Dr. Rob Johnstone New Jersey CC Student Success Summit Mercer County CC, New Jersey

www.inquiry2improvement.com

Dr. Rob JohnstoneNew Jersey CC Student Success Summit

Mercer County CC, New Jersey April 16, 2014

The Economics of Innovation in the Community College:

Exploring the Fiscal Considerations of Doing

Things Differently

www.inquiry2improvement.comNational Center for Inquiry & Improvement

Agenda• The Backdrop & Doing Things Differently• Fiscal Considerations of Innovative

Programs• Demonstrating The ROI Approach in

Action• Demonstrating the Cost Efficiency / Cost

Savings Metrics Approach• Final Thoughts

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Part 1: The Backdrop & Doing Things

Differently

Fiscal Considerations of Statway & Quantway – July 2013


Data Backdrop• CC Completion rates for URM students 34%; non-

URM closer to 50%

• 55%-85% of FTF require Dev Ed; average of 25% to 35% ever complete transfer-level course

• 80% of High-Income Students enter college; 29% of Low-Income Students enter college

• College Graduation Rates by income (next slide)



College is a Meritocracy, Right?

Highest Income Quarti le Lowest Income Quartile

70%

26%30%

9%

College Graduation Rates By Income Quartile & Test Scores

High Scores Low Scores



Innovative Approaches

• Programs and structures exist on every campus

• IR data has demonstrated many as effective

• Tend to be small in scope, serving relatively small numbers of students

• Why?



Why are Non-Traditional Programs Isolated and Small?

• Limited awareness about the research literature• Need for paradigm shifts in thinking of campus

administrators, faculty & staff• Organizational change issues• Lack of IR resources to provide local data• “Pilot” mentality – w/o scaling plan• Perhaps the single biggest reason?

Perceived Cost of scaling these programs to many / most / all students



Other Motivations for Change

• Student wage gains through higher education attainment – access to family sustaining wages

• Workplace needs – 80% of 21st century jobs need advanced skills

• Societal implications – lack of skilled workforce, competition in global economy

• Equity & Moral Imperative – achievement gap vs. educational debt

• Improvement Science Tenet: Every system is perfectly designed to achieve exactly the results it gets



It’s Our Moral Imperative• It’s easy to blame the student, blame K-12

preparation, blame parents, or blame the social, political, economic and educational conditions that create the systems that produce the inequities

• Story on central line infections from healthcare (30,000 – 60,000 deaths per year to essentially zero)

• Economic sustainability, social mobility and a living wage are on the line



But…

• Community Colleges have to pay their own bills. Thus, we are left with a situation where: Society and our moral imperative demand

that we succeed in our mission of developmental education….

But our funding system seems to suggest that we at the CCs can’t afford to do so



Part 2: Fiscal Considerations of Innovative Programs &

Approaches


Fiscal Approaches to Consider1. Cost analysis2. Cost effectiveness / ROI3. Cost efficiency / Cost per Completer4. Cost reductions per student5. Wage gains per student6. Economic impact for communities



1. Cost Analysis Approaches• An analysis of what it costs to “do things differently” vs.

the traditional model• Can include costs such as:

• incremental salaries• release time for faculty• stipends• IR support• tutors• travel• supplies• facilities*

• Note: colleges are often good at identifying incremental costs…



2. Cost Effectiveness Approaches

• An investigation of not only the incremental costs to the college but also the potential for incremental revenue that may be generated at the college to offset costs

• Also referred to as return-on-investment or ROI analyses

• Fairly uncommon in higher ed until recently• Challenges of differential costs / returns by programs,

interdependency with level of efficiency of college / departments, enrollment caps, state funding questions



3. Cost Efficiency Approaches

• An analysis of the effect of the program and its incremental costs on key outcomes such as completion, transfer or graduation

• Also called “cost per graduate”, “cost per transfer”, “cost per completer”, etc.

• Good when accountability calls for improvement in key outcomes – or determines incremental funding by them

• Challenge that incremental costs still may go up, even when cost per completer goes down



4. Cost Savings Per Student

• As colleges become more efficient at creating structures that enable students to finish their degrees more quickly, there are direct cost savings for the student, including:• Tuition savings• Books cost per semester



5. Wage Gains for Students

• As more students finish degrees, the college’s net return on wage gains for their students will increase• As this is starting to be emphasized / measured,

colleges are very likely to have key performance indicators / accountability measures based on such outcomes

• Also, as an individual student finishes more quickly, she will experience the increased wages that a completion grants them earlier, producing a net wage gain for the student.



6. Economic Impact to Community

• With more students getting credentials / degrees / completions, the local, state, and national economies are catalyzed

• Challenge is that this often hard to estimate, but important to call out as a fiscal impact of innovative programs that produce higher completion rates



Part 3: Demonstrating a ROI

Approach for Statway / Quantway


Traditional CC Economic Reality

• Community Colleges and Four-Year Colleges are set up to think in terms of fiscal periods (usually fiscal years)

• Simplistically, this year’s salaries, fixed costs, & variable costs seemingly need to be offset by this year’s revenues from tuition, FTES apportionment, and other sources of revenue



A Different (?) Way of Thinking

• As has become common in industry, we could think about deviating from our “traditional” model toward a return-on-investment (ROI) approach

• Under this approach, we use our “traditional” model as the baseline for costs and revenue



Incremental Costs

• We first account for the additional costs associated with the aforementioned more successful alternative programs. Examples:• Incremental salaried faculty/staff • Hourly personnel costs (tutors, etc)• Stipends• Equip / Supplies / Facilities

• Note: We are quite good at assigning incremental costs to non-traditional programs!



The Flip Side – Incremental Revenue

• Successful alternate programs have the following outcomes:• Increased course retention • Increased course success rates• Increased persistence• Increased progression to college-level work• Increase in overall units attempted / earned



What is the coin of the realm?

• FTES & Tuition• As an example, in California, colleges generate

$4,361 per FTES in apportionment• In most states, colleges also keep tuition

and/or fee revenue• The incremental FTES apportionment and

tuition generated in successful alternative programs can, in many cases, offset the incremental costs



Caveat before we move on…• This approach runs into an issue if a system caps

apportionment funding and the college is at or near its enrollment capTo our knowledge, only California does thisSomewhat ironic, given that this model was developed in

California

• Further irony - the caps are based at least partially on historical failures in developmental educationCould flood the system with successful students



Incremental FTES $$$ Not Without Costs• Instructional costs for students who are retained and

progress – may require adding additional sectionsMay fill non-full classrooms especially in productive GE

courses

• Overhead / infrastructure costsEstimating is very complex

• Taken together, we estimate a range of 40%-75% “profit” from FTES



What the Model Doesn’t Do

• This is not a sophisticated economic model

• It doesn’t take into account economics concepts such as net present value (NPV), economic rates of return (IRR), discounting, etc.

• Ultimately, it is designed to be an order of magnitude demonstration



Part 4: Modeled Outcomes & Other

ROI Thoughts


Modeled Profit Summary



Modeled ROI Rate Summary



The Bottom Line (Literally)

• In many cases, supposedly expensive programs such as Statway / Quantway do pay for themselves• Real-world examples from Cerritos, Chaffey, De Anza &

Foothill in “Economics of Innovation” section of CA BSI paper on Developmental Education

• Examples also applied to Illinois, Kansas, New York, Ohio, and Texas funding structures

• In many cases, these programs produced a net financial benefit for the college

• Can estimate 3-year incremental FTES for SW / QW now; will have real-world data in 2014/2015



The Soap Box

• We should be looking to expand these more successful non-traditional basic skills programs for moral, ethical, and societal reasons

• This approach suggests colleges also may have a financial incentive for doing so



Growing Pains

• As programs are expanded past their current small reach, they will likely experience some decrease in incremental success

• Flip side is that costs do not scale up proportionally – and this usually is a good thing as economies of scale emerge

• May balance each other out?



Part 5: Demonstrating Cost Efficiency

& Cost Savings Per Student Metrics for Statway &

Quantway


Cost Efficiency Description

• Uses the incremental cost summary from used in the ROI Model

• Calculates the incremental spending increase per student as a percentage increase

• Assumes a decrease in time to degree (modeled at 1 semester or 1 year until real-world data is collected)



Cost Efficiency Description (2)

• Uses the 3rd semester persistence rate and 2-yr, 3-yr, 4-yr, and 5-yr graduation rates

• Uses Control Group spending and SW/QW spending to estimate overall costs / group

• Produces a net savings per SW / QW completer



Student Cost Savings Description

• With decreased time to degree, student savings in tuition and books are estimated

• Uses customized local tuition and average books cost



Student Wage Gains Description

• Students will also experience a wage gain based on the incremental value of their completion vs. wages while in college (often only PT wages).

• This incremental year may occur directly after the AA for terminal degree completers, or after the completion of BA • either way it’s a 1-year wage gain increase



Part 6: Early Modeled Outcomes on Cost per Completer, Student Tuition & Books Savings, and

Wage Gains


Modeled Cost Per Completer Summary



Modeled Student Tuition & Books Savings Summary



Modeled Student Wage Gains Summary



Part 7: Final Thoughts


Summary

• Numerous ways to estimate the fiscal impact of innovative programs on colleges and students

• ROI analyses best for estimating net revenue impact to colleges; also tricky as it bumps up against state funding issues, college enrollment trends & capacity issues

• Cost efficiency analyses useful for demonstrating effects of improved completion / time to degree



Resources

• The downloadable Excel Model and accompanying white paper are available at:

• http://www.inquiry2improvement.com/publications-resources

• While examples use SW-QW, have also developed similar models for tutoring, supplemental instruction, structured pathways – can be customized to most situations

Completion by Design? Completion by Accident?


http://www.inquiry2improvement.com/publications-resources



www.inquiry2improvement.comNational Center for Inquiry & Improvement 46

Find Out More

• The National Center for Inquiry & Improvement websitewww.inquiry2improvement.com

• Dr. Rob Johnstone, Founder & [email protected]

• Carnegie Foundation for Advancement of Teaching’s Statway & Quantway: http://www.carnegiefoundation.org/developmental-math


http://http/www.carnegiefoundation.org/developmental-math



Documents

Dr. Rob Johnstone New Jersey CC Student Success Summit Mercer County CC, New Jersey