Minority Serving College and University Cost Efficiencies

Problem statement: Higher education minority enrollment growth has far outstripped white non-minority growth in the United States. Minority serving colleges and universities have disproportionately attended to that growth and will continue to play a critical role in providing minority educational opportunities in a knowledge based and globally diverse economy. However, they will face new and challenging budgetary and managerial reforms induced by the global financial crisis. As a result, they will be pressured to operate in the future with greater cost efficiency. Approach: Panel data pertaining to minority serving colleges and universities was used along with stochastic frontier analysis to provide cost inefficiency estimates over a four year academic period. Specification of an inefficiency component contained time varying institutional characteristics and influences, including a public Vs. private ownership control. Results: Minority College and university mean inefficiency was estimated to be approximately 1.24, indicating a 24% operation above the frontier cost. The study found that institutions achieved inefficiency reductions or efficiency gains in 2008-09 compared to 2005-06. The findings suggested that private institutions operated at greater inefficiencies relative to their publicly owned counterparts. However, the private sector laid claim to the most efficient institution, but also the most inefficient one. While the public minority serving colleges showed inefficiency deterioration over time, the findings point to private institution efficiency gains. Conclusion/Recommendations: A literature survey indicated that the study could be the first attempt at providing empirical estimates and subsequent insights into the operating cost efficiencies or inefficiencies of minority serving colleges and universities. The cost inefficiency findings suggested that these institutions did compare favorably in their managerial skills. However, as additional academic years of observations become available, they should be employed to determine the sustainability of the efficiency levels and gains uncovered in the present study.