Dive Brief:

• U.S. colleges can expect their costs to rise by 2.6% in the 2019 fiscal year, according to data from the Commonfund Institute, which intends to help higher ed institutions project their budget increases.
• The preliminary Higher Education Price Index (HEPI) for 2019, which measures inflation in higher ed costs, marks a slight decrease from a rate of 2.8% in 2018 and 3.3% in 2017. However, inflation rates for supplies and materials, as well as for utilities, are projected above those of last year. Faculty salaries are projected to increase at a slightly lower rate (2.0%) this year than they did last year (3.2%).
• The Institute said it will begin releasing more HEPI estimates throughout the year, as well as add data for nine regional variants across the U.S. and for different categories of institutions.

Dive Insight:

The HEPI wrapped up last year by announcing that the average yearly rate of inflation for higher ed over the last five years was 2.4%, with 2018 marking the third-highest score in the previous decade. Faculty salaries, which get the most weight in the index, came in slightly above the five-year average, as did pay for administrators and service employees. Only two of the eight categories tracked — administrator salaries and fringe benefits — came in under the five-year average in 2018.

Despite the slight reduction, colleges are looking to be more efficient on cost as state support continues to lag and demographic projections threaten tuition revenue. To do so, they are taking a range of approaches, including changing out program offerings and partnering with the private sector to reduce their risk.

Fundraising has also become a focus for colleges large and small, with several institutions wrapping up record-breaking capital campaigns in recent months, though that momentum could slow. Smaller institutions, such as St. Johns College in Santa Fe, New Mexico, and Annapolis, Maryland, are taking that approach to subsidize massive tuition cuts.

Institutions face cost concerns elsewhere, too, including a hefty maintenance backlog following a decade-long building spree as operational budgets remained stagnant. That's according to a report released late last year, which found that although funding to support campus construction now comes from a more diverse array of recurring capital sources, it is "not keeping pace with growing project lists."

Colleges are looking to third parties with expertise in areas such as building campus housing, maintaining utilities and developing other infrastructure to share responsibility for those projects. Examples include Ohio State University and Dartmouth College, which have each engaged the private sector to help with energy management on campus. And the University of California, Merced, is using a private partner for a project to double the size of its campus.

A 2017 report from EY-Parthenon valued such partnerships in higher ed at $3.1 billion in 2016 with 28 transactions, up from $500 million in 2008 with nine transactions.