The Commonfund Higher Education Price Index (HEPI) is an inflation index designed specifically to track the main cost drivers in higher education. It is an essential planning tool for educational managers, helping schools to understand the future budget and funding increases required to maintain real purchasing power. HEPI is issued annually by Commonfund Institute and is distributed free of charge to educational institutions.
HEPI is a more accurate indicator of changes in costs for colleges and universities than the more familiar Consumer Price Index. 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.
HEPI is compiled from data reported and published by government and economic agencies. The eight categories cover current operational costs of colleges and universities. These include salaries for faculty, administrative employees, clerical employees, and service employees, fringe benefits, utilities, supplies and materials, and miscellaneous services.
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.
From 1961-2001, HEPI was based on the price data for 25 budget components organized into eight categories – more than 100 items in all. From fiscal year 2002 on, HEPI has been calculated using a regression formula. The regression-based index values are essentially equal to those resulting from complete data. The R-squared value for the regression is .999997809. Regression-calculated HEPI values are not likely to vary from fully compiled values by more than 0.1 parts out of 200.0 or ± 0.05%.
Beginning in 2009, the estimates and the final HEPI calculation were calculated using data series that were entirely aligned with the July-June academic fiscal year. Prior to that, the index had been calculated using data drawn from data series with various monthly endpoints. The resulting timing differences in the underlying data had sometimes led HEPI to seem too high or too low relative to the Consumer Price Index (CPI).
Adoption of the improved methodology led to a restatement of HEPI for the period 2002-2008.
The item categories are:
Service employee salaries
Supplies and materials
These represent the major cost factors for current operations by colleges and universities.
Prices for these items are obtained from salary surveys conducted by the American Association of University Professors, the College and University Professional Association for Human Resources, and the U.S. Department of Labor’s Bureau of Labor Statistics; and from price series for components of the Consumer Price Index (CPI), the Employment Cost Index (EPI) and the Producer Price Index (PPI) published by the Bureau of Labor Statistics.
The eight components employed represent 79.6 percent of the HEPI's total component weight in 1990.
HEPI and major component values are reported for fiscal years 1961 through the latest completed fiscal year. Consumer Price Index (CPI) values are also reported for the same time period for comparison purposes.