Enhancing Institutional Revenues: Constraints, Possibilities and the Question of Values

Abstract

It would be badly wrongheaded to assert that colleges and universities were until recent years somehow above the unruly fray of commerce. High-minded notions of the public good, with the accompaniment of guidance and support by governmental and spiritual organizations, have indeed long been elements in higher education, indeed of learning more generally, but the first of the modern universities were market-driven in the most basic, foundational sense (Kerr 1993). 1 The organizational form of the modern university, now largely taken for granted, originated not from the highest reaches of government and church, with the inevitable accompaniment of lofty rhetoric, but rather from old-fashioned demand at 'the ground level.' In these early exemplars, adequate revenues from paying customers were essential for survival.Perhaps inevitably, this simple, ground level marketplace came to be supplanted by larger forces. Church and state gradually came to be more intimately involved in subsidizing the emerging institutions. In the US especially, other actors also became financially involved. Largesse from businesses, charitable organizations, alumni, and friends enabled institutions to persist, prosper, and also to price low, despite rising costs.Through the 1800s, these diverse non-tuition revenues were directed toward supporting the costs of teaching and learning, i.e., the heart of these early collegiate operations. Revenue complexity grew further in the late 1800s and into the 1900s, however, as external research contracts, university hospitals, museums and athletics each began to involve new campus activities and provide additional sources of funding. By the 1970s, institutional revenues were far more diverse than a century earlier, and observers were noting the advantages of variety. Economist and college president accounting for a quarter (24.9 per cent) of all revenues (Knapp et al. 2002), a pattern notably different from earlier years. Indeed, in public institutions, revenue mixes are beginning to resemble those of private institutions and it is becoming appropriate to label much of public higher education 'state-assisted' rather than state-supported. Even in private four-year institutions, tuition and fees accounted for only about one-fourth (24.4 per cent) of all revenues in 2000 (Knapp et al. 2002). 2 Thus, institutions increasingly appear to be accepting the potential benefits of diversifying revenues (Ehrenberg 2000; Breneman 1997; Clark 2002). The more difficult issue is not whether to diversify, but rather how. In the best case, institutional leaders can develop educationally valuable revenue-generating activities integral to campus values and missions. Less edifying are defensible pursuits that simply help institutions survive under austere conditions. Most troubling, of course, are new activities that may threaten core, cherished academic values. New revenue streamsInstructional initiatives, research and analysis initiatives, pricing initiatives, reforms in financial decision-making and management, human-re...