The Impact of Resource Allocation on Graduation Rates

Higher Education is currently facing challenges from a variety of forces; a stagnant economy, shifting student demographics, increased accountability and need for the demonstration of value. Colleges and universities are being forced to function more efficiently and at the same time improve student outcomes. One major outcome that has come under increased scrutiny is student graduation rate. With revenue at many institutions expected to remain flat or in some cases decline over the next several years institutions must find a way to strategically allocate their funds so as to positively impacts student outcomes, in this instance graduation rate. While studies have examined the relationship between institutional expenditures and graduation rates this study looks at a specific type of institution that has not yet been a focus; moderately and less selective private, four year institutions. Using the theoretical framework of Berger and Milem (2001), this study analyzed student completion research through the lens of organizational theory. Their work identified two overarching categories, the “structural demographic features” of the institution including size selectivity, and student body composition and “organizational behavior dimensions” which include institutional expenditures. The following research questions were examined; Did the recession of 2008 influence institutional expenditures? Do 6-year graduation rates differ by level of selectivity? Do institutional resource allocations in terms average expenditure per FTE differ by level of selectivity? Is there a relationship between institutional expenditures and completion as measured by 6-year graduation rates? What influence, if any, do institutional characteristics and institutional expenses have of 6-year graduation rates? The sample for this study was 363 institutions with an average acceptance rate of 70% or greater from 2006-2011. Using the IPEDS dataset institutional expenditures designated for institutional support, instruction, academic support, and student service were extracted for the 2006-2011 reporting years. In addition, institutional characteristics including the total institutional size, percentage of students who were white, and acceptance rate were extracted for the same years. There were two main analyses conducted in this study. The first was an ANOVA to determine which if any institutional expenditures increased over time. After adjusting for inflation only the student service expenditure category increased significantly over the selected time period. There was also variation among these institutions by selectivity with respect to graduation rates and institutional expenditures. Institutions with an acceptance rate between 70 and 79% had a higher graduation rate and spent more on instruction, student services and institutional support than those institutions with an acceptance rate of 90% or greater. Using a Linear Mixed Model it was determined that institutional characteristics had the largest impact on graduation rates and expenditures instruction had a small but significant and positive impact on graduation rates. Possible implications for theory and practice were discussed, as were limitations. Future research was suggested to expand the understanding of institutional expenditures, the limitations of the current graduation rate, calculation, and the expansion of this analysis to include public institutions