Philippine Institute for Development Studies Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas Efficiency of State Universities and Colleges in the Philippines: a Data Envelopment Analysis Janet S. Cuenca DISCUSSION PAPER SERIES NO. 2011-14 The PIDS Discussion Paper Series constitutes studies that are preliminary and subject to further revisions. They are be- ing circulated in a limited number of cop- ies only for purposes of soliciting com- ments and suggestions for further refine- ments. The studies under the Series are unedited and unreviewed. The views and opinions expressed are those of the author(s) and do not neces- sarily reflect those of the Institute. Not for quotation without permission from the author(s) and the Institute. July 2011 For comments, suggestions or further inquiries please contact: The Research Information Staff, Philippine Institute for Development Studies 5th Floor, NEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village, Makati City, Philippines Tel Nos: (63-2) 8942584 and 8935705; Fax No: (63-2) 8939589; E-mail: [email protected] Or visit our website at http://www.pids.gov.ph EFFICIENCY OF STATE UNIVERSITIES AND COLLEGES IN THE PHILIPPINES: A DATA ENVELOPMENT ANALYSIS Janet S. Cuenca PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES JULY 2011 Table of Contents Pages Abstract i I. Introduction 1 II. Methodology 5 III. Data and Sources 10 IV. Analysis of Results 12 V. Concluding Remarks 22 References 24 Annex Tables 26 List of Tables Table 1. HEDF Thrusts, Priority and Program Areas 2 Table 2. SUCs Technical Efficiency Scores, Under CRS and VRS Assumption 13 Table 3a. Efficient SUCs based on DEA Results, Under CRS Assumption 15 Table 3b. Efficient SUCs based on DEA Results, Under VRS Assumption 16 Table 4. Peer Count Summary, Under CRS and VRS Assumption 19 Table 5. Malmquist Index 20 List of Figure Figure 1. Overall Project Framework HEDP 3 List of Annex Tables Annex Table 1. State Universities and Colleges (SUCs) Under Review by Region 27 Annex Table 2. Summary of Peers, 2006, Under CRS Framework 28 Annex Table 3. Summary of Peers, 2006, Under VRS Framework 30 Annex Table 4. Summary of Output and Input: Original VS Targets, 2009, Under CRS Assumption 32 Annex Table 5. Summary of Output and Input: Original VS Targets, 2009, Under VRS Assumption 33 ABSTRACT In view of the long-standing issues and concerns that beset the Philippine system of higher education, the study attempts to evaluate the performance of state universities and colleges (SUCs) in the period 2006-2009 using Data Envelopment Analysis. In particular, it estimates the efficiency of 78 SUCs based on available input data (i.e., expenditure data) and output data (i.e., number of enrolled students, number of graduates, and total revenue). Also, it examines productivity change in these institutions by applying the Malmquist approach on a four-year panel data set of 78 SUCs. The DEA results indicate that majority of the SUCs have efficiency score less than 1 and thus, they are considered inefficient. In addition, the target input and output levels derived from the DEA suggest potential cost savings for each of the SUCs. Further, productivity of about 62 percent of the SUCs has slightly improved in the period under review. The findings of the study points to a potential research in the future that would take a closer look on each of the SUCs identified as inefficient in this exercise with the end in view of identifying, understanding and hopefully, addressing the factors that affect their operation and performance. Keywords: higher education, higher education institutions (HEIs), state universities and colleges (SUCs), efficiency, productivity, data envelopment analysis i EFFICIENCY OF STATE UNIVERSITIES AND COLLEGES IN THE PHILIPPINES: A DATA ENVELOPMENT ANALYSIS Janet S. Cuenca1 I. INTRODUCTION The assessment of performance of state universities and colleges (SUCs) in the Philippines is important in view of the long-standing issues and concerns that beset the country’s system of higher education. In particular, the higher education subsector is haunted by issues of (i) limited and inequitable access to higher education; (ii) inequitable financing of public higher education; (iii) lack of overall vision, framework, and plan for higher education resulting in the proliferation of low quality higher education institutions (HEIs) and programs, oversubscribed and undersubscribed programs as well as skills and job mismatch; (iv) deteriorating quality of higher education due to inadequate faculty credentials and as indicated by the declining performance of graduates in professional licensure exams; (v) crowding out of private provision; and (vi) underdeveloped innovation system (Preddey and Nuqui 2001, Tan 2011, and Licuanan (undated)). The Higher Education Development Fund (HEDF) was established under the Commission of Higher Education (CHED) in 1994 with the end in view of strengthening the higher education in the country. The thrusts, priority areas, and program areas of HEDF (Table 1) as identified by the CHED are meant to address the many issues and concerns surrounding the higher education system. To wit, the thrust on quality and excellence is in response to the issue on deteriorating quality of higher education while the thrust on access and equity is centered on providing special scholarship particularly to students in difficult/disadvantaged areas, thus making higher education accessible to the poor. On the other hand, the thrusts on efficiency and effectiveness, and relevance and responsiveness are expected to address the rest of the above-mentioned issues. In addition to the national government funding, all HEIs (i.e., both public and private HEIs) can avail of grants from the HEDF provided that their proposed development projects are consistent with the HEDF thrusts. In particular, the HEDF is intended for faculty/staff development, facilities upgrading, promotion of Centers of Excellence (COE) and Centers of Development (COD) in all HEIs, research enhancement and capacity building, scholarship, and institutional development (Table 1). To ensure the sustainability of the HEDF, it is financed from the income of an initial P500 million in seed capital, 40 percent of the proceeds from the travel tax, 30 percent of the total collections from the Professional Registration Fee of the Professional Regulations Commission (PRC), and one percent of gross sales of lotto operation of the Philippine Charity Sweepstakes Office (PCSO). 1 Supervising Research Specialist, Philippine Institute for Development Studies 1 Further, the CHED launched in 2003 the Higher Education Development Project which aimed to: (i) rationalize the higher education system; (ii) upgrade the quality of higher education; and (iii) enhance equity in higher education. Figure 1 presents the specific activities that are essential in achieving the objectives of the HEDP. According to Garcia (2011), the activities that are most relevant in addressing the issues mentioned earlier are as follows: ¾ Implementation of rationalization policies: normative financing,2 rationalization of the number, distribution and growth of SUCs; ¾ Strengthening of the HEDF developmental activities; ¾ Improvement of private access to credit; ¾ Improvement of quality of teaching through faculty development; and ¾ Strengthening of student assistance programs. Table 1. HEDF Thrusts, Priority and Program Areas Thrusts Target Priority Areas Program Areas Allocation Quality and 40% - Capacity building - Faculty/staff development Excellence - Higher education - Facilities upgrading research - Centers of Excellence and Development - Research enhancement and capacity building Access and 25% - Special scholarship - Student grants for students equity in difficult/disadvantaged areas - Scholarship to programs important for national development Efficiency and 20% - Administration and - Executive training programs effectiveness management of HEIs - Performance audit and - Optimal use of limited review of executives resources - Networking and linkages Relevance and 15% - Review, analysis and - Support programs on responsiveness implementation of industrialization, information higher education science, and sustainable programs development - Support for emerging - Empowerment of HEIs to disciplines shape the future of local communities Source: Johanson (2001), Table 1 2 Defined as the application of a set of prescribed objective criteria and norms that are designed to promote and reward quality instruction, research and extension services, as well as financial prudence and responsibility in the Department of Budget and Management (DBM)’s policies and guidelines for the FY 2011 SUCs Budget 2 Figure 1. Overall Project Framework HEDP Objective 1: Objective 2: Objective 3: Rationalize Higher Upgrade Quality of Enhance Equity in Education System Higher Education Higher Education 1. Implement Rationalization 4. Strengthen HEDF 8. Strengthen Student Assistance Policies Developmental Activities Program • Pilot programming New systems • Normative financing • Rationalize number, distribution, and procedures and growth of SUCs - Typology 5. Improve Private Providers’ - Pilot governance and Access to Credit 9. Develop a Pre-baccalaureate restructuring models-RUS, • DBP loan facility Program complementation, corporation • Introduce flexibility in HE regulatory framework 6. Strengthen the Quality Assurance System • CHED-PRC curriculum 2. Strengthen HE Central benchmarking Management • Strengthen accreditation • Upgrade