Economics of higher education

Economics of Higher Education

Why is budget development such an important aspect of policy-making and why is the process sometimes described as an "awkward" one?

Budget development is such an important aspect of policy-making because it allows administrators to devote funds to the programs that they find most important, in addition to dictating policy, as colleges that run out of funding cannot execute what remains unfunded. Budgeting is one way that colleges can combat the rise of high tuition prices. Many universities have turned to cost-cutting strategies in order to respond to these higher tuition rates. Colleges use short-term cost deferential strategies to make emergency reductions in spending, strategic cost reduction to try to cut costs while keeping all programs, and permanent cost restructuring in order to eliminate programs in favor of permanent cost-reductions (Wellman 23-24). The varied types of cost reduction strategies and the decision to cut programs in order to keep costs low can make this process awkward. Further, the process is also made awkward by the fact that institutes of higher education are not for-profit businesses (Winston), so helping them create budgets in a traditional way is flawed. Also, colleges must create budgets and learn how to disperse money in a way that is fitting to their academic community (Kane and Rouse). All of these factors make the process difficult.

2. When there are fewer financial resources to allocate, why do budget processes often become both more laborious and contentious?