CBA of the MS3 Program

CBA of the MS3 Program

CBA of the MS3 Program

Public Expenditure AnalysisSpring 2003Trey Carlson

Mike KaufmanManos Kranidis

Outline• Methodology/Statistical Info

• Costs

• Benefits

• Model

• Possible Solutions

Acquisition of Information• Number of applicants

• Per Student education cost

• Per student scholarship amount or percentage

• Total Donations

• Aggregated value of salaries

• Unable to obtain





Survey Pt 1What program you are currently in: A. MS1 B. MS2 C. MS3How many graduate schools did you apply to? A.1-3 B. 4-6 C. 7+From how many graduate schools did you receive

acceptance letters?__________Did you apply to any program that was less than 4

semesters? Yes or NoWere you accepted? Yes or NoWould you attend a three semester Masters

Program? Yes or NoWould you attend a four semester Masters

Program? Yes or No

Survey Pt2Would you prefer to be in a 3 or 4 semester Masters Program?

Why did you pick the Heinz School?

How would you rate the availability of courses accessible to you? (scale 1 to 10 with ten = excellent and 1 = very poor) ___

Did you apply for the MS3 program? Yes or No

If the MS3 program didn’t exist, would you attend Heinz? Yes or No

If the MS2 program didn’t exist, would you attend Heinz? Yes or No

Have you switched programs at Heinz? Yes or No

Do you feel the MS3 program enhances the prestige of the Heinz School? Why?

A. Yes B. No C. I have never thought about it

Key Assumptions• Discount Rate*= 5% • Growth Rate = 5% • Alumni giving rate/yr = 20% of total

alumni at $150 avg.• Alumni giving effective period= 30 yrs • School revenue composition*:

Tuition $ = 42% of revenuesResearch $ = 58% of revenues

• Scholarship per student = 30% of tuition

*Source: CMU Annual Report 2001-02

Key Assumptions Cont’d

• 20 MS3’s per class

• (x -20) MS2’s per class

• Faculty to Staff Ratio: 1 to 1.2

• Faculty to Student Ratio: 1 to 2.6

• MS2/MS3 analysis 10 year period

• MS3’s effect on reputation = 10 years

Costs Introduction

• Cost of Scholarship

• Cost of Staffing Incremental classes of MS3

• Reputational Costs

• Total Costs

Scholarship Cost of MS3 3rd Semester

• 20 students on average/yr

• Scholarship = (30% x MS3 tuition) = $4,440

• Total Scholarship Costs = $88,800

Cost of Staffing # Type Base Salary Benefits Total Cost

8 Faculty Assistant $ 30,000 $ 9,000 $ 312,000

3 Admissions $ 35,000 $ 10,500 $ 136,500

4 Career Services $ 40,000 $ 12,000 $ 208,000

10 Computing Ser $ 40,000 $ 12,000 $ 520,000

1 Dean office $ 35,000 $ 10,500 $ 45,500

3 Alumni Relation $ 50,000 $ 15,000 $ 195,000

3 Fiscal Management $ 40,000 $ 12,000 $ 156,000

2 Financial Aid $ 35,000 $ 10,500 $ 91,000

1 Facility Mgmt $ 30,000 $ 9,000 $ 39,000

3 Associate Dean $ 70,000 $ 21,000 $ 273,000

38 Total $ 1,976,000

Average $ 52,000

*Salary estimated

Total Faculty Salary at Heinz

# SalaryFactor

Salary &Benefits Total Cost

32Full-TimeFaculty 1 $ 80,000 $ 2,560,000

16RelatedFaculty 0.5 $ 80,000 $ 640,000

100AdjunctFaculty 0.1 $ 80,000 $800,000

50 total $ 4,000,000

Salary Estimated

Cost of Staffing Incremental MS3

Classes

• MS3 program requires additional 8.5 classes

• Requires: 3 faculty and 2 staff

• Total Cost: $240,000 + $104,000 = $344,000

Current Heinz MS3 Staffing Procedures

• Relieve faculty of research responsibilities and increase teaching load

• Average research grant per faculty member 130 students*(0.7*$28,000)*1.4/50 faculty

=$71,350

• Total Staffing Cost =$71,350*3=$214,050

Effects on Reputation

“Congratulations to all of the Heinz School faculty and staff members who worked so hard to bring these significant funds to the Heinz School to support our research, outreach and teaching missions! They are a significant factor in our success in the most recent US News & World Report's graduate school rankings.” *

*Source: Heinz School Alumni Website.

http://www.heinz.cmu.edu/fyi/may01/fyi/grants.html

Reputation

Does The MS 3 Program Enhance The Prestigue of The School

8%18%

60%

0%10%20%30%40%50%60%70%

Non-MS 3 MS 3 Total

Program

Per

cent

Average GRE score:

MS2 2002=1245, 2003 = 1250 MS3, 2002=1250, 2003 1250

Cost of Reduced Prestige

• 4000 alumni

• Average salary $65,000

• After 5 years, reduction in prestige results in .1% decline in salary for next 5 years

• NPV Per year reduction in combined MS2 alumni salary = $130,000

Total Costs

• Scholarship Costs: $88,800• Staffing Costs : $214,050• Reduced Prestige Cost: $130,000

• Total Cost: $432,850

Benefits

• Cash Inflow due to 3rd semester of MS3 during calendar year

• Predictors of future Alumni giving

Cash Inflows from Entering MSPPM 1yr Class

MSPPM 1 year program, Cash flow (received) per

Student

July 1 2002

January 1 2003 June 30 2003

$14,100 $14,100 $14,800

Total annual revenues from 1 year program: $43,000/student-year

Extra Income Generated due to MS3 Program

Income generated from 3rd

semester of MS3

($14,800 *20) = $296,000

Predicting Alumni Giving

Course Offering and Availability Satisfaction (1-10, 10=Very Satisfied)

6.36.8

5.3

0

1

2

3

4

5

6

7

8

9

10

MS2 MS1 MS3

Program

Sa

tis

fac

tio

n

Predicting Alumni Giving cont’d

Percent That Would Attend the Heinz School

if MS3 Did Not Exist

100% 100%

70%

0%

20%

40%

60%

80%

100%

MS2 MS1 MS3

Program

Per

cen

t

Percent That would Attend the Heinz School if MS2 Did Not Exist

41%53% 50%

0%

10%

20%

30%

40%

50%

60%

MS2 MS1 MS3

Program

Perc

en

tag

e

MS3 Alumni Giving • Increased number of alumni:

20 MS3’s/yr – 20 MS2’s/(2*yr) = 10/yr• Average MS3 rate that gives drops

from .2 to .15• Average donation =$150/yr-alumni

• Total increase in Alumni giving= $6,750

Total Benefits

• Income from Tuition = $296,000• Income from Alumni = $6,750

• Total Benefits = $302,750

NPV

Benefits - Costs = 302,750 - 432,850$-130,100/yr

10 year lifespan = $-1,301,000

Recommendations• Faculty should be doing research

• Faculty utilization can only be optimal with an MS2 program or MS3 program, not both

Heinz Most Wanted

Documents

CBA of the MS3 Program