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Efficiency-Based Funding for Public Four-Year Colleges and Universities


  • Thomas R. Sexton

    () (State University of New York-Stony Brook)

  • Christie L. Comunale

    () (Long Island University)

  • Stephen C. Gara

    () (Drake University)


We propose an efficiency-based mechanism for state funding of public colleges and universities using data envelopment analysis. We describe the philosophy and the mathematics that underlie the approach and apply\break the proposed model to data from 362 U.S. public four-year colleges and universities. The model provides incentives to institution administrators to eliminate wasteful spending and increase positive outcomes while maintaining educational quality and research productivity. The institutions in our study spent $96.74 billion, and states would reimburse $88.02 billion. Thus efficiency-based funding would reduce state government expenditures on these institutions by $8.72 billion, or approximately 9.0 percent. Efficiency-based funding is politically viable, as demonstrated by North Carolina’s successful use of this approach in pupil transportation operations since 1994. The model will be of interest to state legislators, state education officials, and others who are concerned with funding formulas for institutions of higher education. © 2012 Association for Education Finance and Policy

Suggested Citation

  • Thomas R. Sexton & Christie L. Comunale & Stephen C. Gara, 2012. "Efficiency-Based Funding for Public Four-Year Colleges and Universities," Education Finance and Policy, MIT Press, vol. 7(3), pages 331-359, July.
  • Handle: RePEc:tpr:edfpol:v:7:y:2012:i:3:p:331-359

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    1. repec:pal:jorsoc:v:68:y:2017:i:4:d:10.1057_jors.2015.92 is not listed on IDEAS

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    higher education; college; universities; state funding;

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions


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