"Efficiency Indicators"

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March 2002

On March 15, over 40 members of the University community gathered in the Assembly Room of the Nittany Lion Inn for the bi-monthly meeting of the Quality Advocates Network. Clay Hosterman, Assistant Director of the University Budget Office, and Tony Wagner, Special Assistant to the Senior Vice President for Finance and Business, shared information about the report on Penn State’s Efficiency and Underfunding that they recently prepared in response to questions from Pennsylvania legislators regarding Penn State’s accountability for resources allocated by the State. The report attempts to tell the story of Penn State’s efficiencies–that the University is a good steward of the funds it receives. For years the accountability issue has been addressed by senior executives of the University in the State budget hearings, but this year the situation became more critical when the governor recommended a 5 percent cut in the University’s appropriation, which amounted to a $17 million reduction from last year’s appropriation.

Against a back drop of a likely two-digit tuition increase, Gary Schultz, Senior Vice President for Finance and Business, convened a group to develop indicators to access efficiencies in various University offices. Over the fall semester, Hosterman and Wagner met with representatives from 74 units and compiled a report that describes the ways these units have saved money. The authors stress, however, that this report is a work in progress, as its data change almost daily and are constantly being updated.

In the most recent U.S. News and World Report survey, “America’s Best Colleges 2002,” Penn State is ranked as the 14th best public university in the nation. Based on National Science Foundation reports for fiscal year 2000, Penn State research was ranked 11th in the nation and 8th overall for public universities. There are a variety of measures, both university-wide and unit specific, that show how efficiently Penn State operates. Some of these, while demonstrating efficiency, are also indicative of years of underfunding.

While Penn State maintains relatively high academic quality with relatively few resources, the University cannot hope to improve its ranking of academic quality without a commensurate increase in resources. Indeed, it may have difficulty sustaining its current ranking with existing resources. The following data are excerpted from the Hosterman-Wagner report:

  • Among the public universities in Pennsylvania, Penn State operates with the lowest educational and general appropriation per student, the highest student to faculty ratio, and has the highest average undergraduate class size.

  • Among the Big Ten universities, Penn State operates with the lowest total expenditures per full-time equivalent student, receives the lowest state appropriation per full-time equivalent student, and ranks 7th, 9th and 9th respectively in the number of square feet per student for classroom, instructional laboratories, and research laboratories.

  • Penn State ranks 6th among 50 public research universities in the lowest administrative cost per sponsored research project dollar awarded.
    Since 1992-93, Penn State has reallocated over $87 million from operating budgets to areas of critical need. Over the past ten years, 64 academic programs have been eliminated or merged.

  • Penn State strives to meet programmatic needs with funds raised through private sources. The national standard in higher education for cost per gift dollar raised ranges from 8 to 16 cents; for fiscal year 2001, Penn State’s fund raising cost per dollar is at the low end of this range at 10 cents.

  • Unlike most Division I programs nationally, Penn State Athletics is completely self-supporting and receives no funds from tuition or State appropriations.

 

Penn State managers work hard at the departmental level to keep operating costs low. For example, among the Big Ten public universities:

  • The University Libraries ranks 8th in number of professional staff per student.

  • Penn State has the lowest ratio of student aid staff to student aid recipients at 1 to 797. To administer student aid, Penn State has the lowest cost per student aid recipient.

  • Police Services at Penn State operates with the lowest ratio of officers per 1,000 population.

Penn State capitalizes on its buying power in the market place:

  • Penn State’s pharmaceutical contract yields annual savings of $350,000, compared to standard wholesale pricing.

  • The University’s express package contract saves $750,000 annually as compared to standard rates.

  • Volume discount contracts with United and Northwest Airlines net annual savings of $334,000.

  • Using the Big Ten buying consortium, Penn State has realized the following annual savings over previous agreements; scientific supplies, $365,000; office supplies, $150,000; and National Car rental agreement, $210,000.

  • Penn State saves $2.3 million per year in software licensing agreements negotiated with software vendors.

For more information or questions about the University’s efficiency indicators, please contact Clay Hosterman.

The Quality Advocates Network meets several times each semester to share ideas and examples of improvement and change. To join the Quality Advocates Network mailing list or to learn more about the meetings scheduled, contact the staff at psupia@psu.edu.

The Quality Advocates Network is open to all Penn State faculty, staff, administrators, and students.