Running head: EFFICIENCY OF COMMUNITY COLLEGES

Report on the Efficiency of Community Colleges Caitlin Cairncross Higher Education Finance August 8, 2013

EFFICIENCY OF COMMUNITY COLLEGES Introduction Community colleges are an important part of the higher education landscape, for they serve over half of the countrys first time undergraduate students (Laanan, 2001).

Despite community colleges notable role in access to higher education, it is important to also consider how well they fulfill their intended purpose. This paper will take a closer look at how community colleges operate, and make the case that community colleges are actually the most efficient sector of higher education today. While they are not always thought of as efficient, particularly because of their heavy reliance on state funding, I will demonstrate that community colleges are indeed efficient institutions, and will expand upon this determination through three matrices of efficiency: funding and operations, outcomes and effectiveness, and adaptability. I will then conclude with some suggestions about how community colleges can become even more effective and efficient in realizing their egalitarian mission of open access. Funding and Operations For most community colleges, a large portion of funding comes from the state and federal government (although some community colleges receive local funding as well). While a heavy reliance on government funding can be problematic, particularly with regards to quick and reliable access to money, it could be argued that in many ways community colleges are actually financially efficient. Compared to other institutions like private and state schools, community colleges are indeed more reliant on state funding; however, they have an advantage over other institutions in terms of operational costs. Facilities In terms of facilities, community colleges tend to be more streamlined with regards to their physical spaces; for example, most community colleges do not have

EFFICIENCY OF COMMUNITY COLLEGES residence halls, and therefore do not have to worry about financing or staffing a physical residence space. Most community colleges also do not have prolific sports teams that

require large athletic complexes, and therefore do not have to pay for stadiums or athletic personnel (many community colleges do offer some sports, but typically do not offer as many sports as four year institutions). While community colleges are certainly susceptible to the costs of standard facility maintenance, many community colleges simply do not have the same number of distinct facilities that other schools (particularly large institutions) have. Academics In terms of academics, community colleges do not offer graduate programs, which can be very expensive to provide but often do not generate a large amount of money for institutions. Instead, they can use their money towards programs that are more cost efficient and that their student body actually needs. In addition, community colleges do not typically have a research emphasis, and therefore can focus more of their funding on instruction rather than on supporting research. In fact, about 41% of community college expenditures go towards instruction, compared to 29% at four-year public universities (Dowd & Shieh, 2013). Finally, community colleges are usually very dependent on part time faculty recent studies show that part time faculty make up about 60% of all faculty at community colleges (Cohen & Brawer, 2008). Not only do part time faculty receive smaller salaries than full time faculty (at many schools part time faculty earn less than one half as much as full time faculty) but they also can be hired and dismissed as needed (Cohen & Brawer, 2008; Vaughan, 2005). By utilizing part time faculty, community colleges can get the educators they need to teach classes while freeing up extra money that would be

EFFICIENCY OF COMMUNITY COLLEGES spent on full time faculty to cover other operating costs. Even with a large population of part-time faculty, students still benefit from small, intimate class sizes that encourage learning and development. High(er) Tuition/High(er) Aid Model While community colleges are dedicated to providing an affordable education to all, some two-year institutions are moving towards a high tuition/high aid model that seems to be quite effective in generating more money for the school. Although a high tuition/high aid model may seem to contradict the open access mission of community

colleges, it actually is not as imbalanced as it may seem. According to this model, schools raise their tuition to increase the amount of money that is flowing through the institution, which in turn can help increase the amount of money the school has to pay for necessary (but sometimes overlooked) expenses. Robust financial aid packages and scholarships/grants would be provided to those who cannot afford the higher tuition; little to no aid will be provided to those who can afford the tuition. It is important to note that according to this model, schools would not necessarily impose astronomical tuition increasesthey would still maintain their cost effectiveness, but with a slight increase in tuition costs to help bring more money to the institution. High tuition high aid attempts to restore some equity in the community college systemmany believe that the way that most community colleges are structured now is not equitable, because all students, even those who could afford a higher tuition, pay the same very low tuition (Romano, 2003). Meanwhile, as many community colleges are experiencing budget cuts from the state, there isnt enough money generated by tuition to truly help them function at their best. If schools had a bit more money at their disposal, while not inhibiting access for students with low socioeconomic status, they could

EFFICIENCY OF COMMUNITY COLLEGES become more efficient by becoming less dependent on state funding, which tends to

fluctuate. Indeed, community colleges currently using a high tuition/high aid model have seen positive gains in efficiency and funding (Romano, 2003). Revenues Another fiscal benefit of community colleges is that excess revenues that have accumulated at the end of the year from areas like tuition can go straight back into the institution (Romano, 2003). Community colleges are not expected to maintain large reserves of moneyif they have too much excess money, it suggests that the state may not have to provide as much money as it did the year before. Therefore, community colleges must strike a fine balance between maintaining a large enough reserve to cover unanticipated costs, while keeping it low enough that the state wont have the opportunity to decrease funding. Such a system means that community colleges can self-assess and direct money into the areas that need the most funding without having to consider whether or not it should instead be spent on building up reserves or contingency funds. In this way, money can get to the areas that it is needed more quickly than it may in institutions that have more pressure to maintain large reserves. Educational Outcomes and Effectiveness Community colleges are intended to serve their communities, specifically by providing open access to education. For community colleges, it is important for students to receive a high return on investmentthey need to have an education that will help open doors for them socially and financially, all at a bargain price. In other words, for community colleges, efficiency is tied to equityif efficiency is defined as the ratio between the benefits deriving from some good or service and the costs of producing it, then it is very important for community colleges to maintain efficiency in order to ensure

EFFICIENCY OF COMMUNITY COLLEGES maximum benefits to the student (and to society), while keeping both production costs and tuition costs down (Cohen & Brawer, 2008, p. 177). Such efficiency, if carried out properly, can benefit both the individual and society as a whole. Implications for Student No matter what program community college students are enrolled in, the benefits of pursuing an education at the college level are well documented. Community colleges are unique in that they are dedicated to accepting those students who either may not be

able to afford a four-year education, or who may not be academically prepared for a fouryear education. As Dowd and Shieh (2013) note, Community colleges restore vertical equity to an otherwise stratified, hierarchical system (p. 44). They accomplish this vertical equity primarily by maintaining an open enrollment policy, and significantly lower tuition than their four-year counterparts: in community colleges, in state tuition averaged $3,800 or less per year, compared to an average of $7,234 for public four-year institutions and $23,300 for private colleges (Dowd, 2013). In addition, due to flexible class times and affordable tuition, more than half of community college students maintain jobs and pay their way through college rather than take on debt through financial aid. In fact, 62% of graduates from community colleges had no loan debt (Dowd & Shieh, 2013). Such statistics are indicative of the functionality of community colleges, particularly for students who simply cannot afford to graduate with overwhelming amounts of debt. For students who do pursue some kind of degree or certificate, the benefits are outstanding: on average, students who receive an associates degree will experience a 54% increase in earnings, and students who receive a certificate will experience a 29% increase in earnings (Cohen and Brawer, 2008). In addition, The average community

EFFICIENCY OF COMMUNITY COLLEGES college entrant who enrolls but does not complete a degree, earns 9 to 13 percent more

than the average high school student. Put another way, each year of credit at a community college is associated with a 5 to 8 percent increase in annual earningswhich happens to be the same as the estimated value of a years worth of credit at a four-year college (Cohen & Brawer, 2008, p. 266). In light of these statistics, the return on investment for degree or certificate seeking community college students (even those who do not complete a degree) is high. While estimated effect on income the same as it is at a fouryear institution, the expense of tuition and likelihood of assuming debt is much lower. With an associates degree students can either proceed into the workforce or can transfer to a four-year institution; with a certificate students are theoretically well prepared to enter the workforce and attain a job in a specific field that requires specific training. In this sense, community colleges are efficient and effective institutions with regards to the mobility and success of their students. There are also benefits for students who pursue developmental and adult/continuing education. Developmental education can give students who are underprepared for college level coursework the necessary foundation to progress both personally and academically. Although developmental courses cannot be used towards a degree, they can have important benefits, such as giving a non-native English speaker enough language proficiency to be able to attain a job, or to proceed on to college level coursework. Adult/continuing education gives individuals the opportunity to further hone their existing skills, develop new skills, or transition into a new career. Adult/continuing education is valuable both for the potential for community building as well as the ability to give students new skills that could be used to bring about professional success.

EFFICIENCY OF COMMUNITY COLLEGES Overall, no matter what courses community college students take, they will receive a solid educational foundation that they may not have opportunity to achieve elsewhere. Many community college students dont have the freedom to pursue a liberal arts degree, because they need an education that will make them employable immediately. A community college education can not only prepare students for the

workforce, but can also aid in critical thinking, writing, and other skills that are necessary for personal and professional growth. The efficiency of community colleges, then, lies in giving students an education that they need to be successful in the future, at a bargain price (and at low cost to the state in comparison to public four-year institutions). In addition, unlike four-year institutions that may be efficient with regards to outcomes, but are restrictive with regards to access, community colleges manage to bundle access and outcomes together. As there is increased pressure from the state on student outcomes, community colleges will only become more effective and efficient with regards to providing a good education that results in a high return on investment. Implications for Society The benefits of a community college education extend beyond the individual students to the community as a wholeas Strauss (2013) argues, human capital is perhaps the most important long-term driver of an economy. An educated population is important for the functioning of the community, and can have a multitude of returns. Indeed, studies have shown that the ratio of taxpayer benefits of an associates degree compared to cost to provide associates degree is 3:1, indicating that overall the value to society is higher than the cost to the school (and thus the state) (Dowd & Shieh, 2013). Beyond the simple economic benefits, an educated population can also benefit society in other ways. For example, companies that need a workforce with a specific

EFFICIENCY OF COMMUNITY COLLEGES technical skill (or simply a post-high school education) can look to community colleges for employees with the necessary training and skill sets. Community colleges, on the other hand, can help ensure that students are prepared to fill the needs of a given company, thus increasing the likelihood of employment for students after graduation. Such a partnership is clearly beneficial for the student, but is also beneficial for the community as a whole, for if companies feel that they have an educated workforce locally, they will be less likely to look elsewhere for potential employees.

In addition, community colleges aim to provide education to those who are of low socioeconomic status. Those low SES students who do go on to attain a degree or certificate (or even just complete some credits at the college level) are more likely to find a job and contribute back to the community, and are less likely to be dependent on state services like welfare (Cohen & Brawer, 2008). Essentially, a more educated and productive population leads to a net benefit to society at a reasonable costtherefore, community colleges are effective in their ability to produce both individual and societal gains without too much of a financial burden on either party (particularly in comparison to four-year institutions). Adaptability Because of the diverse array of programs that community colleges offer, as well as their affordability, it could be argued that another aspect of efficiency of community colleges is their ability to weather the storm and adapt to changing economic conditions. Here I will highlight enrollment and programming as two of the ways that community colleges are able to adapt to changing economic climates.

EFFICIENCY OF COMMUNITY COLLEGES Enrollment

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Community colleges tend to be counter cyclical: during difficult economic times, when other institutions are struggling to maintain enrollment, community colleges typically experience an increase in enrollment, as demonstrated by the spike that occurred during the 2008 recession (Pew Research Center). Many private and public four-year institutions raise their tuition during economic dips, and students simply cannot afford the increasingly elevated cost of educationthey need an education that is affordable, without the looming possibility of high debt upon graduation, and therefore turn to community colleges. Because community colleges are not burdened with selectiveness, they can accept as many students as they can support. An enrollment surge in a tough economy is important, for state funding usually dips in such conditions. Although enrollment may decrease as the economy recovers, at that point the state may be in a better financial position to make up for any gaps left by lower enrollment. Overall, increased enrollment during an economic downturn is important for the success of community colleges, and speaks to their efficiency in the face of a challenging economy rife with decreased state funding. Variety in Programming Another strength of community colleges is their variety of programmingin a poor economy students often want an education that will lead directly to a job. In this situation they can turn to community colleges for specific technical training that may be more likely to lead directly to employment than a liberal arts education. Beyond technical training, community colleges also offer many other educational programs, such as continuing education for students looking to develop new skills to help them make a career or job change, and developmental education for individuals looking to gain

EFFICIENCY OF COMMUNITY COLLEGES remedial skills in order to become more employable in a tough economy. In addition, ESL courses can provide a strong foundation for international students hoping to eventually attend a four-year institution. Because international students pay a higher

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tuition (often with no option for financial aid), community colleges can make quite a bit of money from international students who are looking to build the skills they need to continue their education in the U.S. In this way, community colleges are efficient in their ability to fit the needs of a diverse array of students, making them desirable to multiple populations of students, even in a depressed economy. Recommendations for Future Although I have attempted to provide evidence that community colleges are the most efficient sector of higher education, it should be noted that community colleges are not necessarily as efficient as they could be. The primary concern for community colleges is their reliance on state funding. While state funding (and all the hierarchical burdens and financial fluctuations that are associated with it) will probably never go away, community colleges can continue to try to look for alternate ways to generate money, including through a high tuition/high aid model. Once community colleges are able to get more money infused in their budgets, they will be able to focus more attention on directing money where it is needed, potentially increasing both efficiency for the school and equity for the students in the form of a quality education for all. Another issue for community colleges is their lack of flexibility in decisionmaking (particularly with regards to budgetary decisions). Community colleges must respond to state representatives and state boards, in addition to boards of trustees, meaning that there isnt always a lot of autonomy for the president at the campus level (Barr & McClellan, 2011). If community colleges want to become more efficient, they

EFFICIENCY OF COMMUNITY COLLEGES should start looking for ways to bring more decision-making power back to the school itself. To do so, they may want to continue to look for opportunities for compromise, including identifying ways in which their autonomy can meet the needs of the school

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while also satisfying the wishes of the state. It is also possible that if community colleges become more and more economically self-supporting, they will be granted more and more power from the state. While increased autonomy may be a political process that requires a lot of compromise on the states part, many states (including New York) have found success in this strategy (Romano, 2003). Overall, increasing institutional autonomy so decisions, particularly those regarding how money is spent within the school, can be made more quickly and efficiently would be beneficial to community colleges as a whole, and would help them better achieve their mission of access and equity.

EFFICIENCY OF COMMUNITY COLLEGES References Barr, M. & McClellan, G. (2011). Budgets and Financial Management in Higher Education. San Francisco: Jossey-Bass. Cohen, A. M. & Brawer, F. B. (2008). The American community college (5th edition). Thousand Oaks, CA: Jossey-Bass. Dowd, A. C. & Shieh, L. T. (2013). Community college financing: Equity, efficiency,

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and accountability. The NEA 2013 Almanac of Higher Education. Retrieved from http://cue.usc.edu/assests/Dowd_CC%20Financing_EquEffandAccount_NEA% 0Almanac_2013.pdf Laanan, F. S. (2001). Transfer student adjustment. New Directions for Community Colleges, 114, 5-13. Pew Research Center. (2009). College enrollment hits all-time high, fueled by community college surge. Retrieved from www.pewsocialtrends.org Romano, R. M. (2003, October). Financing community colleges across the states: An economic perspective. Paper presented at the Cornell University Higher Education Research Institute conference on The Complex Community College, Ithaca, New York. Retrieved from www.ilr.cornell.edu/cheri Strauss, R. (2013, June 17). U.S. education slipping in ranks worldwide, earns poor grades on CFR scorecard. Council on Foreign Relations. Retrieved from www.cfr.org Vaughan, G. B. (2005, October 28). (Over)selling the community college: What price access? Chronicle of Higher Education. Retrieved from http://chronicle.com