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New Delta Cost Study Estimates Productivity of State Public Higher Education Systems

July 29, 2009

A recent study. "The Dreaded P Word: An Examination of Productivity in Public Postsecondary Education," by the Delta Cost Project presents a new market-based methodology for estimating productivity in state public higher education systems, and compares results across states. The new measure relates state and student spending on higher education to the market value of degrees and other credentials produced.

According to the report, "many have labored to address productivity in postsecondary education. However, most productivity studies have focused on the internal costs of producing degrees at the institutional level rather than the total volume of production." This report uses data on the market value of degrees instead to develop an alternate methodology for measuring and comparing postsecondary productivity across the states.

To measure productivity, the report uses the two primary sources of state higher education unrestricted revenue-- state and local appropriations and tuition and fee revenues. The revenue data is then compared with the numbers of certificates and degrees awarded by level and the weighted median earnings associated with each in the state's employment market. If two state higher education systems have similar funding levels and credentials awarded, but one state produces more bachelor's degrees and the other state produces more certificates, then the state that awards more bachelor's degrees would be considered more "productive" relative to the other state.

The market-based productivity estimates show that the costs per credential are lowest in the states of Florida, Colorado, Washington, Utah and North Dakota, and highest in Alaska, Wyoming, Delaware, Rhode Island and Connecticut. For the full list and the complete study, visit www.deltacostproject.org.

Patrick Kelly, the author of the report, recognizes that "this measure of productivity does not capture more granular measures of institutional production costs, it focuses on one mission for all institutions (the production of certificates and degrees), and it does not address quality. However, the benefit is that it is relatively simple to use and policy makers don't need to wait for data and measurement issues to be resolved to evaluate performance."