Costs rising for colleges

Ret Boney

The cost of running colleges and universities grew last year and rising prices for utilities and supplies were significant drivers, new data say.

During fiscal 2008, which ended on June 30, the Commonfund Institute’s Higher Education Price Index Institute was up 3.6 percent.

But that number, which is only slightly higher than the fiscal 2007 inflation rate of 3.4 percent, may be understated, the institute says. Using more recent data for a portion of the index, the inflation rate jumps to 4.6 percent.

“When you’re making an index, you have a procedure that’s consistent from year to year,” says Bill Jarvis, managing director and head of research for the institute. “And yet, in this particular year, extreme volatility in one of the factors has led to a perception that the results aren’t representative.”

The Higher Education Price Index is similar to the Consumer Price Index, except it tracks the prices of eight sets of goods and services relevant to colleges and universities: faculty salaries, administrative salaries, clerical, service employees, fringe benefits, miscellaneous services, supplies and materials and utilities.

When gauging the prices of these factors, the institute uses “final” data; for six of those factors, final data are available as of the end of the June 30 fiscal year.

For supplies and utilities, however, the most recent finalized data stretch back to December 31 of 2007, before much of the price volatility hit.

So to provide a more up-to-date perspective on inflation, the institute also ran the index using “preliminary” data for the first half of 2008 for supplies and utilities.

And while together, those utilities and supplies account for only 12 percent of the index, their increases were enough to drive the overall inflation rate for colleges and universities up a full percentage point to 4.6 percent, which the report calls a “significant difference.”

The cost of utilities spiked 13.7 percent in fiscal 2008 and supplies and materials jumped 4.7 percent, according to the preliminary data the institute used.

Inflation for faculty salaries, the largest portion of the index, was flat last year at 3.8 percent, while inflation for administrative salaries rose to 5 percent from 4 percent.

Rates for clerical salaries, service employees, fringe benefits and miscellaneous services all declined.

About one in four institutions of higher education use the institute’s index, says Jarvis.

Of those, more than half use it to inform their budgeting processes and almost three in 10 use it to decide how much of their endowment they will spend in a given year.

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