Page 144 - Crisis in Higher Education

A Customer-Focused, Resource Management Perspective • 115

tuition and fee payments to institutions of higher learning are made by or
on behalf of students.
In addition to tuition, Figure 5.4 shows that state and local govern-
ments support public higher education by adding 21% to their revenue
stream. The primary purpose of this subsidy is to keep tuition at public
universities affordable for residents. This can be seen by comparing the
in-state tuition at public universities to tuition at private, not-for-profit
universities, which is shown in Table 1.1 in Chapter 1. Nearly all of the
difference is higher tuition at private, not-for-profit universities.
Figure 5.4 also shows that universities receive approximately 12% of
their revenue from the federal government in the form of research grants.
These funds are different from the federal grants for tuition described ear-
lier. The balance, approximately 27%, comes from endowments and other
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income. Research funding, endowments, and gifts are described here.
1. Research grants and contracts: Universities pursue grants and con-
tracts, which are funds from governments, foundations, industries,
and other organizations for doing specific tasks, including basic
research in chemistry or biology, applied research in engineer-
ing, investigating new teaching methods, creating new computer
technology, and dozens of other topic of interest to the funders.
The amounts received vary widely with more funds going to larger
and better known universities. There are strict spending guidelines,
which universities must follow or they will lose the research grant
and put future grants in jeopardy. Most universities have a grants
accounting office that monitors these projects to validate that dollars
are spent according to the guidelines.
2. Endowments: They usually come from individuals, companies, or
foundations, and only the earnings from endowments can be spent.
Although some of the earnings support scholarship, a significant
amount is used to fund research, support faculty development, pay
for equipment, and build and operate facilities. Endowment amounts
vary widely. A community college or technical school is likely to
have a small endowment with a total in the millions or tens of mil-
lions of dollars. Regional universities are likely to have endowments
measured in the $100s of millions. Nationally and internationally
known universities have endowments in the billions of dollars with
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Harvard University leading the pack at $36.4 billion in 2015. Each
year, Harvard University is likely to generate more than a billion