The Cost of Undergraduate Education at the University of California - Improved Calculation

by Charles Schwartz, Professor Emeritus, UC Berkeley, December 15, 2007


The previous calculation, dated September 2005, is posted on my web site http://ocf.berkeley.edu/~schwrtz/UndergradCost.html .  The unique characteristic of the method used is that it disaggregates the cost of undergraduate education from other core missions of the University - specifically faculty research and graduate programs - all of which have traditionally been tied together in the I&R budget.

The present paper improves on that earlier calculation in several ways beyond using more recent accounting reports. The Faculty Time-Use Survey is studied more closely and provides a quantitative correction for the contribution of faculty research work to instruction. Consideration is also given to the cost of Capital Assets that contribute to undergraduate education. Several smaller points in the analysis are improved as well.  The overall result is just about the same as before: The current level of mandatory fees for resident undergraduate students is very close to 100% of the University’s actual expenditure for undergraduate education, averaged per student.



Introduction

     This method of calculating the cost of undergraduate education – as a specific portion of the big bundle of costs based upon the traditional I&R Budget (for Instruction and Research) - continues to be quite controversial.  The basic idea is to use the official Faculty Time-Use Study to effect an activity-based costing analysis upon the extensive accounting records published by the University.

     In carrying out this analysis I rely on the principles that it should be rational and objective and based upon the best available quantitative information.  I invite my critics to respond in kind.

     The previous calculation started with the data on Expenditures of Current Funds for 2003-04 and then went through 5 Steps.  The current  improvement uses the latest accounting data, for 2006-07, with additional details explored at several steps.  In addition, we explore more closely the information contained in the official Faculty Time-Use Study: this is now called Step 0. We also address the question of Capital Assets and how they may contribute to the cost of undergraduate education: that is treated in a new Step 6.

Step 0 – The Faculty Time-Use Data

     The most sensitive, and most controversial, part of my calculation is the use of the data on how faculty spend their work time. So let’s explore the “University of California Faculty Time-Use Study, Report for 1983-84 Academic Year” in some detail.

Page 3. Highlights of the Study Findings
Regular faculty members (100% I&R FTEs) spent an average of 61.3 hours a week on University-related activities of all kinds. This total includes:
26.0 hours on instructional activities;
23.2 hours on research/creative activities;
  6.6 hours on university service;
  5.5 hours on professional activities/public service.

     Based upon this summary data, I previously said that (26.0 + 6.6/3)/61.3 = 46% of faculty work time was devoted to Instruction – guessing that one-third of the university service (committee work) was assignable to instructional programs.  Further data, found in Tables 3 and 4 (on pages 38 and 39 of the report), show that faculty instructional time (counting both “regularly scheduled course instruction” and “independent/special study supervision”) was evenly divided between undergraduate and graduate courses. This led me to the conclusion that 23% of faculty work time  should be allocated to undergraduate instruction.

     We shall now revise that result by noting further relevant data provided in the Time-Use report.  At the conclusion of the Highlights section, on page 4, we find the following statement.

“Of the time spent on non-instructional activities during the 1983-84 academic year, an average of 7.3 hours a week also contributed to instructional activities.”

The details of this additional data are given in Table 5, on page 41, and we shall study this now.

     First, it is reported that of the 23.2 average weekly hours that faculty spent on Research/Creative activities, 5.8 hours of that time also contributed to Instruction.  How shall we treat this 5.8 hours per week?  We cannot simply add this into the Instructional time reported above, since that would violate the total hours of work time reported by the faculty members. As the discussion of this Table 5 data (see page 42) makes clear, the first reporting of time spent is according to the primary activity of the faculty member. Therefore, the proper way to handle this 5.8 hours is to say that something less than half of this time may be subtracted out of the Research total and added to the Instruction total.  We conclude that something less than 2.9 hours per week should be added to the 26.0 hours per week of Instruction time.

     Next we should ask how this extra 2.9 hours should be divided between undergraduate and graduate instruction.  There is no specific data in the report that  can be used to answer this question. I believe that the overwhelming portion of this 2.9 hours pertains to graduate instruction rather than to undergraduate instruction; this is based upon the fact that for graduate students who are advancing toward their PhD degrees (the majority of our graduate students) there is full intermixing of their “instruction” (in seminar and research courses) and the research work of their faculty supervisors.  I conclude that it will be generous to allot 1.0 hours per week of faculty research time as contributing to undergraduate instruction.  

     What is of the greatest significance about this consideration is that we have now resolved one of the recurrent complaints about my whole methodology: the claim that faculty research at the university must make uniquely valuable, and usually unquantifiable, contributions to the education of undergraduate students.  This matter is now quantified in the most authoritative way: namely, based upon the survey responses of the faculty members themselves.

     Let us now continue to study the other new data in Table 5. We are told that of the 6.6 hours per week reported as University Service, 0.7 hours also contributes to Instruction. That is a surprisingly small portion: note that I had previously estimated that 2.2 hours of that 6.6 hours should be credited to Instruction. How could I have been so wrong?  Looking back at the long list of activities which the survey presented to faculty members as activities to be counted as part of Instructional activities (see page 32 of the report), we find: “informal or committee discussions regarding teaching, curriculum, etc.” So, the time that faculty spend in committees (university service) related to instruction is already specified to be counted as Instruction time.  My estimate of 6.6/3 = 2.2 hours was an error, which I must now correct. I should drop that 2.2 hours and add at most half of 0.7 hours per week to Instructional activities. Assigning half of that to undergraduate instruction, as done previously, I conclude that 0.2 hours per week should be substituted for the previous contribution of University Service to the average faculty undergraduate Instructional work time.

     Finally, in Table 5 we also see that of the 5.5 hours per week of Professional Activities/Public Service 0.9 hours are also attributable to Instruction.  I believe that by far most of this, also, relates to graduate students rather than undergraduates; so I will allow that at most another 0.2 hours per week may be added to average faculty undergraduate Instruction work time.

     This leads us to the conclusion of Step 0: Average faculty work time at undergraduate instruction (upper limit):
26.0/2 + 1.0 + 0.2 + 0.2 = 14.4 hours per week = 23% of 61.3 hours per week. We are back at the same number we had before; but now it is much more reliable.

     There is also the correction for sabbatical leaves, mentioned in the earlier paper, which gives a 10% reduction to 21% as our final answer.

     Another question about the reliability of the data from that Faculty Time-Use Study is its age: that data was gathered over 20 years ago.  Have things changed since then?

     In the earlier paper I quoted data from UC’s official reports on Faculty Instructional Activities (FIA) which showed that the relevant number of primary classes taught per regular rank faculty had not changed over the period 1991-2000. For undergraduate classes it was constant at 2.5 quarter classes per year; for graduate classes the number grew from 2.0 to 2.4 quarter classes per year. The newest report in that FIA series, issued February 2007 and available at http://www.ucop.edu/planning/facultyinstructionalactivities2007.pdf , shows that same data extended to 2005, where the numbers are 2.6 classes for undergraduates and 2.5 for graduate classes. I consider that a strong  validation for continuing to use the original survey numbers.

     Of course, primary classes (lectures and seminars) are not the only ones counted in the overall faculty teaching load: there are independent study classes as well and these are most heavily weighted toward graduate courses rather than undergraduate ones. The original faculty time-use survey counted hours spent on those along with  hours spent on primary classes: the result was 50% of faculty class time spent on undergraduate classes and 50% on graduate classes.

     In this latest FIA report there is considerable attention given to a new method of counting faculty teaching activities. It is called the TIE methodology and its purpose is to find a way to count those independent study courses along with the primary classes.  The main effect of this innovation is to give the faculty more “credit” for the large amount of time they spend working with graduate students in independent study.  If you want to follow that new methodology, then it gives a new answer to the question of how faculty teaching effort is divided, on average, between undergraduate and graduate education.  From Tables 14 and 15 of that FIA report, for teaching by regular rank faculty in 2004-05, the effective count of classes per faculty FTE comes out to be 3.3 for undergraduate courses and 5.5 for graduate courses.  This answer is quite different from the 50-50 split; it would lead to a considerably lower outcome in our cost calculation for undergraduate education, changing that pivotal 21% figure to 16%.  However, I shall stay with the original methodology that is based upon faculty time-use rather than course counting.

     Now we proceed by steps through the latest accounting data in the UC Campus Financial Schedules (CFS) for 2006-07.


Step 1 – Get the Relevant Part of Instructional Expenditures

     We proceed first as in the earlier calculation, taking accounting data from the Campus Financial Schedules (CFS) for 2006-07, which may be found at  http://www.universityofcalifornia.edu/finreports/index.php?file=/06-07/finschd.html . The total expenditure for Instruction is $3,570 million (from CFS schedule 12-F).  From this we take out the expenditures for: University Extension ($205 million) and Summer School ($54 million); Health professions ($1,325 million); professional schools of Business management and Law ($209 million). Those programs are removed because they are not involved with undergraduate education.  (One can quibble that Business schools do provide some undergraduate courses; but I would then point out that there are other smaller professional schools that are almost exclusively for graduate students, yet I have not subtracted them out.)

     The reader should have a look at Table 1, below, which is a copy of part of one page from the Campus Financial Schedules.  This is the detailed spending record for Instruction at UCLA and one can see how the various components mentioned above are presented. I merely sum this data for all of the campuses and the systemwide administration.

     Now I shall do something new: Remove all expenditures of Restricted funds – as those may be seen in Table 1.  Those are monies provided by external parties (endowments, gifts, etc.) for specified purposes and so they represent no cost to the University’s operating budget. This amounts to another subtraction of  $121 million.

     The result of Step 1, the Adjusted Expenditure for Instruction, is $1,656  million.



Table 1.  UC Campus Financial Schedules     Schedule 4-B     Los Angeles Campus
Current Funds Expenditures by Uniform Classification Category   2006-07
     INSTRUCTION
 Total
 Unrestricted
 Unrestricted
 Restricted


General *
 Designated
GENERAL ACADEMIC
 $  ,000
 $  ,000
 $  ,000
 $  ,000
Architecture and environmental design
   3,500
   3,133
      296
        71
Area Studies
   3,810
   2,506
      202
   1,102
Biological sciences
 15,257
 11,045
   2,923
   1,289
Business and management
 51,430
 14,971
 32,442
   4,017
Communications
   2,220
   1,849
      294
        77
Computer and information sciences
        10
      -
        10
      -
Education
 21,131
   9,130
 10,963
   1,038
Engineering
 36,826
 31,681
   2,810
   2,335
Fine and applied arts
 34,599
 29,238
   3,215
   2,146
Foreign languages
 19,288
 16,462
      845
   1,981
Health professions:



  Dentistry
 34,135
 12,227
 19,158
   2,750
  Medicine
 436,018
 66,485
 325,038
 44,495
  Nursing
   8,370
   6,100
   1,607
      671
  Other
   6,220
      855
      639
   4,726
  Public health
 14,630
   7,712
   2,765
   4,153
Interdisciplinary studies
   3,314
   2,816
      325
      173
Law
 24,884
 15,070
   7,490
   2,324
Letters
 32,758
 26,922
   3,451
   2,385
Library science
   2,246
   1,985
      163
        98
Mathematics
 15,918
 12,880
   2,541
      497
Military sciences
      275
      210
        36
        29
Physical education
      -
      -
      -
      -
Physical sciences
 41,535
 31,165
   7,687
   1,683
Psychology
 13,583
 10,513
   2,465
      605
Social sciences
 58,895
 48,718
   7,272
   2,905
Social welfare - pubic policy
 10,294
   7,055
        97
   3,142
Compensated absences accruals
   1,317
       (7)
   1,185
      139
     Total
 892,471
 370,721
 435,919
   85,831





SUMMER SESSION
   16,797
    3,735
   13,042
          20
UNIVERSITY EXTENSION
   43,619
      -
   42,599
     1,020
EDUCATIONAL FEE EXPENSE PRORATION
      -     
 (81,199)
   81,199
      -     
     Subtotal
 952,887
 293,257
 572,759
   86,871





ELIMINATED CAPITAL EXPENDITURES
    (7,284)
     (652)
   (5,857)
     (775)
    Total Instruction
 945,603
 292,605
 566,902
   86,096
*General funds are state appropriations; Designated funds are other UC revenues.
Restricted funds are those whose use is specified by the external donor.



Step 2 – Get the Undergraduate Part of That

     We first have to identify the portion of that result from Step 1 that pays for Lecturers and Graduate Student Instructors.

     As of October 2006 there were 1724 FTE lecturers employed in General Campus sector of UC. Their pay scales cover a wide range with a midpoint (for the academic year) at $73,000. An alternative data source (Cal Profiles, for the Berkeley Campus) gives information on Non-Recurrent Faculty: the average payments were $60,000 per FTE in 2006-07.

     Using the latter figure we get a total expense of $103 million. What fraction of their teaching is for undergrad rather than grad classes?  Look at the latest FIA report and we see that 81% of classes (T+I+E) taught by lecturers are undergrad rather than grad classes. That gives a total undergraduate expenditure for Lecturers of $83 million.

     Now we turn to Graduate Student Instructors. The 2005-06 report of graduate student financial support ( http://www.ucop.edu/sas/sfs/docs/gradsupport_0506_td_allacad.pdf ) shows: Expenditures for TA earnings = $127 million, removing the professional schools. (The Governor’s budget says $102 million for TAs in the General Campus sector; but I’ll stay with the former number.) I can find no direct data for how this work is divided between graduate and undergraduate classes; however, the FIA report shows data on student credit hours and this allows me to estimate that about 87% of GSI work is for undergraduate education. This gives a net cost of $110 million.

     Total expense for Lecturers and Graduate Student Instruction = $230 million of which $193 million is allocated to undergraduate education.

     From Step 1 we had adjusted expenditure for Instruction = $1,656 million; and from Step 0 we take 21% of the regular faculty component as assignable to undergraduate education.

Result of Step 2:
Direct Cost of Undergraduate Instruction = 193 + 0.21*(1656 – 230) = $492 million.

Note. I believe the largest uncertainly here concerns the allocation of non-academic staff salaries in the I&R budget to undergraduate education.  I know of no data on this (something analogous to the Faculty Time-Use Study would be required.) I have simply followed the idea that the non-academic staff here are provided to assist the faculty in the academic departments in whatever they do and therefore I have applied the same 21% factor.

Step 3 – Add in Academic Support

     We proceed as before with the Academic Support category of expenditures, first removing all those portions (called “Ancillary Support”) that are part of the research and medical services activities of the University.  This leaves us with: Libraries ($225 million); Museums, Computer Support, etc. ($97 million); Academic Administration  minus its portion in the professional schools (247 – 57 = $190 million). Restricted funds have been subtracted out here as well.  The same formula will be used as before to get the portion of this allotted to undergraduate education:
½ (225 + 97) + ¼(190) = $209 million


Step 4 – Overhead and Enrollment

Overhead, calculated as before, using new data from CFS schedule 12-F:
[Institutional Support (883) + Operation and Maintenance of Plant (480)]/
[Total (15,905)– Medical Centers (4,185) – Student Financial Aid (407)] = 12.0%

Number of undergraduate students = 167,000 FTE

Unit cost of Instruction = $MM(492+209)*1.12/167,000 = $4,701 per student


Step 5 – Add in Student Services

As before, Student Services = $MM(504-120)*1.12/214,000 = $2,010 per student

Total Expenditure for Undergraduate Education (2006-07) = $6,711 per student.


Step 6 – Capital Assets

      The previous calculation of University cost is based entirely upon the expenditures of current funds (annual operating costs) and we now want to allot an additional cost associated with the University’s capital assets. According to the University’s Annual Financial Report 2006-07, capital assets are depreciated or amortized over their estimated lifetimes (see page 46) and the amounts for the last fiscal year are given (from page 71) in Table 2 below.

Table 2. Capital Assets Depreciation and Amortization (D&A)
Type of Asset
 D&A for 2006-07 (in $ millions)
Infrastructure
      15
Buildings and improvements
    537
Equipment
    411
Libraries and collections
      86
       Total D&A
 1,049


     It turns out that a significant portion (mostly for Equipment) of this D&A cost is already included in the Expenditures of Current Funds.  If you look at Table 1., there is an entry at the bottom called “Eliminated Capital Expenditures,” which is an amount to be subtracted from the total expenditure. (The logic for doing this is to avoid double counting of this expense, as explained in the UC Accounting Manual, Section P-415-3.) The data I have used in Steps 1-5  are taken before this subtraction, so that portion of the D&A cost is already included. According to Schedule 12-F of CFS the total of such depreciation cost is $488 million for that year.  From other data in the Annual Report (page 89) and CFS, I find another $97 million of D&A that is allotted to the Medical Centers.  This leaves us with a remainder of $464 million in depreciation expense (mostly in buildings); and we now ask how much of this may be assigned to undergraduate education.

     To estimate that I find some data from the Berkeley Campus’ Cal Profiles web site which shows assignable square feet on this campus dedicated as follows:
Instruction
   7%
Housing/Food
 21%
Meeting/Study
 15%
Research
 14%
Offices & Support
 25%
Other
 18%

Let me estimate what portion of those may be attributed to undergraduate education:
Undergraduate students constitute about ¾ of all UC students; so I will take ¾ of the Instruction component.  Of the Offices and Support component I shall take ¼, as generally done above for faculty and departmental staff. For the Meeting & Study component, I shall take something in between these two fractions, say ½.  This gives me an overall estimate that perhaps 20% of all building assets may be allocated to undergraduate education.

     So if I take 20% of that $464 million, it comes out to $93 million in annual depreciation attributable to undergraduate education.  That amounts to about $600 per student for this year.

Questions:  How much of that depreciation relates to buildings that were paid for by gifts or other restricted funds? Shouldn’t that portion be disallowed as a cost?  If we focus on state financed buildings, then another question arises: Isn’t non-resident tuition supposed to be a charge that makes up for the past cost of capital investments in UC paid for by California taxpayers?  UC’s income from nonresident tuition amounts to $250 million per year.   Surely, it would be wrong to charge twice for the same product.

     We need better data and analysis here; but at least we have a plausible upper limit on this additional cost for undergraduate education, coming from Capital Assets: it is at most $600 per student per year.   So, the final cost to UC for undergraduate education (2006-07) is between $6,711 and $7,311 per student.

Compare Student Fees to UC Cost for this Year

Mandatory student fees for resident undergraduates for 2007-08, averaged over campuses = $7,446. Increase expenditures by 6% for 2007-08: $7114 to $7750.

Undergraduate students are now being charged 96% to 105% of the actual cost of their education.