). Public institutions find it difficult to compete with 19 the spending of large, private institutions. Mary Sue Coleman (2002), the first female president of the University of Michigan, acknowledged the spending gap and challenged the public to take an interest in funding public institutions of higher education. She argued that the University of Michigan system can compete with the wealthy private institutions in the area of quality; however, public institutions must be funded much better in order to maintain. Critics of higher education costs escalation have taken aim at faculty and their research programs. Politicians and political writers have responded to serious questions about college costs with uninformed answers. They believe that faculty members do not teach enough classes, are paid too much, or are always engaged in useless research, needing to be more productive (Flower, 1998). The best and brightest individuals appear to be attracted to higher education teaching positions by high salaries, benefits, and research opportunities. However, faculty salaries in general do not account for the bulk of higher education’s steadily increasing costs. In fact, during the recession of 2001 and 2002, record state budget deficits dictated that faculty members at U.S. two- and four-year public colleges and universities enjoyed an average 2.5% increase in their salaries in 2003, according to a report by the U.S. Department of Education’s National Center for Education Statistics (NCES, 2005). Groyles (2005) reported that salaries are barely keeping up with inflation. Salary increases for higher education faculty at every level of experience and longevity are consistent, ranging from 1.6% to 3.5%, but averaging 2.5%. During these same years, college costs rose between 8% and 14% at four-year public institutions. 20 Likewise, small salary gains for professors, instructors, and lecturers at both public and private non-profit schools. Curtis (2005) stated that schools, regardless of their size, are facing difficulties, noting that the negative effect of the downturn in the stock market in 2001 and 2002 on endowments for private schools was in many ways just as detrimental as what the public schools experienced due to state budget deficits. While faculty salaries occupy a significant proportion of any university’s budget, faculty are not the only large expenditure. Technology is another large line item expense that contributes to the rising costs of higher education. Technology issues. In 1997 management guru Peter Drucker predicted that in 30 years big university campuses would be relics, driven out of existence by their inexorable increases in tuition and by competition from alternative education systems made possible by information technology (IT). While Drucker’s comments may be overstated, the nation’s major research universities, both public and private non-profits, are facing fundamental changes in the way they provide education if they are to thrive, rather than simply survive. Research universities suffer from what economist Baumol (2005) referred to as runaway costs. Labor-intensive industries cope with rising costs of delivering their products and services by employing labor-saving devices that result in cost savings in their production environments. However, highly selective universities operate in a market in which rankings and prestige have been more important than the price to most prospective students. These universities prosper not by employing practices which save money but by convincing their publics that the value of an education at a first-tier 21 university is worth the rising costs. The fact is that labor intensity and quality-based competition are causing an increase in the cost of higher education at all universities, particularly the private non-profits. Lohman (2005) pointed out that this increase cannot continue indefinitely. In examining technology issues related to higher education administration, Gilbert (1995) argued that numerous questions and beliefs arise from students, faculty, the university president, the provost, the librarian, and even the bookstore manager. Students wonder why some courses are not more on the cutting edge of technology as they prepare for their future, while at the same time wanting the personal attention that a “real” professor, and not a graduate student or a computer, can give in the classroom. Many faculty members are basically afraid of new technology and wonder if they can keep up with their students who are demanding more technology in the classroom. Faculty want to know how they will and must change their teaching strategies and who will help them get where they need to go as they integrate the classroom and new technology. University presidents want to know that the large sums of money being spent on updating and investing in new technology are not only appropriate for the time but also valuable in the long term. With the rapid developments in technology, the university presidents’ expectations are not realistic. Technology administrators may be perplexed by the speed at which technology is advancing, which influences their decision making. What may be the latest technological advancement for the present more than likely will be out of date, though not useless, in a few years, maybe even months. Technology administrators, in addition to the 22 responsibility of training faculty and staff on new hardware and software, must also worry about the daily issues that are problematic to ongoing operation. Librarians, who often work with technology administrators to assist with training faculty, staff, and students in the library setting, face the personal dilemma of remaining up to date and current in the area of technology. Many bookstore managers seek to find the least expensive way to manage resources for students. A growing number of students are buying their texts from online sources or checking them out of the University library. In the face of rapidly rising higher education costs, of which information technology is a major concern, how will universities and colleges keep up, maintain the latest information technology resources for students and faculty, and avoid financial difficulty? According to Eisenberg, Nilan, and Schaber (2006), technology costs must be built into the budget and planned, not as an addendum that may or may not be funded. While states and higher education institutions have committed significant funds to technology, it is still treated mainly as an addendum that may or may not receive the attention it deserves rather than a recurring expense for colleges and universities that must receive high priority in the budgeting process. Temporary solutions do not reduce costs or increase productivity on the university campus. Eisenberg et al. explained that what may contribute to a short-term fix may cost higher education institutions and the state budgets that fund them more in the long term. States may need to abandon current short-term, cost-based funding approaches and develop in their place new approaches that encourage longer term investments in course and program development related to information technology. 23 State universities have been forced to raise tuition in order to generate income to offset state budget deficits and diminished funding for technology costs. Likewise, private, non-profit higher education institutions have been forced to take this same approach, especially when university endowments generate little income in the face of a flat stock market (Lohman, 2005). Technology issues pose significant challenges on a day-to-day basis. However, construction of new facilities, coupled with the renovation and maintenance of existing facilities, presents a budget challenge that will only escalate over time if not addressed. Construction, renovation, and maintenance. As competition grows in higher education markets, more institutions are improving their position by focusing on an aspect that typically is the first and often most remembered impression that prospective students and parents have as they search for a college: the physical environment of the campus. Agron (1999) conducted a study for the American School and University’s Fifth Annual College Maintenance & Operations (M & O) Report. Agron mailed questionnaires to approximately 1,300 physical plant directors at two-year and four-year public higher education institutions with no graduate programs. Questions on the survey related to costs and expenditures associated with salaries, benefits, supplies, equipment, energy usage, maintaining and remodeling existing structures, and new construction of facilities. Physical plant directors were also asked to report the percentage of the institutional budget spent on energy usage, maintenance and remodeling, and new construction. Forty-one percent of physical plant directors responded to the survey. 24 Agron found that colleges earmarked an average of 10% of their total institutional budgets to maintenance and operations for the 1998-1999 school year. A similar study was conducted by Agron in 2007. Data for the American School and University M & O Cost Study were collected via an in-depth questionnaire mailed in October 2007 to 900 physical plant directors at two-year and four-year colleges with no graduate programs. Recipients were asked to document various M & O costs for the 2007-2008 school year. Median M & O expenditures were measured as per full-timeequivalent (FTE) student and per square foot of space, as well as incidence of various maintenance practices. The physical plant director distributed portions of the survey among position holders including administrative personnel, those individuals who have managerial or supervisory duties (did not include the overall director of the physical plant); custodial personnel, those individuals responsible for building upkeep and cleaning; maintenance personnel, those individuals who perform skilled jobs, such as plumbing, electrical, or HVAC repair; grounds personnel, those individuals responsible for landscape maintenance and upkeep; and secretarial personnel, those individuals providing clerical support. Agron’s research showed that institutions spent 16.4% of their budgets on maintenance and operations expenditures in 2007, up from 10% in 1999 (Agron, 1999). Additionally, data for the annual American School & University M & O Cost Study were collected by Agron (2008) via an in-depth questionnaire mailed in October 2008 to 700 physical plant directors at two-year and four-year colleges with no graduate programs. Private institutions made up 52% of respondents while public institutions made 25 up 48% of respondents. Fifty-three percent of respondents were four-year institutions while 47% were two-year institutions. Recipients were asked to document various M & O costs for the 2007-08 school year. Research detailed median M & O expenditures per full-time-equivalent (FTE) student and per square foot, as well as the incidence of various maintenance practices. Maintenance and Operations costs in this study were expressed in median dollars per FTE student. The total median M & O budget per FTE student was $1,418 and amounted to 11% of the total budget, down from 16.4% in 2007 (Agron, 2007). However, the amount of square footage maintained increased from 272 square feet in 2008 (Agron, 2008) to 277 square feet per FTE student in 2007 (Agron, 2007). The author reported that the amount of square footage maintained per custodial employee was 34,084 square feet and 69,873 square feet per maintenance employee (Agron, 2008). The area affecting M & O budgets the most was energy expenditures. Spending per FTE student on energy/utilities rose an astounding 24% from the year 2007. Moreover, this increase came after dramatic increases in the cost of energy/utilities in 2006 (Agron, 2008). Furthermore, the author indicated that the annual amount that the median college spent on energy cost (gas, electricity, and other fuels) amounted to $850,000.00. Eight percent of responding institutions had as few as four buildings, while 47% of respondents had 15 buildings or more. Only 8% of responding institutions had more than 10,000 students while 52% of responding institutions had between 2,000 and 5,000 students. This study showed that whereas the percentage of the budget allocated for maintenance 26 and operations is decreasing, the amount of work expected of maintenance and grounds employees continues to increase. The State of Illinois Board of Higher Education (2004) reconvened the Committee on Statewide Capital Policies and Priorities on October 7, 2004. The Committee was charged to evaluate current statewide higher education facilities’ policies. According the State of Illinois, facilities constituted an institution’s largest asset and provided the foundation that was necessary to attract high quality faculty, staff, and students. The Board determined that the State of Illinois college and university facilities supported a wide array of instructional, research, and public service programs. The Illinois system constitutes a physical plant that is large, complex, and diverse with its facilities differing by institution in accordance with institutional mission. Some Illinois higher education institutions have major research facilities, whereas others primarily have facilities supporting undergraduate and graduate classroom instruction. Some Illinois institutions have residential facilities, whereas others operate primarily as commuter institutions. Facilities also differ from institution to institution based upon the condition and age of original construction. The State of Illinois Board of Higher Education found that increasing costs for maintenance, new construction, energy, and staff were beyond the reach of diminishing revenues in the state’s budget. The Illinois State Board of Higher Education (2004) suggested that a concept identified as “Life Cycle Costing” be implemented. Life Cycle Costing was devised due to the reality that construction of a building is only a part of the building’s cost. The plan integrates construction and operations costs for the building under construction. Life 27 Cycle Costing also ensures that funds would be available in the future to maintain and remodel as needs arise and functions change. However, complicating the concept of Life Cycle Costing is the fact that this process may increase the initial cost of each project, thus reducing the amount of funding that is available for other capital projects. Furthermore, general budget funds, those funds which support the day-to-day activity of the institution, may be reduced for operations and other initiatives. In revenue-producing facilities such as residence life complexes, these issues are somewhat less complicated because the monies they produce will pay off the debt incurred during construction, maintenance, and renovation (Agron, 2005). Colleges and universities face a barrage of facilities-related needs each year, ranging from small repairs to major remodeling for new or expanding programs to construction of completely new facilities and utility systems. Minor repairs will always be needed as buildings age through their normal life cycle. Institutions must address small repairs and renovation needs as they occur, as failure to do so leads to accelerated deterioration and costly repairs. Furthermore, program change and growth necessitates facility renovation and growth. However, renovations to make existing space more useful for emerging academic priorities can be addressed in less time than raising money, designing a completely new facility, and construction of the new facility (Agron, 2005). Buildings and the infrastructure systems that support them also have finite life cycles. Composition roofs deteriorate and may only last 15-20 years; heating, ventilation, and cooling systems (HVAC) wear out or require repair in as little as 10 years; mortar 28 and masonry decay; and outdated lighting systems become inefficient. At certain points major remodeling is required to extend the useful life of every facility. The need to expand electrical and cooling capacity for individual buildings and entire campuses has grown dramatically with the acceleration and advancement of technology. While a facility may appear to have outlived its usefulness as originally designed and constructed, with remodeling and renovation the facility can be used for other purposes (Agron, 2005). Further, Argon explained that when the cost to upgrade building systems to current state-of-the-art standards for today’s instructional and research programs is greater than new construction costs, new construction may be required. New construction is also required to significantly expand the scope of an existing program, initiate new programs, or replace temporary facilities. Even with differences in size, scope, and scale from campus to campus and from institution to institution, colleges and universities face a similar array of capital funding needs. Institutions must ensure that facilities are upgraded to take advantage of the latest technologies and are adequate for the needs of students, faculty, and staff. Many institutions face large amounts of deferred maintenance and must work to protect previous investments in facilities. Agron (2005) argued that for state colleges and universities there are severe limitations on funds that are available for new construction, especially in years of strained state budgets and shortfalls. The requests for funds for new construction and maintenance of facilities may be viewed as less important than funds for day-to-day operations. When institutions are forced to reallocate operating funds, the temptation and necessity may be 29 to move funds away from the maintenance of facilities and infrastructure to other operating line items, such as student services. Whereas deferred maintenance may seem the least costly short-term solution, this decision spread over several years results in more maintenance and infrastructure projects held over from one year to the next, with the cost of the project increasing as each year passes. It is clear how the delay of maintenance and upgrades of aging structures results in a significant deferred maintenance backlog (Agron, 2005). Despite the challenges of the University of Illinois system, the Illinois Higher Education Statewide Capital Policies and Priorities Committee (State of Illinois Board of Higher Education, 2004) recommended that future requests for new building projects include an estimate of the new building’s complete life cycle costs: the costs for its initial construction, daily operations, maintenance, and the major renovations and upgrade of building systems to ensure the building’s integrity over its expected life cycle. The committee argued that a Life Cycle Cost plan was important for every facility. As new construction takes place, university administrators and facilities managers and operators are asking architects and contractors to confirm whether their building systems are performing as expected upon completion of the construction phase. The more comprehensive the confirmation process, the greater opportunity there is for reducing operations and maintenance costs, thus, improving facility performance. A highperformance facility that produces an environment conducive to learning can boost the achievement level of university students and comfort levels for the occupants of the building (Erickson, 2009). 30 University facilities are incorporating building systems with sophisticated technology, computer controls, and circuitry for operation. These systems, particularly designed for heating, ventilation, and air condition (HVAC), are also being incorporated for the use and control of lighting, fire alarm systems, energy management, elevators, security, communications, and life-safety. However, after construction is completed, these facilities should be evaluated on a regular basis to determine if they are operating correctly and functioning at the promised levels of efficiency. This process, known as building commissioning, confirms that the facility fulfills the design intended by the university, its occupants, and operators (Erickson, 2009). According to Erickson (2009), as commissioning services are reviewed, educational institutions should involve the architects and engineers that can evaluate the proposals for design and construction to determine which proposals overlap with standard owner and architectural agreements. The costs of these professional services are dependent upon the depth of evaluations and the systems that are being commissioned. Typically, fees are based upon the square footage of the building, project scope, and geographic location. Erickson determined that the cost of building commissioning is well worth the upfront cost and will lead universities to recover project cost quickly due to long-term efficiency of the facility. Examining the perplexing state budget funding issues and the costs of building, operating, maintaining, and renovating state university campus structures, it is apparent that most public university systems face similar dilemmas. The American Recovery and Reinvestment Act of 2009, passed by Congress on February 12, 2009 and signed by 31 President Obama on February 17, 2009, was designed to stimulate the economy. This Act includes $7 billion for colleges and universities that may be used for renovation, improvements, and energy-efficiency projects. While the $7 billion is a small part of a large overall package, the intent of the Act is to create jobs and address some of our fossil-fuel dependence. Colleges are facing a growing deferred maintenance problem, which at many public institutions adds up to repair bills in the hundreds of millions of dollars. Some state legislatures have not supported higher education institutions at levels needed to maintain campus infrastructure. At the same time, these institutions continue to expand their campuses even as they have trouble maintaining the buildings they already have (Carlson, 2009). Moreover, Carlson explained that maintenance funds for public universities have not been increased in decades. For example, in Kansas the deferredmaintenance backlog at 7 public universities, 19 community colleges, and 6 technical colleges amounts to $1 billion (Kansas State Board of Regents, 2009). In the past two years the Kansas state higher education system has established a rule that each new building must have funds in place to permanently cover its maintenance, a policy that too few colleges have even considered. Colleges and universities continue to compete with one another in several areas. Competing for high quality faculty members demands that campus facilities are built and maintained at the highest level in order to attract and retain them. Additionally, the best and brightest students are attracted to outstanding faculty members under which they may 32 study. Quality facilities at a cost of tens of millions of dollars attract high quality faculty and students. As institutions compete with one another, parents and students seem willing to pay the escalating costs that are initiated by such competition among institutions and the need for quality facilities (Agron, 2005). Construction, renovation, and maintenance of campus facilities command a large portion of the university budget. Additionally, the development of new programs and expansion of existing programs must meet the demands of the market and needs of the community. New programs and expansion of existing programs. Yankelovich (2005) asked several questions concerning the future of higher education. For instance, what will higher education look like 10 years from now? If higher education is highly responsive to the demands of society for new programs and the expansion of existing programs, how will higher education keep up with the demands and the costs of expansion? What forms might these new programs assume? Realistically speaking, higher education has many constituencies, traditions, and constraints weighing on it. Yet the higher education system must find ways to meet the needs of its customers. Some strategies utilized to meet these needs include the creation of new programs, varied schedules and offerings, distance learning, advanced technology, block scheduling, and advanced degrees (Yankelovich, 2005). According to Daniel (1997), universities are in crisis. First, Daniel argued that university systems are mainly driven by teaching rather than learning. While universities are constantly evaluating present programs, starting new programs, and expanding 33 existing programs, there has not been a sufficient paradigm shift to emphasize learning, which is student-centered, as opposed to an emphasis on teaching, which is teacher/professor-centered. Further, Daniel stated that there must be a change in the manner in which university faculty relate to knowledge and their students. Student learning must be more outcome-based. Second, Daniel (1997) explained that the crisis is not only an American university problem, but is worldwide. Students around the globe are limited to higher education due to access, cost, and flexibility. According to Daniel, one new campus would need to open every week somewhere in the developing world to meet the anticipated needs of students entering the world of higher education. Half of the world’s population is now under 20 years of age and three-quarters of them live in Africa and Palestine. The traditional university campus will deny access to nearly all of these young people. Without an education many of these young people will grow up to be unemployed, unconnected, and unstable. In a global world, this is a global problem. In addition to meeting the needs of an ever-expanding world population of prospective students, the world-wide university system is not equipped to accept or educate these students. Ashe (2003) agreed with Daniel’s (1997) perspective on the higher education classroom. According to Ashe (2003), the greatest problem is resistance to change. Universities continue to add and expand new and existing programs, but remain teacher-centered instead of student-centered. The programs are costly but fail to meet the needs and demands of an ever-expanding student population. While adding new programs and expanding existing programs is fundamental to meeting the needs of 34 university students, the market, and the community, institutions are approaching change in a way that makes education more economical and accessible. Ashe pointed out that higher education institutions must be very careful that students, who are labeled as customers by large for-profit universities such as the University of Phoenix and DeVry, are not merely facilitated but are taught and more than adequately prepared for a life of vocational fulfillment. Student services. According to James V. Koch (2001), president of Old Dominion University, the consumer controls what amenities are offered today’s college students. In the world of higher education, one may ask who the consumer is. Students, regardless of location, have become able to shop higher education offerings, prices, quality, and convenience. Koch further stated that institutions respond to what students tell them they want and at some institutions this has involved extensive provision of student services, entertainment, excellent food, and a host of other student-oriented services. The common denominator is that students, the consumers, increasingly are in control. Gone are the days of the 1960s and 1970s when universities spoke of the multitude of students they flunked out. Gone, too, are more recent days when the majority of college students were taught between 8:00 a.m. and 2:00 p.m. Students now demand and receive courses taught at night, on weekends, in three-week blocks of time, over the Internet, with guaranteed internships, and with prolific access to microcomputers. Convenience remains important, but now it is the convenience of the students, not the faculty, that is most important (Yankelovich, 2005). 35 Further, there is a distinct trend toward personalizing higher education to the needs of particular students. Universities are offering programs that recognize a student’s past coursework, experiences, and current and future needs. For-profit, entrepreneurial higher education competitors are telling students that they will provide the education that the student wants or needs, not the education that someone else thinks the student wants or needs (Koch, 2001). The end result is increasing market segmentation in higher education. Colleges and universities have determined that they must focus their efforts in order to succeed because no institution can meet everyone’s needs all of the time. Some institutions are determining that their primary focus must be on four-year, undergraduate, liberal arts education, while others see research as their primary focus. Many for-profit institutions focus on online and distance education. Even Yale University, with an endowment of more than $5 billion, declared a few years ago that it had to narrow its efforts (Koch, 2001). According to Koch (2001), in order for colleges and universities to prosper in an increasingly competitive world, colleges must demonstrate that they can add knowledge to their students, not merely that they are capable of graduating already gifted students who enter with an impressive SAT or ACT score. Further, in this new paradigm students progress as they can demonstrate learning, whether or not they have accumulated the correct number of hours attending faculty lectures. Students are becoming higher education shoppers who are more interested in learning outcomes, job guarantees, and cost of tuition. Student shoppers might say, “Can 36 you guarantee me that I will pass the CPA exam or be admitted to medical school?” They might also ask, “Just how expensive is it and what is it going to cost for you to get me there?” and “What amount of scholarship/financial aid will I get if I come to your school?” Moreover, student shoppers are no longer captive to the particular state in which they live due to the availability of online programs and degrees (Koch, 2001). Fredrickson (2002) explained that prospective students and their parents regularly bargain for scholarship money and financial aid in order to receive the best deal and the most money. Based upon the amount of scholarship money that is awarded to a given student, some students at some universities are actually paid to come to school. In addition, student shoppers look for the best in residential facilities and student centers. According to Fredrickson, Columbia University is in the middle of a five year, $800 million construction program, which includes a student center, major residence hall, an upgrade of existing dorms, and renovation of historic buildings. Columbia has also significantly expanded its College of Engineering and Applied Sciences, and with it created a national center for the emerging field of nano-technology. New York University has also invested heavily to transform itself from a commuter school to one of the most selective private universities in the country. Its average SAT score rose from 1190 in 1990 to 1340 in 2002. Today, the school receives more applications than any other private school in the country. In addition, many colleges and universities remain committed to including numerous and highly desired amenities in residence halls as a means of attracting student shoppers to campus living. Agron (2005) noted that the most common amenities among 37 projects completed in 2004 were laundry facilities and Internet access, followed by electronic security systems, television rooms or lounges, and air conditioning. Other commonly reported amenities included individual room or apartment lavatories, elevators, and kitchen facilities. The total cost of new residence hall construction in 2004 among all universities in the U.S. ranged from $363,000 to $60.4 million. The median project was $10 million; the average project cost was $13.1 million. New housing projects accommodated as few as 48 students and as many as 730 students. Obviously, these revenue-producing projects are much more cost effective than those building projects and capital improvements which produce no revenue (Agron, 2005). New programs, student services, construction and maintenance, along with technology updates and faculty salaries, consume a large part of the university budget. However, government regulations such as Title IX also cost higher education institutions substantial sums of money if they are to meet government imposed guidelines. Title IX compliance. Guidelines issued by Title IX of the Education Amendments of 1972 to the Civil Rights Act of 1964, gave colleges and universities three options for ensuring that they meet Title IX guidelines and have enough women participating on sports teams. First, the number of female athletes should be substantially proportional to the number of female undergraduates. In other words, if half the students on campus are women, then roughly half the athletes should be women. Second, the institution may establish a history and continuing practice of expanding opportunities for women in sports. Third, the institution may prove that the university’s sports program effectively 38 accommodates the interests and abilities of female undergraduates. In other words, the institution must show that sports are being provided in areas where female athletes have interest and demonstrated abilities. Colleges and universities are continuing to make progress toward gender equity in sports. According to Suggs (1999), the number of women on varsity teams continues to rise steadily. Suggs stated that participation and financial trends in Division I of the National Collegiate Athletic Association (NCAA) demonstrates a rise in budgets for both women’s and men’s sports. However, budgets for women’s sports are rising faster than men’s sports. This rise in cost is not necessarily good news for male or female athletes. While women’s teams will not be eliminated or seriously curtailed, non-revenue producing men’s sports like baseball or track and field could face cut-backs. According to Suggs, Title IX will protect female athletes from this kind of program curtailment. Women’s athletics and some men’s programs are threatened by rising costs. The soaring cost of fielding teams is forcing athletic departments to consider program options that will save money yet meet government guidelines, favoring money-making teams over the other squads that make up a broad-based sports program (Suggs, 1999). Teams for men and women alike are becoming more expensive each year, adding to the escalating cost of higher education. Non-revenue teams in Division I cost roughly $220,000 on average in 1999-2000 (Suggs, 2005a). The cost of competing continues to rise. According to equity reports filed by colleges, expenses rose from $5.8 million per institution in 1996-97 to $12.9 million in 2001-2002 for NCAA Division I schools. Most of the increase came for Bowl Championship Series (BCS) members, whose average 39 budgets rose from $14 million to $34 million. Because the manner in which institutions account for revenue and expenses varies from campus to campus, it is difficult to draw definitive conclusions from the budgetary figures in the reports. Scholarships, for example, might be counted as an expense by an athletic department that finances its own grants, while another athletic department might count scholarships as revenue if the college itself allocates money to cover expenses. Division I-AA members reported losses of nearly $700,000 each, while Division I-AAA colleges reported losing $500,000 on average on their athletic programs (Suggs, 2005a). While Title IX guarantees female athletes the opportunities that they deserve, meeting the requirements of Title IX along with the expense of all athletic programs brings to bear escalating costs that are hard to justify in all but the large BCS schools’ athletic programs (Suggs, 2005b). A growing concern among colleges and universities is the practice known as tuition discounting. Results from the 2009 NACUBO Tuition Discount Study show that the average tuition discount rate for first-time, full-time freshman for fall 2008 was 42%. The results are based on the 355 independent institutions that responded to the survey in November, 2009. The greater demand for aid, due to the effects of the current economic crisis on families in an already highly competitive environment, led to an all-time high average tuition discount rate (Merea, 2009). This result came at a high price for colleges and universities. Many independent institutions had to implement salary freezes, hiring freezes, staff reductions, and other cost-cutting measures. At the same time, net tuition revenue fell 2.5% from 2007 to 2008 due to an increase in grant aid awarded by institutions. 40 The percentage of first-time, full-time freshmen receiving institutional grants has also increased. On average, 82.3 % of freshmen at the responding institutions in fall 2008 received an institutionally funded grant award, slightly high than the share in 2007 which was 81.7% but a substantial increase from 78.8% in 2000. For students who received these grants, the reported average award covered more than half, or 53.5% of the fall 2008 tuition and fee “sticker” price, compared with 49.2% in 2007. On average across all survey participants, 12% of institutional grant aid was reported as funded by endowment income. The study found a positive relationship between endowment levels and the percentage of aid funded by endowments; that is, the higher the endowment level, the higher the percentage of grand aid funded by endowment earnings. The study also found that about 36% of the institutional grant aid distributed by independent institutions in fall 2008 was awarded based entirely on students’ demonstrated financial need; 41.5% was awarded based entirely on non-need criteria such as academic merit; and 22.5 % was based on a combination of need- and non-need criteria. On average about 58% of all institutional grants were awarded based at least partially on students’ demonstrated financial need. Numerous studies highlight causes for the escalating costs of higher education. The literature encompassed several factors including attracting high quality faculty, technology additions and updates, construction of new facilities and maintenance and renovation of older facilities, new programs and program expansion, student services and scholarships, and Title IX athletics compliance. All factors are substantive components in 41 the escalating cost of higher education. This portion of the literature review examines strategies that colleges and universities have utilized to diminish the rates of increase in higher education expenses. The literature reviewed explores not only cost management strategies but also sources of revenue which help to defray tuition increases for the next generation of students. Sources of Revenue and Costs Savings Cutting costs as a management resource for facilities. In a stagnant economy, schools and universities must seek new ways to maximize the effectiveness of their already tight budgets. The news from state capitals carries a gloomy message for schools and universities. Revenues are down, state coffers are empty, and schools must cut spending to stay within their budgets. For most institutions, that means searching for ways to cut costs and save money in areas that do not affect a school’s primary role, that of educating students. Many schools can unearth savings by taking advantage of technological advancements, more efficient equipment and supplies, and smarter ways of managing their resources. Kennedy (2003) discussed 10 ways that universities may cut costs on management, upgrading, and construction of facilities. First, institutions may use energy upgrades across university and college campuses. Kennedy (2003) noted that the U.S. Department of Energy estimated that schools could save $1.5 billion in energy costs by making better energy choices. Altering behavior, such as turning off lights in unoccupied areas and shutting down unused computers, can save money. Installing more energy-efficient equipment can also can cut energy bills. Replacing an antiquated, inefficient heating, ventilation, and air conditioning 42 system with a modern system reduces maintenance costs and also lowers long-term energy costs. According to Kennedy, the typical energy cost for a school is 90 cents per square foot per year; the potential energy costs for a school designed to be energy efficient is 45 cents to 68 cents per year. Schools that cannot afford the initial expense of new equipment often use “performance contracting” to partner with energy service companies. The company pays the initial cost of installing new equipment or upgrades and the school pays for the new system with the savings generated from the more efficient, energy saving equipment. Second, institutions may use security technology as another source of cost savings. Continuing technological advancements and lower costs mean that more schools can afford high-tech solutions to security problems. Surveillance equipment such as closed circuit cameras, access control systems, metal detectors, and alarms can help many schools provide safer environments for their students and staff without a strain on their budgets. Advancements such as digital video recording allow schools to record and archive their surveillance without the need to label and store video cassettes. These security products can provide information needed by school officials yet free up manpower for more appropriate work. This type of technology can save money compared with the cost of personnel or the cost impact of failed security (Kennedy, 2003). Third, Kennedy (2003) explained that institutions may use Maintenance Management Systems (MMS) as a source of budget savings. Many schools are using technology to help them run and monitor maintenance programs in their facilities more 43 efficiently. A MMS allows maintenance workers to keep track of ongoing work orders, job costs, preventive maintenance schedules, and equipment and supply inventories. Fourth, institutions may utilize energy efficiency systems to provide historical records of completed work. The most up-to-date MMS packages utilize this system and have become available through application service providers (ASPs). ASPs use their computers to maintain computer applications and institutional data; school maintenance workers connect to the system over the Internet to manage data. Fifth, Kennedy (2003) stated that higher education institutions may contract with another organization in the community for use of facilities as an approach to costs savings. If an institution cannot afford to operate facilities independently, it is possible to find another institution with which to share the cost. As schools confront the growing problem of aging facilities and insufficient space, more administrators are embracing partnerships as a solution to tight capital improvement budgets. Institutions have teamed with park districts, libraries, and municipalities on construction projects in order to save funds and maximize use of public facilities. Once completed, the institution shares the facilities with its community partner. Sixth, the university may choose to modernize washroom facilities. Upgrading the equipment and fixtures in school washrooms can lessen the burden on a school budget by reducing water consumption and discouraging costly vandalism. Waterless urinals, lowflow toilets, automatic flushing devices, and sensor controlled fixtures can help reduce the cost of water consumption as well as provide a cleaner environment. Low-flow devices may reduce water consumption by 15-20% and can pay for themselves in saved 44 energy in four to eight months, according to the U.S. Department of Energy (2001). However, the water saved from modern equipment could be wasted if an institution’s plumbing system is plagued by leaks. A maintenance staff that is vigilant about detecting and repairing leaks can reduce a school’s water waste costs significantly (Kennedy, 2003). Seventh, institutions may update windows in their facilities as a source of savings. Kennedy (2003) reported that schools that upgrade window systems and have added windows to their facilities may save money by spending less on lighting, as well as heating and cooling. Installing more energy efficient windows can reduce energy bills by keeping outside elements – excessive cold or heat – from entering the building and causing more strain on heating and cooling systems. Installation of additional windows in a facility can allow a school to depend more on day lighting and less on artificial lighting that adds to utility bills. A well designed day-lighted environment should eliminate glare and prevent overheating. Kennedy noted that the design should allow users to adjust the artificial lighting as needed through dimmer switches or automatic photocell controls. Eighth, institutions of higher education can save resources by adequately assessing their facilities on a regular basis, usually annually. Schools that have accurate information about the condition and needs of their facilities are in a better position to spend money on capital improvements more efficiently. Facility assessment firms can assist institutions in creating an accurate and up-to-date database of an institution’s infrastructure so administrators can determine more precisely how much needed improvements will cost (Kennedy, 2003). 45 Ninth, Kennedy (2003) explained that institutions may utilize outsourcing as a source of savings. Many institutions can save money by contracting out certain services and operations to private companies. Kennedy stated that the efficiency of outsourcing will depend on factors that vary from service to service and from institution to institution. Some institutions have efficient in-house operations in place and would not benefit from privatizations. However, many institutions contract with private companies to manage their food preparation and custodial operations. On some university campuses, private companies manage bookstores, laundry services, food services, and vending. Kennedy reported that the top reasons institutions utilize privatized services include cost containment, time savings, professional management, and better equipment. Tenth, Kennedy (2003) stated that institutions may use alternative fuels as a cost savings. He reported that U.S. Department of Energy officials are encouraging institutions to consider alternative fuels or electricity to fuel campus vehicles that will reduce cost and pollution. Compressed natural gas (CNG) often is recommended for institutions because the vehicles are readily available and the fuel is considerably less expensive than gasoline. Kennedy noted that in the San Marcos, California School District, CNG-fueled vehicles cost 12 cents a mile to operate compared to 32 cents a mile for diesel-powered buses and vehicles. Whereas electric-powered school buses are not practical in most cases, colleges and universities can take advantage of small maintenance carts and other electric-powered vehicles that are available. Land-rich colleges and universities are showing interest in developing alternative energy resources. They are collaborating with companies to establish renewable energy 46 sources such as wind farms and solar arrays. Possibly the largest such project is Colorado State University’s planned wind farm on an 11,000 acre university holding. While the potential exists for the university to provide for its own energy resources, resulting in considerable savings itself, there is the possibility that the university may be able to contract with other municipal and corporate entities to provide energy resources for them, resulting in additional income for Colorado State University (Carlson, 2008). In addition to Kennedy’s (2003) observations, Agron (2005) also suggested an eleventh factor, building commissioning. When a newly constructed facility fails to meet expectations, administrators often are the ones who must address unexpected repair costs. Building commissioning begins in the pre-design phase and continues through design, construction, and the warranty period to ensure that building systems perform as intended. This process ensures the performance of the building’s systems through review, testing, and documentation. A properly commissioned facility can result in fewer change orders during the construction process, fewer call backs, better long-term occupant satisfaction, lower energy bills, and avoided equipment replacement costs. Contributions from alumni. Just as higher education institutions must investigate cost saving measures in the construction, management, maintenance, and renovation of facilities, higher education institutions are relying upon its constituents for additional funds to help manage and control the escalating cost of higher education, especially for private, faith-based institutions. A vital part of the private, educational institution’s dayto-day operations is raising money needed to carry out the work of that institution. Olsen, Smith, and Wunnava (2001) conducted a study at Middlebury College with the 47 cooperation of the Alumni Records Office to determine the life-cycle giving of alumni at that institution. Data on alumni contributions received in the years 1968-1987 from the graduating classes of 1926-1967 was obtained from Middlebury College, located in Vermont. The alumni gifts were standardized to 1967 dollars. The data was studied over a period of 31 years so that the data became purely cross-sectional in nature. Reunion models were also used to capture the effect that reunions have on the level of donations. With the idea in mind that not every reunion would affect donations equally, the researchers included a second reunion model to capture the effect of the three largest reunions, the 25th, the 50th, and the 60th. Eight cross-sectional dummies were used. Past research has indicated through the life-cycle hypothesis that as age increases, consumer spending increases, and specifically as it relates to charitable giving to this small liberal arts college. However, Olsen et al. (2001) found from their research that this giving trend tends to level off at the age of retirement. Furthermore, the authors found that the growth rate of donations coincided with the age and income profile but became stagnant at the age of retirement. Tax treatment of charitable donations tends to impact the size of donations to charitable organizations. Olsen et al. found that the level of tax benefit associated with the gift impacted the donation to the institution. The university graduate, a new alumnus, has barely had time to frame his or her diploma before the first solicitation arrives from the alumni office of the university. In the ensuing years after graduation, a substantial percentage of alumni will contribute to their alma maters. Whereas most alumni realize that there is a need at the institution for alumni 48 financial support, it is believed that when alumni give they do not do so out of a spirit of altruism (Harrison, Mitchell, & Peterson, 1995). Some alumni donors may give back to the university because of what the institution did for them in the past, but others may give because of what they perceive the college will do for them now or in the future. Donors seem to want the satisfaction that accompanies recognition from their former school, from appearing in a list of names in the alumni magazine or the Roll Call of Donors, to receive free football tickets, or have a scholarship or a building named in their honor. Giving to higher education involves a mutual satisfaction of needs. Many donors are motivated to give out of a need for recognition. Some donors seek status. Many schools are able to foster an emotion generated by good friends, faculty, respect, and institutional memory. These feelings give rise to the desire to be recognized by the institution and serve as a motive for making financial gifts to the university. Furthermore, Harrison et al. (1995) referred to the Exchange Model of alumni donations. The authors of the study indicated that alumni donate to their colleges out of a desire for recognition; thereby, the gift is given in exchange for recognition. Recognition may mean any way in which colleges or universities honor their donors, such as sending them a bumper sticker, having their names printed in an alumni newsletter, inviting them to a recognition dinner or reception, giving them tickets to sporting events, or naming a building or scholarship after them. In addition, the authors found that while alumni are willing to donate funds well in excess of the monetary value of the recognition they receive, their utility does grow with the dollar value of their college’s recognition. 49 Donations by alumni are a significant source of revenue for private colleges and universities and their importance promises to grow in the future. In 1997-98 alumni contributed $3.3 billion to 658 private institutions, representing 7.9% of university educational and general expenditures. In the wake of the bull market in stocks of the 1990s, some university capital campaigns even surpassed their ambitious goals. Income from donations seems likely to assume an increasingly important role in total revenue. Some private institutions, hopeful of sustained growth in the stock market, even moderated their tuition increases only to see their hopes diminished in the stagnant economy of 2001-2002 (Ortman, 2001). However, some close observers have cautioned about expecting sustained growth from alumni donors. One fear is that much of the generosity of the current cohort of givers will be lost in the next generation. For instance, Gose (2004a) found that the generation now in its retirement years has volunteered at a pace that is unlikely to be matched by subsequent generations. However, fear arises as institutions are increasingly admitting students based upon their stronger academic credentials and merit, whereby the sons and daughters of alumni and the socially elite are increasingly overlooked. Since the latter tend to come from families with more financial resources and hence, have more money to give, the former tend to come from families that are less wealthy. This new type of student with high academic credentials may give less as an alumnus than those from previous generations (Clotfelter, 2006). For instance, Clotfelter deducted that changes in 50 admissions policies at Princeton in the 1920s that reduced the prevalence of wealthy students also resulted in a decline of the average gift size from alumni. Most universities average 20-25% of their alumni giving to an Annual Fund. This percentage does not include special gifts to a Capital Campaign or other special projects. However, gifts to the Annual Fund are designated for special funds or scholarships at times, which may or may not be named after the donor. Senter College in Kentucky is the obvious exception with 45% of its alumni contributing to the Annual Fund. Giving by alumni of colleges and universities, especially small, private, liberal arts universities will always meet a critical need. Therefore, it is important to universities that alumni giving to higher education increased to $6.6 billion in 2005, an 11.9% increase from the year before (Strout, 2005a). Planned giving. Financial planners do not often discuss planned giving with their clients. Yet, colleges and universities, among other non-profit organizations, rely on the charitable nature of their alumni and other supporters for their very existence. Woolen (2005) considered various charitable techniques and the tax ramifications that can be presented to potential donors of colleges and universities. Additionally, he explained that both the donor and the university can benefit from planned giving opportunities. Woolen noted in his study sponsored by the National Committees on Planned Giving that approximately 89% of households nationwide contribute to at least one charity each year. Whereas this figure would indicate extraordinary generosity, that generosity is not being expressed in terms of long-range bequest. Of those who responded to the survey representing the general United States population, 42% reported that they had a will, but 51 only 8% had made a charitable bequest. Nonetheless, this number has increased from 6% in 1992. However, it is still relatively small and counts for very few dollars. Woolen also reported that total giving nationwide has shown a steady rise from year to year due to demographic changes. Yet when adjustment is made for inflation, bequest giving has remained relatively constant since 1987. Gaudiani (2006), a senior research scholar at Yale Law School, is a leading voice in the United States on the topic of philanthropy, wisdom, tradition, and civil society. Gaudiani (2006) stated: Generosity is more American than pumpkin pie. It defines the American spirit. Some people think that Americans are generous because we are rich. I argue that we are rich, at least in part, because we are generous. The American experience has produced a tradition of philanthropy that is vital, effective, and intimately linked to our economic success. This tradition has combined with the American experience to produce a culture of generosity that we cannot afford to lose (p. 62). In order to offset some of the escalating cost of higher education, university and advancement officers are working with donors, especially those who have reached or are approaching retirement age, about the various ways that they might leave a lasting legacy at their alma mater, or if not an alumnus, at a higher education institution that is making a difference in the lives of young people as they prepare for a life vocation. Oddly enough, Americans are giving to charity each year while their children are still in the household. Institutions of higher education must help charitable donors understand that planned giving is the same type of charitable donation to the institution through making a bequest 52 by will, charitable trust, life insurance, or through one of the many other techniques available. Colleges and universities are showing donors an avenue to demonstrate how meaningful the institution has been to them during their lifetime (Woolen, 2005). According to Woolen (2005), this approach with potential donors seems to be working fairly well. Out of a list of 12 categories which describes those philanthropies to which donors may give, colleges and universities are first, museums and libraries second, private foundations fourth, and health charities fifth. Religious groups are last. Woolen explained why colleges and universities ranked first in charitable bequest. Universities and colleges, along with other charitable institutions, have a professional development staff with greater access to prospective donors. Universities know where their alumni are and have prepared them to expect to be asked for gifts. Colleges and universities, along with other charitable organizations, are well equipped to show their donors how a charitable gift will benefit them both short- and long-term. The term planned giving generally applies to gifts made at the time of death to any 501(c)(3) organization. Current gifts may also be considered planned giving when used for gifts to be made at the time of death. Charitable gifts are generally deductible from federal income and estate taxes at death since that is when the actual gift is made. Current gifts, however, are income tax deductible in the year the gift is made. This is one reason that charitable gifts seem to inevitably rise in the month of December, at the end of the tax year. Gifts made to colleges and universities often, for example, name a particular department or mission project as the ultimate beneficiary of a planned or current giving opportunity. If the gift is in cash, the gift is deductible from one’s federal 53 income tax for the full amount of the contribution up to 50% of the donor’s adjusted gross income. For gifts of long term capital gain or property that has appreciated (stocks, bonds, mutual funds, real estate), the donor may deduct the full fair market value of the gift only up to 30% of the adjusted gross income. A cancelled check may be used as substantiation for a charitable cash donation of $250.00 or less. The university is required to provide a written receipt or other acknowledgement for cash gifts in excess of $250.00 (Woolen, 2005). The pursuit of planned gifts by university and college development offices requires that someone in that office be well versed in charitable gifts and the various forms that the gift make take: partial interest charitable gifts, IRA’s, life insurance, and other gift options. Most universities will have an expert in the advancement office that only works with planned giving donors simply because it requires much knowledge and expertise with regard to the various options and the Internal Revenue Service laws that oversee such gifts (Woolen, 2005). Student paid tuition. Fiore (1996) noted that for most small, private liberal arts institutions of higher learning, student paid tuition is the largest source of revenue, especially if the university is not heavily endowed. One of the biggest problems facing many parents today is payment of their children’s education as the cost associated with higher education grows each year. Fiore stated that most of the time these costs grow at a rate that is three to four times the rate of inflation. The rising costs of a college education may impose significant burdens on many families. Finding ways to finance these expenses may require extensive thought and planning. 54 At a time when parents seem willing to pay the extra cost for their children to attend exclusive, highly selective, private universities, what is the best way for them to plan to meet these rising costs? Moreover, as state budgets are cut and tuition at large state university systems rises, a taxpayer-funded education is not as inexpensive as it once was. Zimmerman (2004) suggested several options that may assist families in planning for future college tuition costs. First, Zimmerman recommended parents purchase qualified bonds. Qualified bonds include those issued after 1989 at a discount to taxpayers who are at least 24-years-old before the date of issuance of bonds. A qualified bond purchaser may designate anyone as the beneficiary. However, the interest exclusion is not available if the bonds are bought from another taxpayer (other than a spouse) or are put into the name of a child or other dependent. In addition, the interest is not excludable if the bonds are purchased with redemption proceeds rolled over from other Series E bonds. A taxpayer must meet certain income limits to exclude the interest from these bonds. The exclusion is not available to married taxpayers filing separately. However, if a family begins buying early, qualified bonds are an excellent way to prepare for a child’s higher education expenses (Zimmerman, 2004). Second, prepaid tuition programs are a vehicle for funding education costs, better known as the tuition guarantee program. Typically these programs involve the purchase of a prepayment contract or annuity from a state or educational institution. When a designated beneficiary enrolls in the college or university, the contract can be redeemed to pay all or a portion of the college costs. The cost of the arrangement varies with the 55 age of the beneficiary; generally the younger the child, the smaller the payment. Under most plans cash refunds are provided under specified circumstances, such as if the beneficiary becomes deceased or does not attend college (Zimmerman, 2004). In the above mentioned scenario, neither the parent (the contributor) nor the child (the beneficiary) is currently taxed on a program’s investment earnings. The contributor is taxed only if funds are refunded to him or her and then only to the extent the refunded amount exceeds contributions. The beneficiary is taxed on the program’s earnings when they are distributed or when education benefits are provided (Zimmerman, 2004). Regardless of the source of revenue, parents must determine how they will meet the escalating costs of higher education. The above mentioned options are among the ways that this need can be met. However, Zimmerman (2004) noted that as students and parents face the dilemma of increasing costs, some are finding that graduation with enormous debt is the result of a lack of sound planning for higher education expenses. Endowment. An endowment serves two main purposes. First, it provides a consistent source of income that lessens a college or university’s dependence on outside donors for annual support. Second, an endowment also serves as a bulwark against rough financial times. Hartsook (2004) described an endowment as a life insurance policy on the existence of an organization. Unlike an individual’s life insurance policy, an endowment does not end. Rather, the endowment is invested and yields benefits to the university or college for many years to come. The gift prevents the organization from dying. Moreover, colleges with large endowments are not subject to the fluctuations of the economy and the marketplace. Endowments allow an institution to maintain programs 56 and services of the university. Certain kinds of university programs, especially in the arts and classical languages, may not be particularly interesting to some generations, but deserve to be preserved if a renaissance of that program occurs. On the negative side, Gose (2004b) argued that cash cushions found in large endowments might lead a college or university to maintain business as usual even if its service no longer provides much value. However, while the 1990’s served as a prosperous time for fundraising and endowment growth for colleges and universities, the same cannot be said of the last five years, 2003-2008 (Kennedy, 2009). Ivy League schools that normally have very large endowments running into the billions have seen those endowments lose substantially. This loss is causing a dramatic slowdown in the development of ambitious expansion plans. According to Blumenstyk (2009), college endowments earned an average return of minus 3% for the 2008 fiscal year and an estimate minus 22.5% in the five months after that. The declines are already having an impact. More than a quarter of all institutions said they planned to draw less money from their endowments during 2010 than they had expected to spend. Blumenstyk (2009) invited 796 institutions in the United States and Canada to respond to a survey after the abrupt downturn in the markets during the summer of 2008. A total of 435 institutions responded to the survey. Blumenstyk found that endowments had fallen in overall value by an estimated average of 22.9%. At least five universities ranking in the list of the largest 10 endowments did not respond. However, endowment 57 losses translated to an estimated decline of $94.5 billion in market value for institutions who responded to the survey. These findings reflect the two-pronged problem that colleges face. Negative returns are diminishing endowment values and philanthropy has not been adequate to make up the losses and endowment spending. Large private colleges depend upon their endowment income to cover 15-20% of their operating costs and, for some of the wealthiest institutions, endowment provides as much as 45% (Blumenstyk, 2009). An example of the problem is found at Yale University. Yale President Richard Levin announced in February, 2009 that construction projects already under way on the New Haven, Connecticut campus would be completed, but that construction on all other approved projects would be postponed until conditions in credit markets improve or until gift funding is received. Levin further announced that capital expenditures of up to $2 billion will be deferred over the next five years (Kennedy, 2009). Further, administrators at Harvard University in Cambridge, Massachusetts decided to slow down plans to expand their campus facilities across the Charles River into the Allston neighborhood of Boston. According to Drew Faust, Harvard President, the unprecedented drop in endowment and pressure on every other source of income forced a careful review of all capital planning. Harvard expected its endowment, which has been valued at $30 billion, to lose 30% by the end of the 2008-2009 fiscal year. Whereas the work of the Allston complex is vital to the long-term future of Harvard, the work must continue at a much slower pace until the economy and fundraising improve Kennedy, 2009). 58 Hartsook (2004) explained that some of the most successful approaches to fundraising for endowments demonstrate a need to communicate how the endowment fund and its earnings will have an impact on people. Simply having a large bank account is not a persuasive motivation for giving money. However, giving an endowed scholarship so that a university student can get an education and contribute to society is a very attractive motivation. However, it is a challenge to raise endowment funds for operating costs or maintenance of a building; therefore, fundraisers must demonstrate how and why their endowment will make a difference. Furthermore, donors are attracted to success. Older, established institutions with a history of success with the programs they offer are ideal for endowment investments. New organizations have a difficult time illustrating their need for perpetuity since they have not necessarily demonstrated their success or guaranteed longevity (Hartsook, 2004). Traditionally, individual donors are the best prospects for endowment giving. Corporations do not want to give away their capital for endowment purposes. Foundations themselves are effective endowments so it seems redundant for them to give earnings to endowments only to have the money reinvested (Hansman, 2004). Usually those individuals who give endowment dollars understand how and why these funds can assure the long-term future and health of the institution. Furthermore, Hansman (2004) argued that an institution may reach a point when the endowment grows so large that donors do not wish to give any longer. If the endowment is not being accessed to benefit students, faculty research, and the mission of 59 the university, potential donors may become discouraged. Organizations are not always clear about the use of proceeds from their endowments. They must be effective in reporting that a given endowment has been used for special purposes to meet a specific need. Institutions should not simply report that they used interest from the endowment to “balance the budget.” Likewise, Hansman (2004) warned against severely limiting the spending policy of the endowment so that it restricts the institution’s use of the money. Hansman argued the need to be concerned about the perpetual use of the funds, but university endowment managers should know the purpose of the endowment was not to have money stored away so effectively that the institution never really uses it. Raising money for endowment is very difficult. A disappointing lesson to learn for fundraisers is that raising money for endowment is often discouraging in an age when donors are presented giving opportunities that offer immediate personal gratification. While raising money for “bricks and mortar” is also challenging, it does offer naming opportunities and recognition for donors that can be seen on a daily basis while endowments, though helping to ensure the future, are hidden away (Gose, 2004a). However, interest generated by endowments, regardless of size, provides a cushion and helps to alleviate the pressures caused by the escalating costs of higher education. Maintenance of the advancement staff. At first glance, perhaps one might wonder how the effective maintenance of the advancement staff can be a source of revenue. However, retention of staff is important in the field of advancement so that long-term relationships with donors are managed carefully in order to generate confidence in the 60 institution and the management of funds that are given on a regular basis or for a onetime project (Strout, 2005b). Strout (2005b) explained that fundraising professionals may be referred to as fundraisers, development officers, or advancement professionals. Many colleges and universities will immediately employ proficient fund-raising professionals and keep these fundraisers forever. Strout noted the critical importance of maintaining a staff of professionals who know how to secure important private support from alumni and friends of the university, corporations, foundations, and other major donors. There simply are not enough advancement professionals in the field that can secure these funds. Moreover, higher education is desperate for additional funding. Capital campaigns of hundreds of millions, even billions of dollars are not uncommon. Meanwhile, taxpayer support for public colleges is diminishing. The competition for philanthropic dollars is intense and at an all time high. John Lippincott (2004), president of the Council for the Advancement and Support of Education (CASE) surveyed 50 chief advancement officers (CAOs) about their major fundraising challenges. The administrators surveyed were from four-year publicly-funded institutions with enrollments above 10,000 students. The CAOs answered 25 open-ended questions with regards to their activities in the advancement office. Qualitative analysis of the survey revealed that the most significant challenge facing these senior advancement officers was the recruitment and retention of fundraising staff. The fundraising profession is relatively young. While most other administrative positions in higher education have a professional development system from which to 61 draw its talent, development staff members come from varied backgrounds such as corporate sales, marketing, and the legal profession, and are not necessarily groomed for the job in the manner that other administrators are. For example, department chairs are often deans in training and provosts are often college presidents in training (Strout, 2005b). Strout (2005b) further stated that fundraising is not a career to which most people aspire. When fundraisers are asked how they came into their jobs, no two stories are the same. However, after someone starts showing promise as a fundraiser, he or she may not remain at the same organization long. Lipppincott (2004) found that 65.5% of CAOs have been at their institution for five years or less. Another study by the Association of Fundraising Professionals, as cited by Lippincott (2004), found that 18% of 919 respondents from all sectors of fundraising (not just university fundraising) had been in their job for one year or less. Experts such as Lippincott assert that college fundraising professionals are leaving their jobs for better positions at other colleges. Most of the time these professionals do not leave for a higher salary; rather, they do not feel that they have sufficient staff, feel unappreciated, and think that there are no career advancement opportunities where they are (Strout, 2005b). Lippincott (2004) indicated that while giving to colleges and universities was flat in the 2003 fiscal year, there is evidence that institutions are experiencing an increase in private donations. For instance, the Center on Philanthropy at Indiana University reported a 34% increase in donations of at least $1 million to charities from individuals in the third 62 quarter of 2004 compared with the same period in 2003. Higher education accounted for 53 of those gifts in that quarter. Of course, the primary predictor of giving in the next few years is the state of the American and global economy. Assuming the economy continues to grow, and the stock market remains stable, private donations to higher education should continue to grow. However, university fundraisers report that competition for philanthropic dollars is fierce. Many charitable organizations have professional fundraisers now and more international universities are soliciting donations in the United States. There is an effort to shift funding to more private giving because we are in an era when funding at the state and federal levels is being cut. This reduced state and federal funding of public institutions causes an increase in the number of colleges, universities, and other charitable agencies seeking donations. Therefore, stability and longevity among fundraising professionals is definitely an asset to any college or university (Strout, 2005a). Conclusion As higher education costs continue to escalate and universities become more crowded, more and more students are being turned away because there is no room for them; because their entrance exams do not meet selective university standards; or because the rising cost of tuition, room, board, fees, textbooks, and other expenses are simply more than some families can manage. State budget cuts to large state university systems have caused these institutions to raise tuition, making access more difficult for those who can afford these rising costs the least. 63 Contributing to rising costs is the ever-increasing need to update technology and expand existing technology. Communities and corporations are requesting that new programs be initiated to meet their expanding needs. Existing programs must be expanded to satisfy accreditation agencies and market demand. Construction of new facilities and the renovation of existing facilities is a must to attract high quality faculty members along with the best and brightest students. Student life initiatives are becoming extravagant and more expensive to attract those who expect the finest amenities. As universities and colleges compete for students, scholarships have become an increasing component of the budget. The cost of higher education continues to grow. While baby boomers who attended college in the 1960s and 1970s send their offspring to school, they experience the reality of higher education cost and many have not planned well for the inevitable. While parents and students are making the necessary adjustments to fund higher education, colleges and universities have options which will help curtail spending and diminish the rate of escalation for rising college expenses. Universities have the option of cutting costs by managing their resources for facilities more efficiently. Further savings at higher education institutions may be realized by conducting energy upgrades, increasing security technology, employing maintenance management systems, engaging in community facilities partnerships, modernizing washrooms, installing energy efficient windows, and increasing the use of day-lighting. Universities should also do a better job at facilities assessment so that infrastructures may be managed more effectively. Some institutions are outsourcing and contracting for services and operations that have led to 64 cost savings. The use of alternative fuels is also a consideration along with a relatively new concept, building commissioning. Likewise, universities are investigating new sources of revenue. Charitable contributions from alumni, friends, and other constituents are a key source of revenue for universities in the sustainment of their budgets. However, an altruistic spirit does not appear to motivate alumni and other donors to give to the needs of the college or university. Rather, most donors give in order to receive some type of recognition: a return gift in the mail, as simple as a bumper sticker or a key chain; their name listed alongside other donors in the Roll Call of Donors in the university magazine or alumni newsletter; or their name on a building or scholarship which they have funded. In addition, tax credits are a motivation for gifts to the university or other charitable organization. Most colleges and universities receive gifts from approximately 20% to 25% of their alumni (Hansman, 2004). Planned giving resources can be significant sources of revenue for higher education institutions. Both the university and the donor can benefit extensively from planned giving initiatives. Estimates show that 89% of families in the United States give annually to some type of charity. Whereas this percentage is indicative of extraordinary generosity, giving is not being expressed in long-range bequest and accounts for a relatively small amount of dollars (Woolen, 2005). Unfortunately, universities that are dependent on student paid tuition with very little income from endowments or other sources have no other option than to raise tuition. State universities struggling from cuts in state funding are being forced to raise tuition by 65 double-digit figures. Parents who are faced with escalating higher education costs can prepare by engaging prepaid tuition programs offered by colleges and universities, by purchasing tax free bonds over time, or beginning early to save for college. Otherwise, students will have huge amounts of debt after graduation. If this is the only option, some students are opting out of higher education altogether (Zimmerman, 2004). While the raising of endowment funds is crucial to universities, donors must be extraordinarily persuaded to give to endowments. Endowments increase the security of a university to deal with hard times and difficult economies, but endowment donors sometimes diminish their gifts to the Annual Fund, therefore, putting a hardship on university operational and capital funding. Maintenance of a full staff of advancement professionals is crucial to the task of fundraising, which helps colleges and universities meet the ever-increasing demands for increased funds to meet escalating costs of operating and maintaining higher education institutions. However, most advancement professionals are staying in their jobs an average of five years and moving on to other places of employment, not necessarily for increased compensation, but for better advancement opportunities and working conditions. By encouraging retention of advancement staff, universities are better able to develop long-term relationships with donors that lead to stronger alumni giving and contributions to capital fund campaigns, endowments, and planned giving opportunities. All types of giving are necessary in order to constantly meet the challenges of escalating higher education costs. 66 Universities must make extra effort to communicate the mission, vision, and values of the university. It is imperative that those who support the university budget, whether alumni, friends, corporations, foundations, or even students who pay tuition and accompanying expenses, understand these foundational constructs. As communication and interaction between universities and their constituencies increase and understanding is mutual, escalating higher education costs will be confronted constructively. The literature adequately explores the escalating costs of higher education in publicly-funded institutions. Various causes for escalating costs are examined while suggesting ways that costs may be eliminated or diminished. Researchers reviewed in the literature agreed on the issues that point to the sources of increased costs as well as factors for economizing. However, the research is limited to the study of large, land-grant, publicly-funded, research institutions. Private institutions, especially faith-based institutions, have not been included in the aforementioned research and the research is insufficient. Public institutions face serious issues with regards to diminished state and federal funding. However, private, faith-based institutions face rapidly rising costs without public funding. These institutions must raise more money from private sources or raise tuition for students and their families. This study provides helpful information that may assist private, faith-based institutions in exploring cost saving measures in their institutions in addition to locating new sources of revenue. Together, implemented costs saving measures and new sources 67 of revenue will help to diminish the rate of increase for higher education’s increasing costs. CHAPTER 3 RESEARCH METHODS Purpose of the Study 68 The purpose of this study was three-fold. First, key factors in the escalating costs of higher education at private, faith-based institutions as perceived by Chief Financial Officers (CFOs) and Chief Advancement Officers (CAOs) at those institutions were examined. Second, potential sources of income and cost savings at private, faith-based institutions as perceived by CFOs and CAOs at those institutions were investigated. Third, similarities and differences in the perceptions of CFOs and CAOs at private, faithbased institutions regarding escalating costs, potential sources of income, and cost savings were examined. Key factors contributing to escalating costs, potential sources of income, and potential strategies for cost savings identified by public education institutions of higher education in the literature were utilized as a baseline for examination at faith-based institutions. In the context of analyzing and comparing rising costs, the researcher explored and researched populations that have historically not been studied. The vast majority of literature that examines the escalating costs of higher education relates to public, landgrant, research-based institutions that are funded by taxpayer initiatives. Most faithbased, private institutions do not have the benefit of receiving federal or state funding. There is an identifiable gap in the existing literature that examines the escalating costs of higher education in private, faith-based institutions. This study adds to the literature and provides insightful information that may assist private, faith-based institutions as they attempt to manage their rising costs. Population Description 69 One-hundred-five faith-based institutions are affiliated with the Council for Christian Colleges and Universities, hereafter referred to as the CCCU. The CCCU is an international higher education association of intentionally Christian colleges and universities. Founded in 1976 with 38 members, it has grown to 105 member institutions in North America with 74 other institutions affiliated from 23 countries. A variety of denominations are represented throughout the CCCU with sizes of the institutions ranging from approximately 6500 students at Indiana Wesleyan University to Redeemer College with almost 500 students. Total enrollment at all CCCU schools is approximately 175,000 students. The CCCU is headquartered in Washington, DC in the Capitol Hill district with the stated mission of advancing the cause of Christ-centered higher education and helping member institutions transform lives by faithfully relating scholarship and service to Biblical truth (CCCU, 2009). Of the 4,000 degree-granting higher education institutions in the United States, approximately 900 are self-designated as “religiously affiliated.” Only 105 intentionally Christ-centered institutions in the United States have qualified for membership in the CCCU. CCCU members must meet the following requirements: 1. Strong commitment to Christ-centered higher education 2. Located in the U.S. or Canada 3. Full regional accreditation for U.S. campuses 4. Primarily four-year comprehensive colleges and universities 5. Broad curricula rooted in the arts and sciences 6. Christians hired for all full-time faculty and administrative positions 70 7. Sound financial status Research Questions 1. What variables identified by public colleges and universities that contribute to the increasing costs of higher education are also identified by CFOs and CAOs at CCCU institutions? 2. Among variables affecting the increasing costs of faith-based higher education identified by CFOs and CAOs at CCCU institutions, how do they contribute? 3. What are the factors that CFOs and CAOs perceive to contribute to the escalating costs of higher education in faith-based institutions that are beyond costs related to inflation? 4. What solutions do CFOs and CAOs at CCCU institutions identify as available to faith-based higher education institutions that can facilitate more efficient operation that result in savings to students? 5. What solutions do CFOs and CAOs at CCCU institutions identify as available to faith-based higher education institutions that can facilitate an increase in revenue streams that result in savings to students? 6. What solutions do CFOs and CAOs at CCCU institutions identify as available to faith-based higher education institutions that can assist in diminishing the rate of costs escalation? 71 7. Is there a difference in perceptions of CFOs and CAOs concerning the factors that contribute to the increasing costs of higher education at faith-based institutions? Procedures Before the study began, approval from the Union University Institutional Review Board was secured. The population of CFOs and CAOs of CCCU schools was invited to participate. Participants were provided the opportunity to complete the survey online but were also mailed a copy of the survey by United States Postal Service with a return selfaddressed, stamped envelope for convenience. The participants were asked to respond within a two week time period after which an e-mail reminder was sent to each CFO and CAO. Second and third email reminders were sent to each CFO and CAO after the original invitation to participate. Due to low response rate, each university was contacted by telephone for the purpose of extending a personal invitation for participation and to collect information concerning employment of CFOs and CAOs at member institutions. It was found that 21 positions were either vacant or in an interim capacity. Measures were taken to insure the validity of the survey instrument. First, the survey was piloted with a small group of higher education CFOs and CAOs. Second, the survey instrument was reviewed by an advisory team of scholars to check for needed modifications to ensure that the survey was clear, reliable, and valid. The researcher examined, from the research literature, the factors that were shown to affect the cost of publicly-funded higher education institutions. Rather than comparing the schools to each other, the researcher compared the responses of CFOs to the responses of the CAOs to 72 identify potential trends that affect escalating higher education costs at faith-based institutions. Because of the high visibility of these executive level positions, anonymity was maximized. While no institutional names or locations were identified in the study, demographic analysis indicated the size of the institution, the location of the institution by region (northeast, mid-west, west, southeast, south-west), and university setting (urban, suburban, or rural) for the sake of comparison. The researcher utilized a mixed method approach; both open-ended questions and cross-sectional survey design was utilized. The statistical path identified differences in variables and solutions identified by CFOs and CAOs were evident. The dependent variables in this study were the escalating costs of higher education in faith-based institutions and potential sources of new revenue. Independent variables related to the escalating costs of higher education considered in this study include the following: 1. Attracting high quality faculty 2. Increased competition for the best and brightest students 3. Technology upgrades and purchases of new equipment 4. Construction of new facilities 5. Maintenance and renovation of aging facilities 6. New programs 7. Expansion of existing programs 8. Improved student services 9. Title IX compliance 73 10. Other Factors Independent variables related to potential sources of new revenue and budget savings Included: 1. Better management of energy resources, including energy saving renovations 2. Sharing of community resources 3. Outsourcing of core curriculum 4. Increased contributions from alumni and friends of the university 5. Increased planned giving from university donors 6. Student paid tuition 7. Long term retention of advancement staff for maximum productivity in fund raising Analysis of Data Question 1. A frequency analysis was run utilizing the identified factors that contribute to the increasing costs of higher education in CCCU member institutions. In order to answer Question 1, the researcher identified those variables that contributed to escalating costs in faith-based institutions affiliated with the CCCU. These variables were compared to those variables identified in the literature review that affect escalating costs in public colleges and universities. Question 2. Frequency analysis was used to interpret Question 2. Variables were identified that increase higher education costs more heavily than others. Question 3. A qualitative analysis was undertaken to determine which variables, if any, contributed to higher education’s escalating costs in faith-based institutions which 74 are beyond the rate of inflation. A qualitative analysis was appropriate for this question because there is no body of research available upon which to construct a quantitative response choice. The participants responded to an open-ended question. Responses were coded for themes. Question 4. Descriptive statistics and qualitative analysis was used to answer Question 4. The researcher was able to identify the solutions that are available to faithbased colleges and universities that can help them to operate more efficiently and thus diminish the rate of increase in higher education costs. Question 5. Descriptive statistics and qualitative analysis were used to answer Question 5. Solutions were identified that are available to faith-based colleges and universities that can help them to secure additional funds and result in a savings to students. Question 6. Descriptive statistics and qualitative analysis were used to answer Question 6. Solutions were identified that will help CCCU colleges and universities diminish the rate of increases in higher education costs. Question 7. In order to answer Question 7 the Mann-Whitney non-parametric test was utilized. Perceptions of CAOs and CFOs at CCCU member institutions were examined to determine if those who allocate dollars and those who raise dollars have similar views on escalating higher education costs. Limitations Although this study utilized the population of CFOs and CAOs from CCCU institutions in the United States, the response rate was low (25.8%); therefore, results 75 should be interpreted with caution. Furthermore, as with all survey research, the integrity of the research depends upon the honesty of the respondents. CHAPTER 4 FINDINGS First, demographic data is presented that describes the population of Chief Financial Officers (CFOs) and Chief Advancement Officers (CAOs) at CCCU 76 institutions who participated in the study. Second, the data are presented which address the seven research questions specified in this dissertation: 1. What variables identified by public colleges and universities that contribute to the increasing costs of higher education are also identified by CFOs and CAOs at CCCU institutions? 2. Among variables affecting the increasing costs of faith-based higher education identified by CFOs and CAOs at CCCU institutions, how do they contribute? 3. What are the factors that CFOs and CAOs perceive to contribute to the escalating costs of higher education in faith-based institutions that are beyond costs related to inflation? 4. What solutions do CFOs and CAOs at CCCU institutions identify as available to faith-based higher education institutions that can facilitate more efficient operation that result in savings to students? 5. What solutions do CFOs and CAOs at CCCU institutions identify as available to faith-based higher education institutions that can facilitate an increase in revenue streams that result in savings to students? 6. What solutions do CFOs and CAOs at CCCU institutions identify as available to faith-based higher education institutions that can assist in diminishing the rate of costs escalation? 77 7. Is there a difference in perceptions of CFOs and CAOs concerning the factors that contribute to the increasing costs of higher education at faith-based institutions? Participant Demographics There are 105 colleges and universities who hold membership in the Council for Christian Colleges and Universities (CCCU) in the United States and Canada. While there are other colleges and universities outside of North American associated with the CCCU, they are considered to have affiliate membership (CCCU, 2009). The population of CFOs and CAOs at the 105 CCCU institutions was given the opportunity to participate in the online research survey concerning factors that contribute to the rising costs of tuition at their institution. Forty-nine persons out of the possible 210 responded to the survey of which 29 were CFOs and 20 were CAOs, reflecting a response rate of 23%. It is noted that 21 positions were either vacant or had interim officers at the time of the survey, thus allowing for a population pool of 189 possible participants. Therefore, the actual response rate of the survey was 26%, still a low response. To attempt to increase survey participation, the researcher sent a third round of email requests for participation to those who had not responded. Further, phone calls were made to those offices of CFOs and CAOs to solicit their participation. Out of the 49 persons who participated in the survey, 29 (59.2%) were identified CFOs while 20 (40.8%) were CAOs at CCCU institutions. Table 1 indicates the participants’ approximate time served in their current position at the time of their participation in the study. Over half of CFOs (75.8%) and 78 CAOs (63.2%) had served at their institutions for 10 years or less. Only 10.5% of CAOs had served in their positions 16 years or more. A slightly larger percentage (13.8%) of CFOs has served 16 years or more. One CAO failed to respond to this question, yielding an n of 19. Furthermore, results indicated that most (81%) CFOs and CAOs were serving in institutions with ≤ 3000 students. Eighteen percent of participants are working in institutions with student populations of less than 1000 whereas 4% are in institutions with populations greater than 5000. In regards to institutional setting, participants were distributed equally throughout city size. For instance, 35% were working in institutions located in a large city (population of 250,000 or more), 20% were working in institutions located in a small city (population of 50,000 to 249,999), and 45% were working in institutions located in a small town (population of 49,000 or less). 79 Table 1 Time Spent in Current Position _______________________________________________________________________ Variable Frequency Percent _______________________________________________________________________ Chief Advancement Officers (n = 19) 0-4 years 6 31.6 5-10 years 6 31.6 11-15 years 5 26.3 Greater than 16 2 10.5 _______________________________________________________________________ Chief Financial Officers (n = 29) 0-4 years 4 13.8 5-10 years 18 62.0 11-15 years 3 10.3 Greater than 16 4 13.8 80 Statistical Results The Statistical Package for the Social Sciences (SPSS), Version 15.0 was used to analyze the data in order to answer the seven research questions. The subsections that follow provide an explanation of the analyses performed in order to answer each question. Questions 1 and 2. What variables identified by public colleges and universities that contribute to the increasing costs of higher education are also identified by CFOs and CAOs at CCCU institutions? Among variables affecting the increasing costs of faithbased higher education identified by CFOs and CAOs at CCCU institutions, how do they contribute? The population included CFOs and CAOs at the 105 institutions who are affiliated with the Council on Christian Colleges and Universities (CCCU). Forty-nine persons responded to the survey through the use of an online instrument administered through Survey Monkey. The responses were filtered to provide in-depth examination of the two groups and their responses. Those factors affecting rising costs in public institutions were listed in the survey. CFOs and CAOs at CCCU institutions were asked to rate these variables and their affect on escalating costs at their institutions. Furthermore, respondents had the opportunity to provide additional variables not listed that they believed contributed to the escalating costs of higher education at faith-based institutions. CFOs and CAOs were asked to rank the listed factors in the survey according to impact on cost escalation. 81 Descriptive statistics and rank order analysis were used to answer the research question. Factors that affect the escalating costs of faith-based higher education as perceived by CFOs and CAOs are delineated in Table 2. Five participants failed to respond to this question. Continuous updating and acquisition of information technology was noted by both CFOs and CAOs as the most significant factor affecting institutional costs. This factor was followed by the costs of attracting high quality faculty, construction of new facilities, and renovation and maintenance of existing facilities. Title IX compliance was noted as the least significant factor by both CFOs and CAOs. Ranking of factors were similar by CFOs and CAOs. 82 Table 2 Factors that Contribute to Increasing Costs Determined by CFOs and CAOs ______________________________________________________________________ Variables CFOs CAOs ______________________________________________________________________ M SD M SD ______________________________________________________________________ Updating/Acquisition of IT 4.25 .92 4.16 .90 Attracting high quality faculty 3.91 .83 3.80 .86 Construction of new facilities 3.86 1.21 3.67 1.33 Renovation/Maintenance 3.73 .95 3.54 .62 New academic programs 3.63 .87 3.79 .79 Student services 3.56 .73 3.58 .72 Expansion of existing programs 3.42 .73 3.43 .77 Title IX compliance 2.50 1.02 3.00 .90 _______________________________________________________________________ Note. N = 44 83 As stated, CFOs and CAOs had the opportunity in the survey to list factors that contributed to escalating costs not listed on the survey. Therefore, these findings reflect factors different from those noted at public institutions. Thirty-seven of the 49 participants responded to this question. Table 3 lists these factors and the number of CFOs and CAOs who noted each factor. Respondents indicated that institutional benefits such as health insurance were very influential in the escalating costs at their institutions, closely followed by the provision of services and amenities to university students. Other factors listed included institutional provision of scholarships and tuition discounts, marketing and promotion of the university to attract students and institutional support, and reduced income from endowments. 84 Table 3 Factors Affecting the Costs of Higher Education Determined by CFOs and CAOs Not Listed by Public Institutions. Variables CFOs CAOs 18 10 Upscale Student Services Amenities 8 6 Student Scholarships 3 4 Institutional Employee Benefits Health and Dental Insurance Retirement Employee Tuition Discounts Note: N = 49 85 Research Question 3. What are the factors that contribute to the escalating costs of higher education in CCCU institutions that are beyond costs related to inflation? CFOs and CAOs were asked to list those factors which they believed contributed to the escalating costs of higher education in their CCCU institutions beyond costs related to inflation. Qualitative analysis was utilized to identify themes and categories for both respondent groups. CFOs listed the cost of benefits for all employees, especially health insurance, to be particularly significant. CAOs listed the construction of new facilities as a primary factor related to escalating costs beyond inflation. Tables 4 and 5 describe the categories that emerged. 86 Table 4 Factors Affecting Escalating Costs Beyond Inflation: CFOs ________________________________________________________________________ Factors Description ________________________________________________________________________ Benefits for employees Health insurance, tuition discounts for employees and their dependents, and retirement account funding Unfunded student financial aid Providing financial aid beyond that provided by endowment income Expansion of staff Expansion or reallocation of staff to meet needs of new or expanded programs Technology and library resources Expanded use of online research capabilities, wireless computer access, and “smart” classrooms Student services Quality health and counseling services ________________________________________________________________________ Note. N = 29 87 Table 5 Factors Affecting Increasing Costs Beyond Inflation: CAOs ________________________________________________________________________ Factors Description ________________________________________________________________________ Construction of new facilities Competitive physical plants crucial to recruiting new faculty and attracting the best students Marketing Marketing of the university in order to maximize fundraising efforts is crucial and expensive. Competition for high quality students influence marketing trends. Travel Fundraising efforts require accessing donors. Energy and travel costs are increasing. ________________________________________________________________________ Note. N = 20 88 Research Question 4. What solutions do CFOs and CAOs at CCCU institutions identify as available to faith-based higher education institutions that can facilitate more efficient operations that result in savings to students? Overall, both CFOs and CAOs viewed cost savings solutions from very similar perspectives. Both administrators listed and ranked similarly those factors that affect operating efficiency at their institutions. Responses to open-ended questions were coded to establish categories and themes. Five participants failed to respond to this question. Findings from the literature review indicated that the most significant source of revenue for both public and private institutions is student paid tuition. Therefore, CFOs and CAOs were asked to consider factors that could increase revenue that would result in costs savings to students rather than cost increases to students through increased tuition. However, revenue from student paid tuition was noted by both CFOs and CAOs as the most significant source of revenue for CCCU institutions participating in this survey. Following student paid tuition, effective and efficient facilities management ranked high as a significant cost saving measure (61% of CFOs and 55% of CAOs responded that that this factor is a major source of savings), followed by regularly scheduled maintenance of facilities. The use of alternative fuels and “Life Cycle Costing” were listed as factors not in use at over 88% of the respondent’s institutions and was the least significant factor that contributed to cost savings and institutional operating efficiency. Table 6 indicates the solutions that were listed on the survey and the descriptive statistics of the ratings by the respondents. 89 Table 6 Factors That Affect Cost Savings and Operating Efficiency: CFOs and CAOs ________________________________________________________________________ Variables CFOs CAOs ________________________________________________________________________ M SD M SD ____________________________________________ Tuition Revenue 4.18 .82 4.45 .76 Capital Campaigns 3.82 1.08 3.89 1.08 Effective Facilities Management 3.61 .84 3.53 .73 Regularly Scheduled Maintenance 3.44 .98 3.56 .92 Alumni Giving 3.34 1.18 3.77 .96 Endowment 3.32 1.77 3.49 1.94 Planned Giving 3.27 1.07 3.49 1.17 Energy Efficient Lighting 3.17 1.14 3.37 .99 Life Cycle Costing 2.86 1.19 2.68 1.24 Water Saving Devices 2.71 1.01 2.62 1.13 Use of Alternative Fuels 2.02 1.12 2.13 .70 ________________________________________________________________________ Note. N = 44 90 Respondents had the opportunity to respond to an open-ended question asking for solutions available to faith-based institutions that were not listed on the survey. Both respondent groups agreed that increasing student/faculty ratio would improve costs escalation. CFOs noted that better and more efficient athletic team travel could result in a significant cost savings. Both CFOs and CAOs indicated that more efficient heating and cooling systems at their institutions would contribute to saving financial resources. Improved managerial practices such as updating technology to lower the number of support staff, more efficient financial tracking systems, better training of employees, and reduction of employee benefits were cited as potentially significant sources of costs reduction. However, both CFOs and CAOs responded that student paid tuition followed by funds raised from capital campaigns provided the vast majority of funding for university operations and for campus construction projects. Table 7 delineates the factors noted by the CFOs and CAOs that affect cost savings and operating efficiency at faithbased institutions and the number in each group that indicated that factor. 91 Table 7 Factors That Affect Cost Savings and Operating Efficiency Determined by CFOs and CAOs Not Listed by Public Institutions Variables CFOs CAOs Increased Student/Faculty Ratio 13 9 Efficient Healing and Cooling 10 6 Improved Financial Tracking 2 2 Employee Training 2 1 Benefit Reduction 1 1 1 1 Improved Managerial Practices Efficient Athletic Team Travel _______________________________________________________________________ Note: N = 49 92 Research Question 5. What solutions do CFOs and CAOs at CCCU institutions identify as available to faith-based higher education institutions that can facilitate an increase in revenue streams that result in savings to students? Table 8 lists those factors rated by CFOs and CAOs that can assist in increasing revenue streams resulting in savings to students. Operating efficiency ranked high among responding CFOs and CAOs as a source of institutional savings, thus making more funds available for other needs at the institution. Noted as well is the importance of alumni contributions to the institution, either in the form of undesignated gifts to the Annual Fund, or as designated gifts to a particular department, school, or discipline. Alumni gifts are often designated for student scholarships as well. Alumni participation to the annual fund is particularly significant. National rankings in some of the most prestigious annual reports such as U.S. News and World Reports College Rankings will list among other criteria the percentage of alumni giving to the institution. Obviously, a high percentage of alumni giving to the annual fund assist the institution in achieving a higher ranking by such organizations while contributing to revenue streams of the institution. Capital campaigns are most often used to increase endowment or construct new buildings or facilities. Donors and stakeholders for the university will often give to a capital campaign for personal recognition or simply out of a sense of loyalty to the institution. Gifts to a capital campaign may be designated or undesignated. It is most desirable for the institution to receive undesignated gifts so that donor dollars may be used where they are most needed. 93 Endowment funds are the most difficult monies to raise. Income generated from invested endowment funds can be used to support a variety of programs and needs. However, in time of hardship or economic recession income from endowments will be diminished. In turn, institutions that depend heavily on endowment income for operations have difficulty developing a budget, and many times faculty and staff must be cut due to the shortfall. Table 8 Factors Contributing to Increased Revenue Streams Resulting in Savings to Students ________________________________________________________________________ Factors CFOs CAOs _______________________________________________ M SD M SD ________________________________________________________________________ Operating efficiency 4.17 .75 4.25 .96 Capital campaigns 3.82 1.08 3.97 .90 Alumni giving 3.34 1.18 3.76 1.00 Endowments 3.32 1.77 3.70 1.24 Effect of tenured development staff 3.21 1.19 3.47 1.00 Note. N = 44 94 Research Question 6. What solutions do CFOs and CAOs at CCCU institutions identify as available to faith-based higher education institutions that can assist in diminishing the rate of costs escalation? Descriptive statistics were utilized to analyze responses to listed items on the survey and qualitative analysis was utilized check for themes on the open-ended item. Overall, both CFOs and CAOs believed that better facilities management along with scheduled maintenance procedures would result in a diminished rate of costs escalation. CFOs and CAOs listed several solutions that they have used at faith-based institutions that were not found in the literature related to public institutions. Among the themes found from their responses were better control of utilities usage, energy conversation practices, and a heightened awareness of personal responsibility for institutional savings among faculty and staff. Surveyed administrators responded that regularly scheduled maintenance procedures would result in long-term savings and deter the need for major repairs and renovations in the future. Research Question 7. Is there a difference in perceptions of CFOs and CAOs concerning the factors that contribute to the increasing costs of higher education at faithbased institutions? The Chi-Square test was performed to determine any significant differences in the perceptions of CFOs and CAOs relating to the factors which affect increasing costs of higher education at CCCU institutions. The evaluation was made based upon the 49 responses of CFOs and CAOs at CCCU institutions. The Chi-Square statistical analysis resulted in a significance value of .067. There was no significant difference in the 95 responses of CFOs and CAOs concerning factors related to the increasing costs of higher education at CCCU institutions. However, other findings were noted related to differences in response pattern between the groups. Whereas there was a larger standard deviation among CFOs related to the affect of renovation and maintenance factors on costs escalation, CAOs overwhelming responded that renovation and maintenance issues were very influential in contributing to costs escalation. A minor difference in perspective was noted as CFOs responded that Title IX issues were not at all influential factors in costs escalation while CAOs thought that Title IX issues and regulations were moderately to very influential on escalating costs. On the other hand, both administrators believed that attracting and retaining high quality faculty, updating information technology, construction of new facilities, and top quality student services and amenities contributed most to increased costs. 96 CHAPTER 5 DISCUSSION While a significant amount of research has been undertaken to study the factors which affect the escalating cost of higher education, most of this research has involved publicly-funded higher education institutions that are funded to a great degree by taxpayer dollars. This research is discussed in Chapter 2. The findings in this study produced original data which explored the escalating costs of higher education in faith-based institutions as opposed to taxpayer-funded public higher education institutions. There are some similarities in factors affecting escalating costs and funding solutions between public universities and faith-based institutions. However, there are also some significant differences in these two types of institutions when studying those factors which affect rising costs and the strategies utilized to increase revenue streams that will potentially offset some of the increases in costs. Escalating Costs Administrators at both publicly-funded and faith-based institutions cited several key factors that contributed to escalating costs at their institutions: 1. Improvements and additions to Information Technology (IT) 2. Attracting high quality faculty 3. Construction of new facilities 4. Maintenance of facilities 5. Renovation of facilities for new programs or expansion of existing programs 97 6. Student services 7. Expansion of existing programs The respondents in this study were Chief Financial Officers (CFOs) and Chief Advancement Officers (CAOs) serving at higher education institutions that were members of the Council of Christian Colleges and Universities (CCCU). The research literature (e.g., Baumol, 2005; Eisenberg et al., 2006; Lohman, 2005) and respondents in this study indicated that the cost of updating IT to keep up with the fast-paced technological demands of the academic environment is a major contributor to the escalating costs of higher education. Eisenberg et al. (2006) noted that most institutions consider technology as an addendum to the budget instead of a line item in the budget. The authors argued that this practice is impractical because the updating of technology is mandatory to meet student and faculty needs in an academic environment. In addition, attracting high-quality faculty was identified in the literature and by the respondents as a significant factor in the escalating costs of higher education. King (2000) stated that the key to attracting the best and brightest students to any campus is to provide the programs in which they choose to study and to provide high-quality faculty in those programs. He explained that if liberal arts-based institutions are to attract high-quality, researchoriented, publishing faculty, high dollars are needed. These dollars are not limited to salaries and must include provisions for research facilities, auxiliary staff, benefits, and technology. It was determined that there are similar factors that contribute to escalating costs on the campuses of both public and faith-based institutions; however, there are several 98 differences. Public institutions and their funds are driven by public policy and taxpayer dollars which are subject to the political and economic climate. In times of economic growth, funding for public universities seems to be adequate. On the other hand, during economic recessions or depressions, publicly-funded institutions face severe budget cuts that involve program cutbacks and even employee layoffs. Most faith-based institutions are financially driven by student tuition. Whereas this practice may seem to be a tremendous liability for private, faith-based institutions, these same institutions are not affected by legislative budget shortfalls that are generated by diminished tax revenues and job losses in the public sector. A caveat to tuition-driven institutions is that growth in the budget must be accommodated through increases in student tuition or budget cuts in other institutional areas. An issue strongly connected to student scholarships and financial aid is a practice known as tuition discounting. While attractive to potential students, the practice can be destructive to the institution’s budget if the student discounts are excessive, thereby, resulting in budget shortfalls for the institution. Results from the 2009 NACUBO Discounting Study revealed that the average tuition discount rate for first-time, full-time freshmen in the fall of 2008 was 42%. Private colleges who cannot afford these high tuition discount rates will find themselves facing difficult times and perhaps closure. Finally, CFOs and CAOs listed the following factors that contribute to the escalating costs of higher education specific to faith-based institutions: 1. Institutional benefits a. Health and dental insurance 99 b. Tuition discounts for employees and employee dependents c. Retirement funding 2. Provision of high-end student services 3. Unfunded student financial aid/scholarships 4. Library resources 5. Expansion of staff 6. Marketing to prospective students and donors 7. Heightened awareness of university status through highly publicized university events, public service, and presentations 8. Travel Institutional benefits such as health insurance, provision of services and amenities to university students, institutional provision of scholarships and tuition discounts, marketing and promotion of the university to attract students, marketing to attract institutional support from existing and potential donors, and reduced income from endowments contribute to cost escalation. The majority of respondents in this study serves at small institutions (≤ 3000 students); therefore, may be more affected by the cost of health insurance than most large, public systems. Furthermore, faith-based institutions typically absorb tuition discounts given to employees whereas tuition discounts at public institutions are provided through tax dollars. Faith-based institutions do not receive tax dollars; therefore, they are dependent upon revenue from funds such as endowment earnings and tuition. 100 Marketing for institutional support to attract donors is vital, yet costly. The university magazine, special events, community service, publicity, and advertising in print and visual media contribute to the heightened awareness of the university and its success (or lack thereof) in the community, regionally, and nationally. Additionally, faith-based institutions spend money attracting the best students and provide scholarships to these students, resulting in escalating institutional costs. Institutions which offer a multitude of scholarships for students in order to decrease the burden of tuition must be certain that these scholarships are funded, which contribute to an increase in the budget. Solutions University administrators serving at both public and faith-based institutions of higher education are searching for ways to increase their revenue streams to offset increases in their institutional budgets. CFOs and CAOs in this study indicated several factors also noted by public higher education institutions that may be utilized as solutions to reduce the escalating costs of higher education. In addition, respondents differed in two respects. First, they rated some solutions as unimportant that were noted as important by public institutions. Second, respondents reported several solutions that were not indicated by public institutions. Solutions reported to be important in diminishing the escalating costs of higher education and contributing to increased revenue streams by both public institutions and faith-based institutions include the following: 1. Student tuition 2. Capital campaigns 101 3. Efficient facilities management 4. Regularly scheduled maintenance of facilities 5. Alumni giving 6. Endowment 7. Planned giving 8. Effect of tenured development staff Budget increases due to inflation, increases in employee benefits for faculty and staff, program growth, and the provision of high-end student services all contribute to increasing costs. Whereas new construction is primarily funded through capital campaign projects in faith-based institutions, publicly-funded institutions go to public coffers for fund increases for capital projects and improvements. During difficult economic times, these funds are typically not available. Private institutions often utilize income from endowments to support their budgets and also to offset increases in budget spending. Endowments at both public and faithbased institutions vary in size and funds available to support the budget. However, difficult economic times take a tremendous toll on the resources that are generated from endowments due to losses on investments. During times of recession, when income from investments is down, institutions which depend on endowment fund income to supplement their budgets and operations face challenging times. For instance, Yale University, which experienced a significant endowment decline in the 2008 fiscal year, is being forced to delay expansion plans indefinitely. Yale’s large endowment (second only to Harvard University) fell 30% from $36.9 billion to $16 billion as of June 30, 2008. 102 Yale’s endowment supports 44% of the university’s annual operating budget. Among Yale’s 9,000 non-faculty employees, the university fired 59 in its first round of cost cuts. Another 541 left the school either on their own or after accepting a buyout (Lorin & Staley, 2009). Most faith-based institutions are independently managed by university administrators with advice and leadership from trustees of the institution and the influence of some type of denominational board or convention that cooperates with the university. Some denominations contribute more than others to their faith-based universities. However, it is not likely that the percentage of denominational contributions and support to the institution’s budget keeps pace with the escalating costs of higher education and the increase in budgets. No data was available to determine how much denominations in general contribute to their respective higher education institutions. However, it may be noted that funds may also be generated from donors that are affiliated with these denominations. It takes more than student-paid tuition and support from the denomination to support most faith-based institutions. As pointed out in this research (i.e., Hartsook, 2004), donors are more likely to give to an institution that has a strong sense of direction and vision for the institution as well as a long history of personal relationships with individuals on staff, particularly development staff. The university must be able to communicate regularly with a strong sense of mission and vision that will invoke confidence, enthusiasm, and institutional support. The role of the university President is crucial, for his or her leadership sets the standard by which all other administrators, 103 faculty, staff, and students will work together to accomplish the mission of the university. This kind of confidence will likely inspire donors to make undesignated gifts to the annual fund, support a growing endowment, give to a capital campaign project, and invest in student scholarships. Solutions reported to be important in diminishing the escalating costs of higher education and contributing to increased revenue streams by public institutions only include the following: 1. Energy efficient lighting and windows 2. Life Cycle Costing 3. Water saving devices 4. Use of alternative fuels Few of the respondents noted that they utilized energy saving solutions such as energy efficient lighting and windows, Life Cycle Costing, water saving devices, or alternative fuels as a solution to the escalating costs of higher education. However, CFOs and CAOs reported the rising cost of energy and utilities as a factor in escalating costs. Since the price of utilities is a factor in higher education cost escalation, institutions should consider solutions involving energy savings. Perhaps respondents in this study rated these items differently due to their position in the institution. For instance, the sample in the research literature regarding energy and utilities (i.e., Agron, 1999; Agron, 2005; Agron, 2007; Agron, 2008) consisted of physical plant directors. This group would typically be attuned to energy and utility needs of the institution. On the other hand, respondents in this study were CFOs and CAOs, those responsible for the budget and 104 fundraising for the institution. It is likely that differences in response were simply due to awareness resulting from job responsibilities. Nonetheless, institutions should consider a major paradigm shift among its campus populations including faculty, staff, administrators, and students. An increased awareness of energy conservation should be implemented on the campus so that all populations are aware that energy usage costs significant dollars and wasted energy means wasted dollars, which then transfers to increased operational costs for the university and increased tuition costs for students and their families. Institutions should seriously consider Life Cycle Costing and efficient energy practices to be certain that they are using their facilities management dollars as wisely as possible. Solutions reported to be important in diminishing the escalating costs of higher education and contributing to increased revenue streams by faith-based institutions only include the following: 1. Increased student/faculty ratio 2. Efficient athletic team travel 3. Energy conservation practices a. Control of utilities usage b. Efficient heating and cooling systems 4. Improved management practices a. Efficient financial tracking b. Better employee training 105 c. Reduction of employee benefits d. Awareness of institutional savings among faculty and staff While certainly not the most desired means of increasing revenue, the increase of the faculty/student ratio was mentioned by the respondents in this survey. Those institutions, however, who are most interested in the highest academically challenging environment may not consider this practice as a viable alternative. A low faculty/student ratio is crucial as students and faculty seek to form and maintain a relationship that produces a more fulfilling and enlightened educational experience. Ehrenberg (2004a) noted that those institutions which seek to be the most academically challenging will seek out every resource to achieve academic excellence through a low faculty/student ratio. Furthermore, universities seeking to maintain their high rankings in the national journals will maintain a low faculty/student ratio. Whereas raising faculty/student ratio may not be considered by institutions, other solutions mentioned by CFOs and CAOs are viable options for faith-based institutions in reducing costs escalation and increasing revenue streams. Energy conservation with utilities control along with efficient and reliable heating and air conditioning systems (HVAC) could be a key tool in achieving budget savings. According to Agron (2005), some HVAC systems need major repairs or replacement within as little as 10 years. As technology has increased on university campuses, the need for adequate, expanded, reliable, consistent temperature control is essential. Kennedy (2009) suggested that energy upgrades across the nation’s college campuses could save as much as $1.5 billion annually. 106 Higher education institutions need a major paradigm shift that will lead administrators, faculty, staff, and students to think more conscientiously about saving energy and conserving resources, both natural and financial. This paradigm shift will require training of all staff and students so that they become more intentionally aware of behavior that will generate budget savings through energy conservation. Altering behavior by simply turning off lights in unoccupied areas and shutting off unused computers can generate significant savings. Rewarding employees for increased productivity and efficiency on the university campus is a creative way of raising awareness and motivating employees. Campus campaigns to promote energy efficiency can be extremely beneficial as the university seeks to be more frugal. Once again, recognition and rewards are tremendous motivational tools for employees. Better training through an ongoing program of staff development was listed by CFOs and CAOs as a tool to enhance workplace efficiency and productivity in the university setting. With an adequate reward/incentives program for all employees, budget savings and quality of service to students, donors, and other stakeholders should be enhanced. For those institutions desiring excellence in all facets of university life, an ongoing program of staff development is essential for the university and rewarding for employees. Most universities are not fully aware of how all of their financial resources are expended. Better financial tracking systems that contribute to a heightened awareness of ongoing expenditures and accountability for resources by budget managers are essential tools for managing and saving financial resources. For those departments which achieve a 107 high level of resource management, recognition and rewards should be given by the university. Better management of financial resources and a workforce that is highly motivated and productive will most likely result in budget savings. Some institutions may need to reduce their work force in order to remain solvent. While this is not the most desired solution, reduced resources in a time of economic decline, recession, or depression will assist institutions in becoming more financially stable. A reduction in employee benefits is another way to reduce costs. Health insurance alone has increased 20% to 40% over each of the last five years and, in most cases, this increase is absorbed by the university budget. Retirement contributions for employees by the institution are also a source of significant expense. Again, while decreasing of any type of employee benefit is not the most popular means of managing the budget, in financially challenging times it is an option. Perspective Comparison: CFOs and CAOs Results indicated that CFOs and CAOs at CCCU institutions have similar perspectives concerning factors that contribute to the escalating costs in faith-based higher education. It is important for these two administrators to have similar views on this issue and others in the university setting. CFOs administer the budget whereas CAOs are responsible for raising the funds over and above student paid tuition to run the institution. CFOs and CAOs are generally a part of a senior level administrative coordinating team that maintains a high level of communication. This team is generally coordinated by the President of the university or a person of his choosing. CFOs and 108 CAOs work together to coordinate resources and needs of the university. As private, faith-based institutions face the challenges of meeting needs with adequate resources, a strong element of faith is exercised as we seek a provisional God along with alumni, friends, donors, and stakeholders who are willing to invest in the mission and vision of the university. Should the university CFO and CAO have significant, differing views, spoken or unspoken, the institution may not function at an optimum level. Limitations Participation in the study by the population of CFOs and CAOs at CCCU faithbased institutions was quite small. Forty-nine administrators (29 CFOs and 20 CAOs) participated in the survey out of 168 potential research participants. A larger sample could have possibly produced more response diversity or given stronger affirmation to the information cited. Furthermore, as with all survey research, the integrity of this research is dependent upon the honesty of the respondents. Implications There are several implications for this study. These implications are delineated below. • Institutions of higher education should intentionally employ a staff and student development campaign to teach energy conservation on their campuses. Energy conservation campus-wide will result in savings to the institution which will result in savings to students. • The model of good stewardship of resources may have the added benefit of building credibility among the institution’s constituents (alumni, 109 parents, corporations, foundations, churches, etc.) that will assist in raising funds and other types of support. • As colleges and universities examine new and renovated/remodeled space for new and expanding programs, solutions for maintaining these spaces in the long term must be considered. With Life Cycle Costing, the projected building maintenance is built into the costs of the building in its planning stages. • Institutions should examine and update all buildings for energy efficiency. As technology has advanced, so have energy-saving devices such as lighting, windows, water fixtures, and HVAC systems. • CFOs and CAOs at faith-based institutions should maintain a conversation about all issues that affect the university in order to decrease the escalating costs of higher education at their institution. Recommendations for Future Research The results of this research identifying factors in private, faith-based universities that affect cost escalation do not differ significantly from those factors identified by public, land-grant institutions. Key differences lie in how these two types of institutions are funded. While public universities are funded by tax dollars through budgets enacted by state legislatures, private, faith-based institutions are primarily funded by student-paid tuition. Private, faith-based institutions have the freedom to raise additional resources from their constituents: alumni, friends, foundations, corporations, and other donors. In challenging economic times, funds allocated for public institutions through the legislature 110 are generally cut, which may result in significant reduction of services to students, layoffs of faculty and other employees, and a halt of construction projects. These same challenging economic times will also affect private, faith-based institutions as income from endowments that support the budget is diminished. It is recommended that higher education institutions move quickly to institute programs that will promote energy efficiency and conservation of resources. In light of current cultural issues related to energy and resource conservation and efficiency, the depressed economy, and loss of jobs in the workforce, there is much potential for further research into areas that will promote “green thinking” and operations on college and university campuses. New solutions that will assist universities in saving resources, promoting efficient budget management, and diminishing the rate of cost escalation on the campuses of private, faith-based institutions will be welcomed. This type of research will hopefully result in a declining rate of escalation in student-paid tuition that will result in savings for students. The discovery of cost saving measures that will conserve energy and dollars is a worthwhile area of study that would have significant implications for generations to come. Recycling is a must for future generations if we are to be guaranteed much needed resources for a growing world population. Studies researching the institution of alternative fuel conversions such as wind or solar energy and usage for the operation of campus facilities and vehicles could prove to be transformational in managing escalating costs, on both public and private, faith-based university campuses. The general population in the United States has enjoyed plentiful resources for many generations. It is imperative that colleges and universities model a new way of thinking, a 111 paradigm shift that will ensure sufficient resources for the generations to come. Resulting savings will help students, both current and future, achieve an excellence-driven higher education at a reasonable cost that will significantly impact their opportunities in the future. 112 REFERENCES 113 REFERENCES Agron, J. (1999). 25th annual maintenance and operations cost study. American School and University,11(4), 56-59. Agron, J. (2005). Betting the house. American School and University,4(12),42-44. 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