An Analysis of Financial Position of Public Colleges and Universities

By Fischer, Mary; Marsh, Treba et al. | Journal of Business and Accounting, October 1, 2015 | Go to article overview

An Analysis of Financial Position of Public Colleges and Universities


Fischer, Mary, Marsh, Treba, Milburn, Christine, Journal of Business and Accounting


INTRODUCTION

Although higher education in the U.S. is thought to be the best in the world, it is suffering from escalating costs (Immerwahr, 2004; Symonds, 2003). Since the 1990's college tuition and fees have increased by 439% (Callan, 2008). In 2000, states in 47 states paid more to support public higher education than students. By 2012, the support trend shifted to students paying more in 24 states while colleges in only 26 states received more state support (Chronicle of Higher Education, 2014). As a result, accessibility has diminished as the U.S. ranks 7th in proportion of 18-24 year-olds enrolled in college (Callan, 2008). Yet, researchers report per student spending increased 34.5% despite technological delivery advances that should lower costs (Green et al., 2010; Vedder, 2004).

Doti (2013) studied the finances of four-year and graduate-level private colleges and universities to determine their financial health and the characteristics of the institutions with the highest net asset growth. This study replicates Doti's study using public colleges and universities. The findings contribute to the literature by providing comparative public higher education financial characteristics.

A list of the 500 largest colleges and universities in the U.S was retrieved from Google.com. The list was limited to public colleges and universities with 10,000 or more students, excluding community colleges, which resulted in a total of 249 institutions. The 249 institutions were sorted from the highest change in net assets (net position) to the lowest change in net assets. This study sample includes the 25 institutions with the highest change in net asset balance, the 25 institutions with the lowest change in net asset balance, the 13 institutions with a change in net asset balance above mean, and the 13 institutions with a change in net asset balance below mean hereafter termed the mid 26 for a total sample of 76 institutions. Eleven years (2002 - 2012) of financial, enrollment, and employee data were hand collected for each college/university from the Integrated Postsecondary Education Data System (IPEDS).

The collected information for the eleven years was analyzed to determine the financial health of the universities as well as the institutional characteristics. The net assets for the sample institutions were totaled to show the overall financial health. Figure 1 shows the total net assets for the sample for years 2002 through 2012. The slight decrease in total net assets from 2008 to 2009 can be attributed to the impact of the Great Recession. Even though total net assets of higher education are increasing, a different picture is painted when individual institutions are divided into groups. For the purpose of this study, the sample institutions are separated into three categories. The first category is the Top 25. The Top 25 are the colleges and universities that had the highest percentage change in net assets from 2002 to 2012. (See Table 1 for a list of Top 25 schools). The second category is the Mid 26. This includes the colleges and universities with a percentage net assets change around the mean. The last category is the Bottom 25, which includes the colleges and universities that had the lowest percentage net assets change. (See Table 2 for a list of Bottom 25 schools). Figure 2 and 3 show the net assets average for the Top 25, Mid 26, and Bottom 25. Figure 2 shows all three categories, and Figure 3 compares just the Top 25 and Bottom 25. The Bottom 25 started out with a higher net asset average than the Top 25, and continued to have a higher net asset average until 2004. The Top 25 increased at an average rate of 11 % annually while the Bottom 25 decreased at an average rate of 2% annually. The Top 25 increased from $ 166 million to $484 million in 10 years. Between 2004 and 2012 the Bottom 25 fluctuated in the range of $200 million to $260 million. The Mid 26 had the overall highest average net assets compared to the Top 25 and Bottom 25. …

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