A Planning Program for Worcester Polytechnic Institute: The Future of Two Towers - Part Two

VI. ANALYSIS OF WPI AT PRESENT, Financial Status (Cont'd.)

In the previous report the income position of WPI relative to several other schools was given. In what follows WPI's income and expenses for the current year and a tabulation of several relevant factors over the last several years are presented (A). A brief discussion of relationships between planning, income, and expenses is also given (B). In any planning study the financial feasibility of the proposed operation must be considered. While the Planning Group believe it essential that the educational objectives should be the first consideration, the financial feasibility must be considered in evaluating alternatives. This does not mean that any proposed program must be financed from current revenue only. It does mean that if additional revenue is required, additional revenue will have to be generated.

A.

TABLE I
Educational and General Expenses
(Does not include auxiliary operations)

Expenses = $4.75 million (% of total)	Revenue = $4.55 million (% of total)
General Administration 10.20 (President's office Dean of Faculty's, Business office)	Tuition 70.04
Student Services 4.84 (Dean of Student Affairs, Admissions, Registrar's)	Endowment 16.57
Public Services 2.95 (Development, Public Relations)	Gifts and Grants 6.80
Staff Benefits 8.98 (For all personnel)	Miscellaneous 6.59
Instruction and Departmental Research 57.24 (Salaries, equipment and supplies for all faculty and departmental administrative)
Operation of Plant 15.79 (Custodial personnel, B&G maintenance)

TABLE II

Fiscal Year	Educ. & Gen. Expenses (x 103)	Educ. & Gen. Revenue (x 103)	Enrollment Undergrad	Enrollment Grad	Tuition (as % of Educ. & Gen. income)
1968	$4,369	$4,211	1441	209	68.1%
1967	4,207	3,991	1520	200	65.5
1966	3,400	3,431	1383	176	67.2
1965	3,192	3,195	1362	162	66.7
1964	2,647	2,522	1268	134	67.5
1963	2,318	2,370	1150	110	67.8
1962	1,954	2,214	1156	119	71.6

B. Major Effects of Planning on Revenues and Expenses

It should be recognized that cost and revenue considerations which are important from a budgeting point of view may be different from those which are important for planning. One should, therefore, set out the major items in cost and revenue which are influenced by planning of the educational program (as opposed to financial planning). This discussion is not intended to be complete, but rather to indicate the most important considerations for college-wide planning.

1. Revenue.

Of the various revenue items shown in Table I, tuition charges (per student) and endowment income are governed mainly by competitive position and portfolio management and only to a minor extent by the educational program. Income from sponsored research is at least balanced by the cost of the work done and represents a direct improvement in financial operations only to the extent it pays for research which would normally come from school funds. Sponsored research does, of course, have an indirect effect on finances through good public relations and in attracting competent students and staff. The major effect of planning on revenue is in its effect on the ability of the college to attract gifts and support from private sourses, industry, and government.

2. Costs.

The relationships of factors influenced by planning on costs are varied and complex. There are some considerations which may be included in any general discussion. There are others which will be of more or less importance depending on the specific educational goals and program selected.

i. Student:Staff Ratio.

Since salaries and benefits of faculty and staff are and will continue to be a major cost item, and since student tuition is a major revenue item, programs which increase student:staff ratio will clearly have a strong and beneficial effect on balancing costs and revenues.

ii. Changes in Kind of Faculty and Staff.

Again, because salaries, wages, and staff benefits are a major cost item, educational objectives which call for changes in the distribution of salary levels (e.g. more instructors and fewer full professors, et contra) will obviously influence costs. By the same token, changes in ancillary staff (secretaries, technicians) will be influenced by the choice of educational programs and thus influence costs.

iii. Facilities Changes.

There are two categories of facilities changes which must be considered. First, costs of major educational tools such as computers (and staff therefor), television equipment, election microscopes, and mass spectrographs which are either leased or purchased are clearly program dependent and carry a utilization factor of some importance. For some objectives, a laboratory supply inventory could also affect the cost picture. Second, changes in the kind of space needed could also be a major cost in implementing a new program. For example, a program requiring a significant number of large lecture halls and individual laboratory spaces would entail major building alterations.

iv. Space Utilization.

The effect of changes in space utilization as a result of planning is more complex. To the extent that there is unused space, and to the extent that such unused space contributes to cost (fixed charges and upkeep), a program which puts that space to use improves the overall financial picture in the sense that some value will be received for money that is going to be spent anyway. But such utilization might not be beneficial from the point of view of matching income and outgo, simply because what is installed in the space may itself represent an increased cost. It may well be that the chief effect on planning of under-utilized space and facilities is that a program which can use available space will be less costly to implement than one which does not.

v. New Programs.

Establishment of a new program is, in general, a new cost item (Computer Science, Biomedical Engineering, Nuclear Engineering). One might expect that in most cases these new costs would be counter-balanced by phasing out of older programs, but this does not seem to follow generally at WPI. Note that even if a new program is "fully subscribed" in terms of number of students enrolled, there is still a net cost to the college.

vi. Size of Student Body.

Perhaps the "critical mass" for economical operation of any particular objective is the most difficult to establish. From Table I it is obvious that, because tuition does not meet the entire cost of education of the student, the mere presence of the student represents a net cost to the college. The task, then, becomes one of minimizing this net cost within the framework of the educational objectives. For example, the necessity for increased facilities resulting from increased enrollment (presuming a fixed educational policy including student:staff ratio) would not be reached until there is maximum feasible utilization of the most used facility.

The case of the underpopulated course is much clearer, for if enrollment of students who will take that particular course is increased, an economy results. In any educational program having some diversity there will always be some courses which are over-populated and some which are under-populated. If, without further diversification of the overall academic program, we enroll students with other than traditional interests who would tend to populate the under-subscribed courses, we may be able to effect a more economical operation. However, if the student interest pattern remains constant there will be an increased enrollment in over-populated courses which will require hiring of additional staff, presuming a constant student:staff ratio.

To summarize, to the extent that increased size of the student body is accompanied by an increased student:staff ratio a cost reduction may be possible provided that the increment is not offset by the need for additional facilities. Thus, the problem of determining the critical size of student body necessary for economical operation is extremely complex and is clearly intertwined with the student:staff ratio and facilities utilization, rather than the student population itself as an independent variable.