Year of Publication

2009

College

Martin School of Public Policy and Administration

Degree Name

Master of Public Administration

Executive Summary

Since the 1997 passage of the Kentucky Postsecondary Education Improvement Act by the Kentucky State Legislature, the Kentucky Council for Postsecondary Education (CPE) has been an integral part of postsecondary education in the Commonwealth.

Part of CPE’s responsibilities include advising the state legislature on the tuition and fee setting process for all public postsecondary institutions in Kentucky. As this responsibility has manifested itself, it is important that the CPE have an accurate, independent tuition revenue forecasting model, as well as gauging the impact of tuition increases on student demand for higher education in Kentucky.

The current CPE tuition revenue-forecasting model uses the following formula (FTE= full time equivalent students):

Projected Revenue = (GradFTE * (GradTuit + GradFees)) + (UndergradFTE * (UndergradTuit + UndergradFees))

The current CPE revenue projection formulas make the following assumptions:

  • Tuition increases of 9% per year at research universities, 6% for other four-year institutions, and 5% for the Kentucky Community and Technical College System.
  • Fees increase 5% per year at all institutions.
  • FTEs increase at rates specified by CPE in accordance with enrollment goals.

A technique called backcasting (think forecasting in reverse) was used to analyze the CPE formula by comparing past predicted number to past actual numbers. Results indicate that the CPE tuition revenue forecasting model was 97.4% accurate within the 10 year time period of 1997-2007 for all public post secondary institutions in Kentucky. However, improvements to the model can be made to make it more robust to social or economic changes within the state.

Additionally, data were gathered from the Integrated Postsecondary Educational Database (IPEDS) on the public postsecondary institutions in Kentucky to analyze the effects of tuition increases on student applications and enrollment. Regression results showed that from 2000 to 2006 there was no statistically significant effect of tuition increases on student enrollments or applications for any public university in Kentucky. This finding is consistent with higher education literature(Heller, 1997; Leslie & Brinkman, 1987).

These findings help independently verify the validity of the current CPE tuition revenue forecasting model as well as offer insight into student demand for higher education in the state of Kentucky.

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