How college and university revenue and expenditure
patterns have been affected by the current economic
recession is analyzed.
Weathering the Storm: Generating
Revenues for Higher Education During
Robert K. Toutkoushian
During the past fifty years, a number of changes in the external environment—both good and bad—have occurred that have influenced how institutions of higher education (IHEs) operate. The passage of the GI Bill led to significant increases in the demand for college by opening the doors to postsecondary education to a wide range of students and, in the process, challenged institutions to build facilities and hire staff to meet their needs. Increases in federal funding for research in the 1950s and 1960s also had a notable effect on the type of academic work performed by many universities. The high rates of inflation that occurred during the 1970s eroded the relative earnings of faculty and staff (Hamermesh, 2002) and, together with the swelling enrollments due to the baby boomers, challenged IHEs to simultaneously compete with the private sector for faculty in key areas, serve an ever-growing demand for their services, and fully fund their operations.
Despite recurring efforts at many institutions to control the costs of their operations, expenditures at IHEs have historically grown at rates that exceeded the general cost of living. It is encouraging to note, however, that total revenue growth has managed to keep pace with the expenditure growth over this period (Toutkoushian, 2001). Institutions generally rely on six main sources for revenues: students or parents, federal government, state government, private gifts, endowments, and auxiliary enterprises. During the 1980s and 1990s, IHEs in both the public and private sectors turned to students and their families to finance more