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If you follow US higher ed news at all, you will have heard the story of Purdue University, Indiana’s other, somewhat more STEM-focussed, state university system. Under the leadership of former Indiana Governor Mitch Daniels, Purdue has managed to freeze in-state tuition stable for the last seven years. How is this happening, you ask? By what miracle does a major university like Purdue, which regularly ranks in the top 60 or 70 universities in the world, which relies on tuition for something like half of its overall operating budget, manage to keep a tuition freeze going for seven years? What is this secret sauce and how does everyone else get some of it?
Well, it turns out this is not such a miracle after all. Despite frozen fees, fee income has increased steadily. How? Well, in-state enrolment was reduced, from 20,700 in Fall 2011 to 18,835 in Fall 2017, and replaced by international and out-of-state students, whose numbers rose from 18,937 to 22,638 over the same period (recall that in the US, where tuition is concerned, there is no difference between out-of-state and international students). This shift is enough for a 12% increase in tuition revenue. The government also played a part – though we hear all the time about government cutbacks in the US, that in fact has not really been the case for a few years now. In Indiana, between 2011-2 and 2017-8, state appropriations rose by 15%. Thus, if we think of tuition plus state appropriations as being roughly equivalent to “operating” grants, then overall, operating income rose by just under 13% over 6 years, which is roughly inflation plus 1%.
I can’t tell with the same clarity what’s been going on with respect to expenditures, because their budget reporting categories changed a few years ago from the truly obscurantist to the merely unhelpful and like-to-like comparisons are essentially impossible. If you read their promotional material, their key savings seem to come from a lot of changes to process management (contracting out some services which were uneconomic, better cash management), plus employee benefit concessions (moving from a defined benefit to a defined contribution pension system). Nothing earth shattering here: but then, if your revenue is rising by inflation plus one per cent every year, your work on the expenditure side doesn’t need to be as significant.
It’s interesting to compare Purdue to trends in major Canadian universities. And basically, three differences stand out. The first is that government appropriations are increasing in Indiana and they aren’t up here. That relieves some of the pressure on tuition. The second is that Purdue is deliberately substituting non-resident/international students for in-state ones – something I don’t think any Canadian university has done – meaning they can increase income without having to hire new professors to offset enrolment growth. This brings us to the third difference: Purdue’s cost-base is rising at about inflation plus 1%; in Canadian universities, it is closer to inflation plus 2%. But, I would suggest that a lot of the difference between the two is not better underlying cost control, but rather enrolments. Our institutions have at least in part raised expenditures to accommodate rising student numbers, while Purdue – because of its clever substitutions – has not had to do the same.
So, is there a “Purdue model” for other public universities to emulate? Sort of. At the margin, some high-prestige universities can get away with limited substitution of international/non-resident students for in-state ones, but by definition it’s only a game some universities can play because your in-state students have to be admitted somewhere. But I think I would argue that this strategy has its limits: Purdue is, I would say, extremely fortunate to have managed a 15% increase in state appropriations while reducing the number of in-state students it teaches by nine percent. I don’t think many institutions can manage it, and my guess is Purdue won’t get away with it much longer either. At that point, the crushing, grinding reality of being in a labour-intensive business subject to Baumol’s cost disease will return – and it’s back to the world of cost controls and tuition increases that the rest of us live in.
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This post errors on many key facts and should be corrected.
Error No. 1: The wrong baseline year is used.
The current Purdue administration did not start until January 2013 and the first tuition freeze announcement was not made until March of 2013. Therefore, it makes no sense to compare 2017 with the 2011 cohort and doing so throws off both the enrollment and tuition revenue numbers cited.
Error No. 2: Purdue is actually admitting more students from Indiana. In no way has the school replaced residents with non-residents. In fact, the freeze seems to have reversed a trend of declining resident enrollment that started years before the tuition freeze. Consider the following numbers:
Purdue Resident Admissions & Enrollment
2009 (4 years before the freeze): 7,723 admitted and 3,823 enrolled
2013 (Freeze): 6,654 admitted and 3,468 enrolled
2017 (4-years after freeze): 8,328 admitted and 4,095 enrolled
That means in the 4 years before the freeze, Purdue reduced it’s resident admissions by more than 1,000 but after the freeze it increased it by more than 1,600. This suggests a very different conclusion than what Mr. Usher suggests. The problem with the analysis in the blog post is that total enrollment counts that consider freshman to senior numbers are a lagging indicator that speak more to admissions decisions made in years past than about a school’s current strategy. Annual admissions decisions will obviously change less than 25% of the student body so to understand a school’s current strategy, one must look at freshman admissions and enrollment. It’s clear that rather than substituting nonresidents for residents, the tuition freeze has been instrumental in halting a decline in resident enrollment that started years before.
Error No. 3: State appropriations are mischaracterized.
It’s true that Indiana has funded its universities at a higher rate than most U.S. states but the post here looks at the entire state’s appropriations and erroneously assumes this represents Purdue. In reality, state funding changes do not occur equally from institution to institution and it’s false to claim higher state appropriations have been a factor in financing the tuition freezes. In fact, appropriations at Purdue’s West Lafayette campus have declined about 3 percent since the 2013-14 fiscal year.
Error No. 4: The claim that Purdue has not hired professors to offset enrollment growth and the insinuation that it has sacrificed quality is entirely false.
Current faculty counts are larger today than at nearly any point in Purdue’s history. Since 2013, the school added the full-time equivalent of 83 new tenured or tenure track faculty and the student per faculty number has actually improved since Purdue enacted its affordability initiatives, changing from 13.08 the year of the first freeze to an average of 12.33 in the years following the freeze.
What is generally not well understood outside Purdue is that affordability is not the school’s end goal. Rather, it’s one tool in the aim to provide higher education at the highest proven value. Value is Purdue’s ultimate goal and value is defined by the equation “quality divided by costs.” In other words, Purdue sees success as not just holding the line on tuition but also as becoming more disciplined in how it uses revenue so that it can be redirected into the numerator, quality.
Therein lies the real secret to Purdue’s success. Students and their parents are attracted to a school that they know is committed to value through efficient operations, significant investments in quality, and a strong commitment to affordability. For example, Purdue received 12,000 more applications for this upcoming fall than it did in 2014. This unprecedented growth in demand has allowed Purdue to admit more in-state and out-of-state students while improving its student profile in terms of SAT scores and high school GPA. Meanwhile, efficient operations and new non-tuition and non-state revenue streams have permitted Purdue to continue to make investments in research, faculty growth and retention, and student success. Each of these elements are interconnected and efforts to reduce the so-called “Purdue Miracle” to one element, whether it’s a larger student body, efficient operations, affordability or investments in quality are short sighted.
Finally, more specifically on the issue of quality, Purdue has made massive investments since the freeze started such as:
-$250 million (USD) of new investments into the the life sciences
-$200 million into expanding engineering teaching and research
-$30 million into a new Polytechnic program
-11% merit pool raises for faculty and staff since 2016 at a cost well in excess of $100 million
-For the first time ever, Purdue employees have dental insurance and autism insurance, and investment of at $10+ million
-$8 million investment to redesign many dozens of courses so they incorporate active learning
-$40 million more in scholarship funding
-$16 million for a 5-year subsidy of student study abroad costs