Efficiency-Based Funding for Public Four-Year Colleges and Universities

Thomas R. Sexton (), Christie L. Comunale () and Stephen C. Gara ()
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Thomas R. Sexton: State University of New York-Stony Brook
Christie L. Comunale: Long Island University
Stephen C. Gara: Drake University

Education Finance and Policy, 2012, vol. 7, issue 3, 331-359

Abstract: We propose an efficiency-based mechanism for state funding of public colleges and universities using data envelopment analysis. We describe the philosophy and the mathematics that underlie the approach and apply\break the proposed model to data from 362 U.S. public four-year colleges and universities. The model provides incentives to institution administrators to eliminate wasteful spending and increase positive outcomes while maintaining educational quality and research productivity. The institutions in our study spent $96.74 billion, and states would reimburse $88.02 billion. Thus efficiency-based funding would reduce state government expenditures on these institutions by $8.72 billion, or approximately 9.0 percent. Efficiency-based funding is politically viable, as demonstrated by North Carolina’s successful use of this approach in pupil transportation operations since 1994. The model will be of interest to state legislators, state education officials, and others who are concerned with funding formulas for institutions of higher education. © 2012 Association for Education Finance and Policy

Keywords: higher education; college; universities; state funding (search for similar items in EconPapers)
JEL-codes: I23 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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