cba of the ms3 program
DESCRIPTION
CBA of the MS3 Program. Public Expenditure Analysis Spring 2003 Trey Carlson Mike Kaufman Manos Kranidis. Outline. Methodology/Statistical Info Costs Benefits Model Possible Solutions. Number of applicants Per Student education cost Per student scholarship amount or percentage - PowerPoint PPT PresentationTRANSCRIPT
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CBA of the MS3 Program
CBA of the MS3 Program
Public Expenditure AnalysisSpring 2003Trey Carlson
Mike KaufmanManos Kranidis
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Outline• Methodology/Statistical Info
• Costs
• Benefits
• Model
• Possible Solutions
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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
• Unable to obtain
• Unable to obtain
• Unable to obtain
• Unable to obtain
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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
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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
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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
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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
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Costs Introduction
• Cost of Scholarship
• Cost of Staffing Incremental classes of MS3
• Reputational Costs
• Total Costs
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Scholarship Cost of MS3 3rd Semester
• 20 students on average/yr
• Scholarship = (30% x MS3 tuition) = $4,440
• Total Scholarship Costs = $88,800
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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
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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
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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
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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
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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
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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
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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
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Total Costs
• Scholarship Costs: $88,800• Staffing Costs : $214,050• Reduced Prestige Cost: $130,000
• Total Cost: $432,850
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Benefits
• Cash Inflow due to 3rd semester of MS3 during calendar year
• Predictors of future Alumni giving
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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
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Extra Income Generated due to MS3 Program
Income generated from 3rd
semester of MS3
($14,800 *20) = $296,000
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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
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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
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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
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Total Benefits
• Income from Tuition = $296,000• Income from Alumni = $6,750
• Total Benefits = $302,750
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NPV
Benefits - Costs = 302,750 - 432,850$-130,100/yr
10 year lifespan = $-1,301,000
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Recommendations• Faculty should be doing research
• Faculty utilization can only be optimal with an MS2 program or MS3 program, not both
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Heinz Most Wanted