Institutional Expenditure Patterns and the Facilitation of Mission

The authors examine the relationship between institutional spending patterns and performance funding standards at the 14 public community colleges in Tennessee, the first state to implement performance funding standards for its community colleges. Performance standard scores and data on expenditures by category were analyzed to determine the percent of revenue spent by function in relationship to individual and aggregated performance standard scores for the colleges. The analyses revealed a relationship between expenditure categories and performance standard scores, with higher scoring colleges spending a greater portion of funds on academic support and instruction than lower scoring colleges. Considering that efficiency and effectiveness have been recent domains of high criticism from state legislators and the general public, it is important that the public perceives an institution's system of governance as performing efficiently and delivering programs effectively. Such perceptions lead to public confidence and support and positive perceptions of an institution's contribution to the state's well-being. Creating public confidence and trust in an institution as a good investment contributes to the institutional growth and development that fulfill the primary missions of institutions: instruction, research, and public service (Cohen, Brawer, & Associates, 1994). How higher education institutions fulfill their mission through the resource allocation process can be examined by four criteria in an economic model described by Tuckman and Chang (1990, p. 54): (a) a set of goals can be identified that results in increases in the satisfaction of decision-makers; (b) where multiple decision-makers are involved, a means can be found to select from among the myriad of sometimes conflicting goals of participants; (c) enough goal stability exists that the optimal resource allocation remains fairly stable; and (d) increases in the resources devoted to pursuing goals can be related to recognizable outputs. One of the greater powers residing with college presidents and governing boards in higher education is the allocation of educational and general funding in fulfilling the institution's mission in the most efficient and effective manner possible (Vandament, 1989). Satisfaction with an institution's efficiency and effectiveness in fulfilling its mission is accentuated when the president or governing board allocates resources to those goals that yield the highest utility, thus establishing equilibrium and patterns of stable resource allocation. The study described in this report was designed to examine the relationship between higher education institutional expenditure patterns and the facilitation of institutional mission. Tennessee's System of Public Two-Year Colleges Because of the increased need to retain public confidence and trust in the efficiency and effectiveness of higher education institutions, many states have "considered implementation of instructional performance criteria and instructional outcomes measures in their budgeting systems" (Albright, 1985, p. 18). In 1979, the state of Tennessee was the first to initiate performance funding standard criteria; since then, one-third of the states have adopted similar methods (Banta, Rudolph, Van Dyke, & Fisher, 1996). Tennessee's public, two-year higher education institutions, however, differ from other state systems in that they are uniquely governed by the Tennessee Board of Regents, which has implemented a system of uniform policies and procedures that have had strong, positive effects on institutional development, as well as students and the state (Consacro & Rhoda, 1996). In addition, the Tennessee Higher Education Commission (1976) has instituted uniform financial reporting for Tennessee's two-year institutions, in which all educational and general expenditures are classified into eight specific functions. …