INFLATION INDEX FOR COLLEGES AND UNIVERSITIES DECLINES TO 3.4% IN FISCAL YEAR 2007
Commonfund Institute’s Higher Education Price Index (HEPI) drops from 5.0% in Fiscal Year 2006; Supplies & Materials costs show the highest increase of 6.8%
WILTON, CT, August 8, 2007 -- Commonfund Institute has released its annual compilation of the Higher Education Price Index (HEPI) for fiscal year 2007, which ended on June 30, 2007. The FY2007 HEPI calculation reveals that the inflation rate for colleges and universities was 3.4%, 160 basis points below the 5.0% rate reported for FY2006. This compares with an annualized Consumer Price Index (CPI) of 2.6% for the same period. The 2007 rate is similar to that seen in FY2005, when HEPI was 3.6%.
There are eight cost factors that contribute to the HEPI regression calculation. They are: Faculty salaries, Administrative salaries, Clerical, Service Employees, Fringe benefits, Miscellaneous services, Supplies & Materials and Utilities.
Among these, the highest increase came from supplies and materials costs, which had an inflation rate of 6.8% for the year. Providing a partial offset were utilities costs, which had a negative rate of 7.6% versus an increase of 27.2% in the year earlier – largely as a result of the spike in fuel prices following Hurricane Katrina and their subsequent leveling off in the second half of calendar year 2006. All other components of HEPI had positive rates, with fringe benefit costs growing 5.0%, miscellaneous services rising by 4.2%, administrative and service employee salaries both rising by 4.0%, and faculty salaries rising by 3.8%. Clerical salaries saw the lowest year-over-year increase, of 3.6%.
The HEPI regression equation assigns a different weighting to each cost factor, and therefore a change in one component may influence the final HEPI calculation more than another. Those components that are most heavily weighted are faculty and clerical salaries and fringe benefits. Utilities represented the third-lowest weighting, which provides some explanation as to why HEPI did not see more of a deceleration, despite the negative 7.6% inflation rate for this cost factor.
Commonfund Institute provides monthly forecasts of HEPI for the coming fiscal year, beginning in January of each year, together with other information about the index and its calculation. Please visit the following link for the most up-to-date information from the Commonfund Institute on HEPI:
http://www.commonfund.org/Commonfund/CF+Institute/CI_About_HEPI.htm
HEPI is an inflation index designed specifically for higher education. It is a more accurate indicator of changes in costs for colleges and universities than the Consumer Price Index, as it measures the average relative level of prices in a fixed basket of goods and services purchased by colleges and universities each year through current fund educational and general expenditures, excluding research. It is an essential tool enabling schools to project future budget and funding increases required to maintain real purchasing power and investment.
HEPI is compiled from data reported from eight published government and economic agencies that have differing fiscal year-ends. The eight categories cover current operational costs of colleges and universities.
HEPI has been calculated every year since 1983 and includes inflation data going back to 1961. Since fiscal year 2002, HEPI has been based on a regression formula. In 2005, Commonfund Institute assumed responsibility for maintaining HEPI and calculating its annual rate of change. HEPI is issued annually by Commonfund Institute and is distributed free of charge to educational institutions.
About Commonfund Institute
Commonfund Institute was founded to house the education and research activities of Commonfund and to provide the entire nonprofit community with investment information and professional development programs. Commonfund Institute is dedicated to the advancement of investment knowledge and the promotion of best practices in financial management. Commonfund Institute provides a wide variety of resources, including conferences, seminars and roundtables on topics such as endowments and treasury management; proprietary and third-party research and publications including the annual Commonfund Benchmarks Study® and The Higher Education Price Index (HEPI); and events such as the annual Commonfund Endowment Institute and the Commonfund Prize for the best contribution to endowment investment research. Its broad range of programs and services are designed to serve financial practitioners, fiduciaries and scholars.
About Commonfund
Founded in 1971, Commonfund is devoted to enhancing the financial resources of educational and other nonprofit institutions including endowments, foundations, healthcare and service organizations through superior fund management, investment advice, and treasury operations. Directly or through its subsidiaries, Commonfund Capital, Commonfund Realty, and Commonfund Asset Management Company, Commonfund manages approximately $42 billion for 1,800 nonprofit educational institutions, foundations, healthcare and other nonprofit institutions, representing one of the largest pools of endowment and operating funds in the world. In response to the growing needs of nonprofit institutions, Commonfund, together with its subsidiary companion organizations, offers more than 45 different endowment investment programs including funds for the management of short- and intermediate-term operating cash reserves. All securities are distributed through Commonfund Securities, Inc. www.commonfund.org