Budgets and Financial Management in Higher Education E-Book

Margaret J. Barr

• Herausgeber: John Wiley & Sons
• Kategorie: Bildung
• Sprache: Englisch

Seitenzahl: 296

Veröffentlichungsjahr: 2010

Beschreibung

Budgets and Financial Management in Higher Education This thoroughly updated and expanded edition of the classic resource The Jossey-Bass Academic Administrator's Guide to Budgets and Financial Management will help administrators become more proficient in their financial management roles. Grounded in the latest knowledge and filled with illustrative examples from diverse institutions, as well as helpful reflection questions, the book's guidance can be put to immediate use. In addition, the authors suggest ways of avoiding common pitfalls and address what to do when faced with budget fluctuations and changing fiscal environments. "This book is vitally important for understanding the complex financial underpinnings of higher education. Could there be a more critical time for administrators to add to their knowledge in this area? I don't think so." --EUGENE S. SUNSHINE, senior vice president for business and finance, Northwestern University "The authors have produced an easily readable and valuable resource for board members, administrators, students, faculty, or anyone interested in knowing about budgeting and the budgeting process. Their treatment of the subject is thorough and complete." --LARRY H. DIETZ, vice chancellor for student affairs, Southern Illinois University, Carbondale "This is the best 'nitty-gritty-how-to' book on university budgeting that I have found. My graduate students at both the master's and doctoral levels have found it to be a comprehensive, insightful, and useful tool in their graduate studies." --LINDA KUK, program chair, Higher Education Graduate Programs, and associate professor of education, Colorado State University

Leseprobe

Contents

Figures, Tables, and Exhibits

Preface

About the Authors

Chapter 1: The Fiscal Context and the Role of the Budget Manager

The Fiscal Context of American Higher Education

Differences Between Public and Private Institutions

The Role of a Budget Manager

Why Does All This Matter?

Alpha University

Reflection Questions

Chapter 2: Primary Elements of the Budget

Revenues

Expenditures

Conclusion

Reflection Questions

Chapter 3: Understanding Budgets

Purposes of a Budget

Types of Budgets

Organizing and Expressing Budgets

Common Budget Models

Decision Making and Budgets

Conclusion

Reflection Questions

Chapter 4: Management of the Budget Cycle

General Issues

The Fiscal Year Operating Budget

Forecasting Expense and Revenue

Developing Unit Budget Requests

Approving the Budget

Continuous Management of the Operating Budget

Conclusion

Reflection Questions

Chapter 5: Understanding Auxiliary and Capital Budgets

Auxiliary Budgets

Capital Budgets

Conclusion

Reflection Questions

Chapter 6: Problems and Pitfalls in Budget Management

Common Issues

Common Pitfalls

Postponing a Problem

Advice to New Budget Managers

The Attitude Factor

Reflection Questions

Chapter 7: Managing Budget Fluctuations

Reasons for Budget Cuts

Institutional Approaches to Budget Reductions

Managing Budgetary Opportunities

Conclusion

Case Studies

Glossary of Terms

Index

Budgets and Financial Management in Higher Education

Copyright © 2011 by John Wiley & Sons, Inc. All rights reserved.

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Library of Congress Cataloging-in-Publication Data

Barr, Margaret J.

Budgets and financial management in higher education / Margaret J. Barr, George S. McClellan.

p. cm.—(The Jossey-Bass higher and adult education series)

Includes bibliographical references and index.

ISBN 978-0-470-61620-8 (hardback); ISBN 978-0-470-92312-2 (ebk); ISBN 978-0-470-92313-9 (ebk); ISBN 978-0-470-92315-3 (ebk)

1. Education, Higher—United States—Finance. 2. Universities and colleges—United States—Business management. I. McClellan, George S. II. Title.

LB2342.B3245 2011

378.1'06—dc22

2010037992

The Jossey-Bass

Higher and Adult Education Series

Figures, Tables, and Exhibits

Figures

Figure 1.1.Relationships in Financing of Higher EducationFigure 1.2.Distribution of Revenues by Source in Higher EducationFigure 4.1.A Typical Budget Unit Cycle

Tables

Table 3.1.Functional Expression of Revenues for Unit in Alpha University HospitalTable 3.2.Natural Expression of Expenses for Administrative Unit and Academic Unit in Alpha UniversityTable 3.3.Impact of Various Funding Formulas on Alpha UniversityTable 3.4.Strengths and Limitations of Budget ModelsTable 4.1.Typical Institutional and Unit Budget SchedulesTable 5.1.Alpha University Continuing Education Revenue from Tuition and FeesTable 5.2.Alpha University Continuing Education Revenue from Tuition and Fees Accounting for Response to Local Manufacturer’s DecisionTable 5.3.Alpha University Continuing Education Revenue from Tuition and Fees Accounting for Increased Local CompetitionTable 5.4.Alpha University Continuing Education Revenue from Tuition and Fees Reflecting Two New InitiativesTable 5.5.Capital Budget for Alpha University ProjectTable 5.6.Moody’s and S&P Ratings

Exhibits

Exhibit 4.1.Typical Additional Unit Budget GuidelinesExhibit 4.2.Six Pitfalls in Preparing Budget DocumentsExhibit 6.1.Avoiding Pitfalls in Budget Management

Preface

Most administrators in institutions of higher education carry responsibility for budget management. It may be only one of many parts of their responsibilities but it is critical to their success. Individuals charged with budget responsibility, however, often do not have training or experience in managing this important function. Assumptions are often made that because a person is experienced in program development, teaching, or research that they are familiar with the basic principles of budgeting and financial management. This is not necessarily true, and this volume has been written to fill part of that gap in knowledge and experience.

The target audiences for the volume include managers in a variety of roles within higher education, including director, dean, vice president, department chair, coordinator, and program director. Graduate students studying higher education administration at both the master’s and doctoral level will also find this version of the book to be useful. This volume is intended for those with limited exposure to higher education budgets and fiscal management. Written in plain language, it is intended for readers who do not have a strong background in matters financial.

This text is based on a successful 2002 monograph, The Jossey-Bass Academic Administrator’s Guide to Budgets and Financial Management. The original monograph was focused on helping those new to budget responsibilities in academic affairs understand the language and the processes of budget management in higher education. This edition builds on that work but expands it in some critical areas, including an expanded focus on budget models in higher education and an expanded discussion of the fiscal management of auxiliary enterprises. The text has also been expanded to address the broader audience of those with new or expanded budget responsibilities in higher education and to include a more in-depth discussion of the factors involved in developing and implementing an institutional budget. Information has been updated throughout the text to reflect contemporary conditions in higher education. Auxiliary and capital budgets are covered in greater depth in a separate chapter. A case study involving budget increases at Alpha University in Chapter One provides an opportunity for readers to apply information learned to an actual situation. The fictional Alpha University is referenced many times in subsequent chapters to illustrate important concepts. Alpha University is revisited in another case study in Chapter Seven and provides an opportunity for readers to apply what they have learned. Chapter Seven also contains a case study on Omega College added to illustrate the unique challenges facing smaller, private, tuition-dependent universities. Each chapter closes with a set of reflective questions to help the reader apply the information to the specific set of circumstances and challenges that they face.

Chapter One, “The Fiscal Context and the Role of the Budget Manager,” discusses the broader fiscal forces that influence funding in American higher education. In addition, the chapter contains a discussion of the role of a budget manager (whether it is a full or part-time responsibility) within a budgetary unit and within the greater institutional environment. Chapter Two, “Primary Elements of the Budget: Revenue and Expenses,” presents the various sources of revenue and the broad categories of expenses that characterize budgets in higher education. Attention is given to the issues that should be confronted when dealing with revenue and expenses. Chapter Three, “Understanding Budgets,” discusses the purposes of the budget, the different types of budgets, and the different budget models that may be part of the responsibility of any administrator in higher education. In Chapter Four, “Management of the Budget Cycle,” the discussion centers on the ongoing nature of budget management and the need to understand the past, present, and future fiscal issues of the budget unit. Auxiliary enterprises and capital budgets provide special issues in fiscal management. Chapter Five, “Understanding Auxiliary and Capital Budgets,” clarifies the challenges and opportunities facing budget managers dealing with those enterprises. Any administrative position is fraught with problems that must be solved and pitfalls that should be avoided; budget management is no exception. Chapter Six, “Problems and Pitfalls in Budget Management,” discusses those issues in detail and suggests how to confront problems and avoid pitfalls. Finally, Chapter Seven, “Managing Budget Fluctuations,” offers suggestions on how to manage both budget cuts and new resources flowing into the institution and budget unit. Also in Chapter Seven, Alpha University is revisited in an additional case study with budget reductions as the task for the reader. Chapter Seven also contains a new case study on Omega college that permits the reader to apply the information learned throughout the volume. The book concludes with a Glossary of Terms, which we hope will be helpful to readers in understanding the terminology used throughout the volume as well as in their daily work as budget managers within an institution of higher education.

Acknowledgments

Peggy Barr would like to thank her colleagues at several institutions for helping her gain an understanding of financial matters in higher education. Those individuals include John Pembroke, Leigh Secrest, the late Bill Fischer, Gene Sunshine, Sheila Driscoll, and Eric Wachtel. She would also like to thank her family and friends for their support and her colleague George McClellan for his quality contributions to the volume.

George McClellan is grateful to all those who have helped shape his journey in the student affairs profession, not the least of whom are the students who have allowed him in ways direct and indirect to be a part of their amazing stories. Particular thanks go to two colleagues at Indiana University–Purdue University Fort Wayne: Chancellor Mike Wartell for his continued support for George’s efforts as a practitioner scholar and Dave Reynolds for being a truly wonderful budget manager. Last but not least, George is particularly thankful to Peggy Barr for being his mentor, friend, and partner for this project.

Our purpose was to write a book that instructs, informs, and aids our colleagues who are facing fiscal management responsibilities as part of their responsibilities. We hope it does that.

Margaret J. Barr

Evanston, Illinois

George S. McClellan

Fort Wayne, Indiana

About the Authors

Margaret J. Barr served as vice president for student affairs at Northwestern University from October 1992 until July 2000 when she retired. She currently is professor emeritus in the School of Education and Social Policy at Northwestern and is engaged in part-time consulting, writing, and volunteer work. Prior to her appointment at Northwestern, she was vice chancellor for student affairs at Texas Christian University for eight years. She also served as vice president for student affairs at Northern Illinois University from 1982 to 1985 and was assistant vice president for student affairs at that same institution from 1980 to 1982. She was first assistant and then associate dean of students at the University of Texas at Austin from 1971 through 1980. She has also served as director of housing and director of the college union at Trenton State College and assistant director and director of women’s residences at the State University of New York at Binghamton.

In her various administrative roles, Barr has always carried responsibilities for supervision of operating budgets. During her eighteen years as a vice president, she supervised operating and reserve budgets for both auxiliary and institutionally allocated budgets. She has been involved in a number of capital projects, including the construction of new residence halls, new recreation facilities, and dining facilities and renovations of multicultural centers, residential units, and an academic advising center.

She has held numerous leadership positions with the American College Personnel Association (ACPA), including a term as president (1983–1984). She has been the recipient of the ACPA Contribution to Knowledge Award (1990) and Professional Service Award (1986) and was an ACPA Senior Scholar from 1986 to 1991.

She also has been active in the National Association of Student Personnel Administrators (NASPA), including service as the director of the NASPA Institute for Chief Student Affairs Officers (1989, 1990) and president of the NASPA Foundation Board (2000–2002). Barr was the recipient of the NASPA Outstanding Contribution to Literature and Research Award in 1986, the award for Outstanding Contribution to Higher Education in 2000, and was named a Pillar of the Profession by the NASPA Foundation in that same year.

She is the author or editor of numerous books and monographs, including, The Handbook of Student Affairs Administration (1993), co-editor of the second edition of The Handbook of Student Affairs Administration (2000) with M. Desler, co-author of Critical Issues for Student Affairs (2006) with Arthur Sandeen, co-editor of New Futures for Student Affairs with M. Lee Upcraft (1990), the editor of Student Affairs and the Law (1988), and co-editor of Developing Effective Student Service Programs: A Guide for Practitioners with L. A. Keating (1985). She served as editor-in-chief for the monograph series New Directions for Student Services from 1986 to 1998. She also is the author of numerous books and monograph chapters.

Barr received a bachelor’s degree in elementary education from the State University of New York College at Buffalo in 1961 and a master’s degree in college student personnel–higher education from Southern Illinois University, Carbondale, in 1964. She received a PhD in educational administration from the University of Texas at Austin in 1980.

George S. McClellan is the vice chancellor for student affairs at Indiana University–Purdue University Fort Wayne (IPFW). Before coming to IPFW, he was vice president for student development at Dickinson State University in Dickinson, North Dakota, and served students in a variety of roles at the University of Arizona and Northwestern University. During his service at Northwestern University, McClellan held a variety of professional positions, which included responsibility for graduate and professional housing, food service, and campus commons. Throughout his career he has had significant responsibility for the development and management of budgets, including auxiliary and capital budgets.

McClellan has served in a variety of leadership positions in student affairs. He is a member of the editorial board of both the Journal of College Student Development and the Journal of College and Character and was co-editor of the third edition of The Handbook for Student Affairs Administration (2009) with Jeremy Stringer. He was a member of the National Association of Student Personnel Administrators (NASPA) Foundation Board and a founding member of that association’s Administrators in Graduate and Professional Student Services Community and its Indigenous Peoples Knowledge Community. He served as chair or co-chair of NASPA’s Task Force on Gambling and its Ad Hoc Work Group on the Voluntary System of Accountability.

He received the Outstanding Contribution to Research in American Indian Higher Education award from the Native American Network of the American College Personnel Association in 2002. He was recognized by the NASPA Foundation as a Pillar of the Profession in 2010.

McClellan received his PhD in Higher Education from the University of Arizona (2003). Both his M.S.Ed. in Higher Education (1998) and BA in English and American Literature (1982) were earned from Northwestern University.

Chapter 1

The Fiscal Context and the Role of the Budget Manager

Understanding how to forecast, build, and manage a budget is an essential skill for all administrators in higher education. Almost every administrative position in higher education carries some responsibility for budget management. From a new professional managing a small program budget to a program director to a dean or vice president, understanding the budget and skill in managing budget issues and problems are critical competencies for administrative success.

This chapter focuses on increasing the reader’s understanding of the process of obtaining financial support for institutions of higher education. It first addresses the complex fiscal context for American higher education. It then focuses on the differences in fiscal issues between public and private (independent) institutions of higher education. Next it discusses the responsibilities of the person who manages the budget for an individual program, a department, a division, or a school or college within an institution. The chapter closes with a discussion of the importance of this information for any administrator in higher education. At the end of the chapter the practical implications of this information are illustrated in a case study of Alpha University, followed by reflective questions.

The Fiscal Context of American Higher Education

Higher education institutions, whether public or private, are experiencing great changes related to identifying and capturing fiscal resources to support educational endeavors. The broader fiscal context of higher education sets very real constraints on what can and cannot be done in any institution of higher education. These broader fiscal issues include the influence the recession of 2008–2009 has had on the funding for both private and public higher education; increased competition for funds within both the public and private economic sectors; increased regulation, including a rise in unfunded mandates at the state and federal levels; the cost of technology; increased competition for faculty and staff; increased competition for students; concerns about the rising cost of higher education to students and their families; and rising costs for the purchase of goods and services.

The 2008–2009 Recession

Goldstein states: “The economies of all institutions are linked with the national economy which is increasingly connected to the world economy” (2005, p. 14). Never has that statement been clearer than in the years since 2008. The 2008–2009 recession had a profound effect on American higher education in both the public and private sectors. In the public sector, two major issues have been in the news: the reduction of direct state support to the public institutions and the reduction in state grants and scholarships awarded to individual student residents. At least thirty-four states had some reduction in support for public higher education (AASCU, January 2009), with Arizona, California, and Florida being notable examples. In general, state funding for higher education was substantially reduced in FY2009 and further reductions are being anticipated in many public institutions of higher education in the future.

Student applications for financial aid increased as the economy suffered. “The federal government’s Pell Grant program, the bellwether of all financial aid programs, has seen a huge increase in the number of applications in light of the economic downturn” (AASCU, 2009, p. 2). The influence of the reductions in direct aid to students at the state level played a significant role in the record growth in enrollments to community college and regional public institutions.

Many states also face reduced tax bases due to high unemployment rates and business closings or reductions and thus could not meet their obligations to state institutions. Illinois and California provide excellent examples of such conditions. Failure of the states to meet their funding obligations to state-supported institutions resulted in actions such as mandatory unpaid furloughs for faculty and staff, reduction in support for equipment replacement, reduction in library support, and postponement of needed repairs and renovations. Some of these measures will have ramifications far into the future for state-supported institutions.

Private higher education has also not been immune from budget cuts. Endowment losses have been quite substantial in some institutions. For example, Harvard University, with the largest higher education endowment in the country, initially lost approximately 27% of their endowment (Zhu, 2009), and they were not alone. Both large and small institutions sustained substantial losses in their endowments, and if the institution was overly dependent on endowment funds for the annual operating budget then budget cuts were inevitable. Even prudent institutions with a spending rule for endowment funds were faced with slowing down growth, forgoing raises, postponing capital projects, and other cost containment measures. Those institutions that relied on an annual fund (donations to the institution during the fiscal year) were also hard pressed to continue all activities, programs, and salary raises if the annual fund drive was not successful. Even prudent institutions had to use a variety of cost-containment measures until the full impact of the economic downturn was determined and economic growth returned.

Increased Competition for Funds

Competition for funds has increased in both the public and private sector over the last decade and is likely to continue into the future. In most states, state government has become a growth industry, with the number and variety of programs funded out of tax support growing each year. Many state health care programs have also expanded to meet the needs of an aging population. Other programs, such as prisons and public safety, have grown because of the increase in criminal behavior and public demand for stricter law enforcement and harsher criminal penalties. The infrastructure of most states, including streets and highways, bridges, tunnels, flood control, and public transportation, are all aging and need massive renovation and repair. Recreational use of public lands has grown and with that growth has come the need to assure the safety and health of members of the public using the lands and additional construction to provide safe access and egress. The list of state needs seems to be never ending. Suffice it to say that higher education is but one of many programs seeking support for a very limited amount of money at the state level (Schuh, 2000). The result has been less and less direct fiscal support for public higher education and increased expectations that such institutions develop new ways to obtain the resources necessary to operate the enterprise. In fact, some public institutions have changed their public rhetoric and describe their institution as state “related” rather than state “supported” because the contribution of the state to the institutional budget has been reduced so much over the last decade of the twentieth century and the first decade of the twenty-first century. The University of Virginia and the University of Vermont are both examples of such institutions.

The reduction in available state funding also influences private higher education in both direct and indirect ways. Directly the institution may not receive funding for a special project that meets the needs of the state (See Chapter Two). Indirectly, state financial aid grants to individual needy students usually can be used by the student at both public and private institutions. If funding for such aid programs is reduced or remains static, more of the cost for individual student aid is shifted to any institution enrolling the student.

During the last decades, many public institutions have also joined their private colleagues in seeking financial support from alumni, foundations, parents, business, and industry. Billion-dollar campaigns, in either the public or private sector of higher education, are no longer unusual and consume a great deal of the time and energy of institutional leaders. Concurrently, other charitable institutions such as museums, youth service organizations, and organizations focusing on diseases and social welfare issues have also increased their quest for financial support. Competition for private funds is fierce and likely to remain so. Consequently, fundraising has become a major function in many institutions.

Increased Regulations and Unfunded Mandates

Within the last fifty years American higher education has experienced unprecedented growth in regulations from both the state and federal governments. Many of these statutory regulations support important opportunities for students, faculty, and staff but they also require additional institutional investment in order to achieve compliance. However, funding for compliance at either the state or federal level has not been forthcoming. Examples of these unfunded mandates include the following:

Security and Safety

The security and safety of students, faculty, and staff has been the subject of a number of federal regulations. For faculty and staff the Occupational Health and Safety Act of 1990 (OSHA) and the Employee Retirement Security Act of 1974 (ERISA) both influence the day-by-day working conditions of most faculty and staff members at institutions of higher education. These regulations focus on everything from the disposal of contaminated materials to the configuration of workstations. The Student Right-to-Know and Campus Security Act and accompanying Department of Education regulations (1999) requires notification of all members of the campus community of crime statistics and other crime data on an annual basis. Depending on how that notification is conducted the costs for printing, mailing, and other means of communication can be quite large.

Student and Employee Privacy

The Family Educational Rights and Privacy Act (FERPA) regulates access to student records and requires institutions to inform students of their rights under the act on an annual basis. Faculty and staff have privacy protections under the National Labor Relations Act of 1935.

Research Regulations

Regulations governing research are many, but two stand out with regard to costs to institutions. The Animal Welfare Act (70 U.S.C. sec. 21.31. et seq.) regulates the care of animals used in research on campus. Compliance with the standards required by the federal government under the act has been an expensive investment for most institutions of higher education. Research involving human beings is regulated under the Human Subjects Research Act (45 CFR 46) and requires disclosure of risks and monitoring of participation of humans involved in research studies. Compliance with research regulations has direct and indirect costs to the institution that are not funded by the granting federal or state agencies, including the hiring of staff to monitor compliance across the institution.

Discrimination

A plethora of laws are in place at the federal level that prohibit discrimination in admission and employment, and all have a real and direct influence on the conduct of daily life in colleges and universities. These laws affect the complexity of searches for positions, record keeping in human resource offices, admissions practices, and intercollegiate athletics. All of these statutes have some monetary costs attached to them. The various discrimination statutes include prohibiting discrimination on the basis of age (Employment Act of 1967) and race, creed, sex, or national origin (Title VII of the Civil Rights Act of 1964, amended by the Equal Employment Opportunity Act of 1972). Title IX prohibits discrimination in educational programs, facilities, policies, and employment practices.

Intercollegiate athletics is the most striking example of rising costs associated with compliance with Title IX. Providing opportunities for young women to receive athletic opportunities in proportion to their enrollment in the institution has been a very positive change, but it is a change that has great costs associated with it, particularly in Division I schools that provide scholarships for both men and women athletes. In addition, Title IX requirements also influence costs associated with team travel and facilities to support athletic endeavors.

The Rehabilitation Act of 1972 prohibits discrimination in access to educational programs for persons with handicaps if they are otherwise qualified. The Americans with Disabilities Act (1990) is targeted toward making programs, facilities, and activities accessible to persons with disabilities. Both statutes are laudable for providing opportunities for higher education to previously underserved populations, but neither of these acts include funding for upgrading facilities to assure compliance.

Achieving compliance can be further complicated by state statutes and local ordinances that prohibit discrimination on the basis of sexual orientation. In addition, many state statutes and local ordinances have more stringent antidiscrimination regulations than those covered in the federal legislation.

Student Financial Aid

Federal student financial aid programs are complex, and the accompanying regulations for Pell Grants, College Work-Study, and various loan programs can be confusing to students and their parents. The burden of helping students and their families understand and access such programs falls on institutions of higher education without any funding at all from either the state or federal level. This might include printing materials in another language, providing online assistance to prospective students and their families, or sending financial aid staff out to areas in which many prospective students reside to provide hands-on assistance to those unfamiliar with applying for financial aid.

Other Issues

There are state statutes involving audit requirements, grant funding and reporting, fiscal management, and fiduciary responsibilities of officers and trustees of institutions of higher education. In addition, there are also federal statutes, which must be complied with for cost sharing in grants and contracts and rules for grants and contracts by the Office of Management and Budget (OMB). None of these requirements come with concomitant funding, which must be borne by the institution.

Cost Concerns

The cost of attendance at institutions of higher education, both public and private, is becoming both a growing societal concern and a political one. Parents, legislators, alumni, and friends of institutions of higher education are all expressing reservations about the rising costs of tuition, fees, and room and board. Boards and commissions at both the federal and state levels have focused on the cost of American higher education (Callan and Finney, 1997; Harvey, 1998; and Lingenfelter, 2004). Wadsworth stated, “Tougher economic times could affect the public’s view that anyone who really wants a college education can get one. What’s more tougher economic times might well increase families’ anxiety about their ability to cover their share of college expenses, as well as the availability of jobs for themselves and their children just coming out of college” (in Immerwahr and Foleno, 2000, p. 34).

The issues related to cost of attendance are also directly linked to financial aid for students. Access and choice have been central to the mission of many public and private institutions. In order to support an economically diverse student body, federal and state governments and institutions of higher education have invested heavily in financial aid to students. As the cost of attendance rises, so do financial aid budgets, and the fiscal resources of all institutions are stretched. The problem is compounded in situations with substantial graduate and professional school academic programs. In such environments, the cost of instruction and research is high and the direct payment by individual students for such educational access is relatively low. The cost of higher education and the funding of financial aid will continue to remain challenges for institutions of higher education.

Cost of Technology

Technology is both a blessing and a curse for institutions of higher education. It is a blessing because it provides new tools for communication, administration, and research. Students and faculty come to any institution with high expectations for technology support, including Internet access, networking, and wireless connectivity, and they want quick and accurate access to information and data. The growth of technology is a curse with respect to cost. In a rapidly evolving technological environment the costs for hardware and software are enormous, and once the initial investment is made costs continue to escalate with every change.

Technology also brings opportunities to change the way any institution of higher education does routine business, from keeping student records to supporting a complex research agenda. The installation and continuous upgrades of student information systems, accounting systems, academic support programs such as Blackboard, financial information systems, purchasing, and human resource management have become very large initial and recurring costs in institutional budgets.

There is also a growing expectation that the communication between the institution and students and potential students, their families, and alumni be strengthened through the use of technology. In addition, students, their families, alumni, prospective employers of students, and donors and friends of the institution all expect easy access to the information they want and need. This does not come without cost for the development and maintenance of Web sites, information portals, e-mail systems, and databases, and the movement of traditional hard copy resources such as a library to digitally accessible systems is both expensive and labor intensive.

In addition, each year new and advanced technological applications are developed to improve instruction and to strengthen communication between instructors and students and between students in a specific class or section. As such new applications are tested and adapted within an academic setting there are increased costs to implement and maintain instructional support.

When the technological revolution in higher education started there was a hope that positions could be eliminated as a result of technology, but that has not proven to be the case. In fact, the growth in the use of technology has brought with it increased competition for qualified technical staff between higher education and business and industry. There are many good reasons for installing technological innovations on a college campus. Saving money is not one of them.

Competition for Faculty and Staff

Higher education has been actively competing with business and industry for both skilled and unskilled workers. The recent economic downturn has eased some of the competition, but for some categories of employees competition with non–higher education positions remains very strong. Technical managers and technical support staff are still in high demand in all sectors of the economy, and the problem of attracting and retaining personnel is not limited to staff ranks. New doctoral candidates and young, talented faculty in business, engineering, and computer sciences continue to be heavily recruited by business and industry.

When economic woes in the nation ease there will again be competition with business and industry for talented faculty and staff in a number of academic disciplines. If turnover is high in some categories of positions then the issue should be carefully studied. Compensation may be an issue, but other policies and procedures may also be contributing to the staff turnover problem. When institutions try to attract and retain new faculty and staff, they must assure that those individuals who are currently a part of the work force are not disadvantaged by any strategies used to attract new hires. New approaches to compensation and benefits are being developed at some institutions with the goal of reducing turnover, while at others changes are being made in policies to aid those employed at the institution. Whatever the approach, this issue is likely to have huge financial implications for the institution and every budget unit.

Increased Competition for Students

Competition for students is a constant in higher education. Some institutions are absolutely dependent on enrollment to cover the cost of operations for the fiscal year. The loss of even twenty students (and their tuition dollars) at such institutions can mean the difference between institutional fiscal failure and success. For other institutions, the budget is not as enrollment driven, but policies of providing access and choice to students, referenced earlier, remain at the forefront of fiscal decisions. Competition for students results in higher financial aid budgets and other tuition-discounting schemes, such as a lower tuition rate for a second child from the same family. However, financial aid is often not enough to attract the students desired by the institution. Institutional amenities such as recreation facilities, student centers, wellness centers, residential colleges and the like are becoming more important to prospective students and their parents. Such amenities do not come without cost, and competition for funds within each institution is likely to increase as the college or university attempts to be more inviting to prospective students.

Finally, the cost of the actual recruitment process continues to grow as each institution attempts to get a specific message out to students and their parents. Technology may help ease some of these costs by using e-mail and social networking sites as new recruitment tools. It is as yet unclear what their effectiveness is in increasing yield and is still being studied.