Austin Community College's funding and facility challenges

Austin Community College is an institution designed to help prepare students through higher learning. The community college was established in 1972 with nearly 2,400 students. By 1991, through rapid expansion, the community college had over 40 facilities and over 23,000 students. Although this growth in the overall enrollment of the community college was impressive, it was not without its difficulties. For one, Austin Community College had lackluster facilities with the communities in which it operated in. Although ACC operated 40 facilities, these facilities were quickly becoming obsolete due to rapid depreciation. In addition, many of these facilities were not owned outright by ACC. Instead, many of these facilities were leased from third-party venders. As a result, the facilities were not created to handle a rapidly growing student population. The cramped space within the facilities created high demand for larger more user-friendly accommodations. The problem faced by ACC was on of funding. Funding sources particularly for ACC were difficult to establish. It already had a very high tuition rate as compared to rival institutions. ACC also did not have the benefit of a local tax base, to help support growth initiatives. These problems compounded themselves when combined with low faculty compensation, and overall low morale within the ACC organization. Dr. Angel must therefore change the environment and culture with ACC in order to be successful (Kasper,2002).

Basic Empirical Facts of the Problem

Nearly all the fact regarding ACC, relate to an inability to generate sustainable, recurring, and stable revenue sources. One of the primary revenue sources for any community college is its tuition and state appropriations (Murray, 2002). The chart below references this fact. Chart 1, taken from the period 1983 to 1987 looks at tuition as a percentage of total revenue for ACC. The empirical facts indicate a rising trend of tuition and state appropriation generating a large percentage of ACC's revenue.

Chart 1

1983

1984

1985

1986

1987

Tuition

State Appropriations

Total Tuition/State

13093

16423

17088

17888

17515

Total Revenue

25051

30014

31595

32439

42857

Percentage

52.27%

54.72%

54.08%

55.14%

40.87%

This trend, as evidenced in 1986 is unsustainable. First, the empirical facts suggest that ACC could not raise tuition. ACC had some of the highest tuition rates in the entire state of Texas. However, ACC did not have a compelling value proposition to warrant such high fees. The facilities, as mentioned in the introduction, were lackluster and owned by third parties. The staff sales were low, which made it difficult to attract top talent to the community college. In addition, nearly 75% of the faculty at ACC was part-time. These individuals may not have had a vested interest in the long-term success of ACC, as compared to their full time counterparts. Unfortunately many of these part time employees may be graduate students who may leave the institution eventually (Haley, 2011). Chart 2 provides more empirical evidence related to this fact. Chart 2 depicts the percentage increases in tuition on a year over year basis. The trend has declined, due in part to ACC's inability and unwillingness to raise tuition prices. After an initial 27%, tuition increases normalized to a more moderate range of 4 to 6%.

Chart 2

1983

1984

1985

1986

Tuition Increases

27.13%

4.18%

5.45%

6.19%

Chart 1, also presents an interesting argument in relation to the overall addition of the 5% property tax assessment. In 1987, ACC generated over $10 million in property taxes. As a result, its dependence on state appropriates and tuition dropped 15%. This indicates how vital a role the property tax plays in the future operations of ACC. This stable source of revenue alone accounted for 25% of ACC's total revenue.

The empirical facts also suggest that ACC is a vital component within the overall Texas community. Both directly and indirectly, ACC accounted for 6000 jobs within the Austin area. Of the 6000, 1200 were directly attributed to ACC. Generally higher education jobs are highly sought after and are relatively stable occupations. This stability provides nearly 1200 individuals with a dependable and stable source of income.

More important, ACC served a vital component within the Austin area. ACC is unique in that it has an open door policy as it relates to educational opportunities for students. Students, who therefore, were not accepted to neighboring universities, still have an opportunity to expand their education. This is critical as enrollment in many universities can be highly selective. ACC provides opportunity within a community to those who truly want to expand their education. In addition, in order to generate the revenue from a new tax base, the University would need to convince this community of the merits of its solution. The proposition recommended a .05-cent tax per $100 assessed in property value. In order for the 5% ACC proposal to generate traction, it would need to the support of the Austin community in which it served.

What Other Information Is Needed

All three of ACC's problems require more information. More data is needed in regards to the location of the run-down facilities, their function, how many students use them, and their age. In addition more information is needed in regards to employee compensation. The case mentions wages, however wages are only a piece of compensation. Many employees are eligible for benefits that vary across the institution. More information is needed into what these benefits are. Finally, more information is needed as to how the property tax will grow in future years. Although currently, ACC has $10 million in funds, its future funding depends primarily on property values. Therefore more information is needed to assess what direction those values will go.

Warranted Action

In this instance, I believe Dr. Angel should use the excess funds to expand the facilities at ACC. First the expansion of the facilities will generate future enrollment due to better branding. Higher education quality is critical in regards to overall growth, enrollment and prestige (Ewell, 1999). Currently, the Austin community realizes the lack of space and facilities at the college. By improving the overall facilities at the campus, Dr. Angel can provide the community reassurance that it is indeed improving the overall academic experience. With better facilities, Dr. Angel can also justify increased tuition prices, as students will be more likely to pay higher prices for better facilities. I also believe that Dr. Angel should allocate a portion of the money towards an investment portfolio that can be used during periods of severe economic stress. The college already has an investment portfolio that has not grown very substantially. By allocated a portion every year to the portfolio ACC can insure that it will be financially ready when funding is needed for capital improvements or emergencies. Finally, Dr. Angel should allocate a portion of the funds to either increasing wages or increasing benefits. Dr. Angel should not do both however, as that may place further strain on the financial resources of ACC. The preferable method may be to increase benefits. These benefits may not need to be paid for years into the future. However, when dealing with faculty, Dr. Angel must balance risk of increase wages with the benefit of increased academic experience and moral (Charlotte, 2007). Therefore, ACC will have more flexibility in regards to its financial actions. These solutions should be publicized within the press and community of Austin. In essence the community is taking a portion of their own income to help ACC grow and prosper. I believe that transparent disclosure regarding the progress made and how that progress is benefitting Austin is warranted.

References:

1) Charlotte Christiansen et. al, The Risk Return Trade-off in Human Capital Investment, 14 LABOR ECON. 971, 984-85 (2007)

2) Ewell, P.T. (1999). Assessment of higher education and quality: Promise and politics. In S.J. Messick (Ed.), Assessment in higher education: Issues of access, quality, student development, and public policy. Mahwah, NJ: Erlbaum

3) Haley, K., Hephner LaBanc, B., & Koutas, P. (2011). New school, new job, and new life: Transitions of graduate assistants in student affairs. Journal of College Orientation and Transition, 18(2), 5-19

4) Kasper, H.T. (2002). The changing role of community college. Occupational Outlook Quarterly, 46(4), 14 -- 21

5) Murray, J.P. (2002). The current state of faculty development in two-year colleges. New Directions for Community Colleges, 118, 89 -- 97

6) Scott L. Thomas, Deferred Costs and Economic Returns to College Major, Quality, and Performance, 41 RES. HIGHER EDUC. 281 (2000