Towards reasonable efficiency in degree production: A method for benchmarking the educational expenditures of postsecondary institutions

Abstract

Institutional efficiency is frequently measured as a ratio between input and output (e.g., expenditures per credential), but differences in cost structures preclude attempts to accurately compare and benchmark performance across institutions. This study thus compares actual and predicted educational expenditures while accounting for variation in institutional mission, degree production profiles, faculty employment, and the cost of living. Longitudinal data were obtained from IPEDS for both public and private not-for-profit four-year institutions (n=1,496). The Regional Price Parities index was used to adjust expenditures for differences in the cost of living. Panel regression was used to predict educational expenditures from the number of credentials by award level and discipline, the proportion of full-time faculty, the student-faculty ratio, and average professor salary. An educational expenditures index was then computed as the standardized, three-year average difference between actual and predicted expenditures. Cross-sector comparisons revealed that the prevalence of public four-year institutions with higher-than-expected expenditures ranged from 19 to 25 percent, compared to 36 to 40 percent of private institutions.