Explanation of administrative costs: A case study

Abstract

The expenditures of public higher education institutions have increased steadily over the last decade, a trend echoing the well-documented general tendency for increases in public-sector expenditures. Within public higher education, however, trends have proven more variable. Among the functional areas of instruction, academic support, student services, institutional support, and operations and maintenance, the growth in expenditures has been found to vary in both nationwide examination of higher education expenditures and in case studies of individual institutions. Variation in expenditure growth also has been observed for these functional areas when examined by type of institution. One consistency has surfaced--administrative expenditures have increased at a significantly higher rate than expenditures in other areas. A variety of influences may promote that trend. Theoretically, general expenditure growth in higher education has resulted from (1) the tendency toward revenue and prestige maximization, (2) lack of an efficiency motive, and (3) labor-cost intensiveness. Expenditure increases in specific functional areas also would be expected to reflect consistent, incremental growth. However, growth in administrative expenditures, recently coined "administrative bloat", is out-pacing growth in other functions. At first glance, revenue and prestige maximization would seem to provide little or no explanation for this trend, if not suggesting the opposite; institutions struggling to develop activities that clearly influence prestige (instruction, research, and service) would presumably tend to increase allocations for those activities and decrease allocations for discretionary administrative activities. Obviously, other perspectives are called for; these more focused perspectives may individually or collaboratively suggest explanations. The purposes of this study were to identify administrative expenditure trends and to determine the reasons for these trends through a case study. These issues were of interest to many parties, including legislative representatives, higher education system coordinators, institutional administrators, faculty, staff, and students.