The influence of revenue sources on external perceptions of quality in public universities

The growing emphasis on institutional accountability and fiscal responsibility has made identifying quality in higher education a paramount concern. Public university stakeholders increasingly demand proof that value is being delivered for the costs involved. Academic rankings such as the U.S. News & World Report annual rankings have emerged as the most accessible and popular approaches to identifying and proving quality in higher education. The perception of quality created by academic rankings impact not only college and university behaviors but also student decisions on which school to attend.;The purpose for conducting this study was to explore the influence of major revenue sources of public universities on external perceptions of quality as determined by the U.S. News annual rankings. The findings included identifying significant differences in the revenue structure of top tier public universities and lower tier public universities. Top tier public universities relied less on state appropriations and tuition and fees and more on federal grants and contracts, private gifts and endowment income. Top tier public universities also had more diverse sources of revenue as represented by less concentration of revenues in a single source. In addition, schools that relied more heavily on tuition and fees and state funding were less likely to be perceived as high quality while schools that relied more heavily on revenue from federal grants and contracts, private giving and endowments, or had more diversity in their overall core revenue structure, were more likely to be perceived as high quality institutions.;As the calls for greater accountability have continued unabated and public universities have struggled to prove the existence of quality, the social compact between society and higher education has become increasingly strained. The result for public universities has been a continued decrease in state funding as a percentage of overall budgets. This in turn has forced students and parents to bear a greater share of the cost of education through higher tuition and fees and has required public universities to rely more on alternative sources of revenue in funding educational programs.