Higher Education 7 (1978) 35-46 9 Elsevier Scientific Publishing Company, Amsterdam - Printed in the Netherlands THE RESOURCE ALLOCATION DECISION IN U.S. COLLEGES AND UNIVERSITIES: PRACTICE, PROBLEMS AND RECOMMENDATIONS R. CHARLES MOYER University of New Mexico and WILLIAM J. KRETLOW University of Houston 35 ABSTRACT Two hundred vice presidents of finance of colleges and universities in the United States were questioned about the evaluation processes currently used by their institutions in making resource allocation decisions. It appears that institutions of higher education act in a manner consistent with the objective of prestige maximization subject to some overall budget constraint. There is a strong parallel with hospital budgeting. The paper concludes with suggestions for improving allocation procedures particu- larly through the adoption of a more comprehensive and longer range approach to aca- demic planning. As the pressures of rising costs and stable or declining enrollments have increased on institutions of higher learning, many public, and even more private colleges and universities have been put in a severe financial squeeze. As a result, weaker private schools have either cut programs or closed alto- gether [1], and public universities have been caught in a rising cost, lower rate of utilization spiral of financial problems. Most research on the financial problems in higher education has focused on the dilemma of accelerating labor costs (and constant or unmeasurable productivity), since these make up a majority of the cost of higher education. It is useful, however, to look past the immediate symptoms of trouble to one of its sources. During the 1960's, the expansion of physical facilities and permanent (tenured) faculty took place at a rapid pace. This occurred be- cause of the post-war baby boom for education services and the high nation- al priority then placed on expanding our technological and educational base. In many instances, these long range commitments of resources were based upon short range evidence of demand. As funding from state and Federal