Financing Institutional Operations in Higher Education

November 2007
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In contemporary college and universities, the “taken for granted” is shrinking. Longstanding operational assumptions are being shaken as institutional performance claims are being countered with demands for hard evidence, competition for students and funding has intensified to new levels, healthcare and building costs are growing at rates that threaten support for other central priorities, and the global niche of the U.S. as a magnet for students, faculty, and researchers from abroad has eroded. In response, campuses and their leaders have begun to rethink their traditional business models. This report reviews the emerging challenges and examines some creative responses institutions are pursuing. Comments of a leader panel convened by the TIAA Institute are summarized, and three recent reform initiatives are considered in more detail: highly differentiated pricing, decentralized decision making and budgeting, and aggressive enrollment-management systems. For each reform, the arguments of proponents and skeptics are summarized and some implications of adoption are highlighted.