RESEARCH REPORT Financing Public Higher Education

EDUCATION AND TRAINING

RESEARCH REPORT

Financing Public Higher Education

The Evolution of State Funding

Sandy Baum November 2015

Martha Johnson

ABOUT THE URBAN INSTITUTE The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector.

Copyright ? November 2015. Urban Institute. Permission is granted for reproduction of this file, with attribution to the Urban Institute. Cover image courtesy of Shutterstock.

Contents

Acknowledgments

iv

Financing Public Higher Education: The Evolution of State Funding

1

Funding Changes over Time, 2000?01 to 2014?15

1

Variation across States

4

Fluctuations within States

5

Enrollment Changes over Time, Fall 2000 to Fall 2013

6

State Funding per FTE Student over Time, 2000?01 to 2013?14

9

Tuition Prices over Time, 2000?09 to 2014?15

14

Conclusion

17

Appendix A

18

Notes

25

References

26

About the Authors

27

Statement of Independence

28

Acknowledgments

This report was supported by funding from the Ford Foundation, the Bill & Melinda Gates Foundation, Lumina Foundation, and the Urban Institute.

The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Funders do not determine our research findings or the insights and recommendations of our experts. Further information on the Urban Institute's funding principles is available at support.

We are grateful to our funders, and to Kim Reuben, Matt Chingos, and Greg Acs at the Urban Institute, for their review and encouragement of this work.

Financing Public Higher Education: The Evolution of State Funding

Discussions of recent tuition increases at public colleges and universities in the United States frequently point to the problem of declining state appropriations. Since tuition and state appropriations are the two main sources of funding for these institutions, it is no surprise that declines in one are associated with increases in the other.

In this report, we examine differences across states in funding, enrollment, and pricing changes over time. College access and affordability are national issues, but students residing in different states have very different opportunities. These opportunities have evolved differently in recent years, depending on policy priorities as well as on state economies.

Overall, per student appropriations are significantly lower now than before the Great Recession. But funding has increased in a few states and plummeted far more than the national average in others. In some states, overall funding has sharply declined, while in other states, the challenge has been keeping up with skyrocketing postsecondary enrollment. Greater funding declines are associated with steeper price increases across states' public institutions, but this correlation is far from perfect.

Funding Changes over Time, 2000?01 to 2014?15

After declining from $82.0 billion (in 2015 dollars) in 2000?01 to $77.3 billion in 2003?04, total state funding for higher education rose to a peak of $87.0 billion in 2007?08.1 But the Great Recession led to five consecutive years of funding cuts, for an overall 15 percent decline to $74.2 billion in 2012?13. Two years of increases left appropriations, in 2014?15, 7 percent below their 2007?08 level, after adjusting for inflation. Table 1 and figure 1 show these changes, along with enrollments in public colleges and universities.2

TABLE 1A Total State Appropriations for Higher Education, Enrollment, and Appropriations per Student The path of appropriations per student depends on both total appropriations and enrollment

State fiscal/academic year 2000?01 2001?02 2002?03 2003?04 2004?05 2005?06 2006?07 2007?08 2008?09 2009?10 2010?11 2011?12 2012?13 2013?14 2014?15

TABLE 1B

Total appropriations (billions of current $)

$60.6 $62.7 $62.4 $60.8 $63.1 $66.7 $72.8 $77.8 $78.5 $78.3 $78.5 $72.3 $72.5 $77.0 $81.0

Total appropriations (billions of 2015 $)

$82.0 $83.3 $81.1 $77.3 $77.9 $79.3 $84.4 $87.0 $86.6 $85.6 $84.0 $75.2 $74.2 $77.5 $81.0

Fall public FTE enrollment (millions) 8.3 8.6 9.1 9.2 9.3 9.4 9.5 9.7 10.1 10.8 11.0 10.9 10.8 10.7 10.7

Appropriations per FTE student

(2015 $) $9,910 $9,640 $8,950 $8,370 $8,330 $8,450 $8,880 $8,930 $8,610 $7,960 $7,630 $6,860 $6,880 $7,250 $7,570

State fiscal/academic year

Full 14-yr period: 2000?01 to 2014?15

Period of rising enrollment: 2000?01 to 2010?11

Period of falling appropriations: 2007?08 to 2012?13

Pre-recession to current year: 2007?08 to 2014?15

Period of falling enrollment: 2010?11 to 2014?15

Total appropriations 34% 29% -7% 4% 3%

Total appropriations

-1%

3%

-15%

-7%

-4%

Fall public FTE Appropriations enrollment per FTE student

29%

-24%

33%

-23%

11%

-23%

10%

-15%

-3%

-1%

Sources: Illinois State University, Grapevine, various publication years and tables for 2000?01 through 2014?15 data; National Center for Education Statistics (NCES), Digest of Education Statistics, various publication years and tables for fall 2000 through fall 2013 data. Notes: FTE = full-time equivalent. Appropriations include federal contributions under the American Reinvestment and Recovery Act (ARRA) of 2009, which supplemented state funds from 2009?10 through 2011?12. The latest actual enrollment data are for fall 2013. Estimates for fall 2014 reflect NCES projections. Current dollars before 2014?15 are inflated to 2015 dollars using the average Consumer Price Index for the most common state fiscal year (July through June).

2

FINANCING PUBLIC HIGHER EDUCATION: THE EVOLUTION OF STATE FUNDING

FIGURE 1A Total State Appropriations for Higher Education, Enrollment, and per Student, in 2015 Dollars Enrollment has leveled off in recent years, contributing to a partial recovery in appropriations per student

Billions $100

$83.3 $80

$82.0

$60

$77.3

Total appropriations $87.0

$81.0 $75.2 $74.2

$40

$20

$0

FIGURE 1B Millions

12

10 8 8.3 6

4

2 0

FTE public enrollement

11.0

10.9

10.7

9.7

FINANCING PUBLIC HIGHER EDUCATION: THE EVOLUTION OF STATE FUNDING

3

FIGURE 1C

$12,000 $10,000

$9,910

$8,000

$6,000

$4,000

$2,000

$0

Appropriations per FTE student

$8,330

$8,930

$6,860

$7,570

Sources: Illinois State University, Grapevine, various publication years and tables for 2000-01 through 2014-15 data; NCES, Digest of Education Statistics, various publication years and tables for fall 2000 through fall 2013 data. Notes: FTE = full-time equivalent. Appropriations include federal contributions under the American Reinvestment and Recovery Act (ARRA) of 2009, which supplemented state funds from 2009?10 through 2011?12. The latest actual enrollment data are for fall 2013. Estimates for fall 2014 reflect NCES projections. Current dollars before 2014?15 are inflated to 2015 dollars using the average Consumer Price Index for the most common state fiscal year.

Enrollment in public colleges and universities increased from 8.3 million full-time equivalent (FTE) students in fall 2000 to 11.0 million in fall 2010--a 33 percent increase over the decade. Enrollments have fallen about 3 percent from that peak, to an estimated 10.7 million in 2014. Because of the rise in enrollments over time, funding per student has fallen much more than total funding.3

Variation across States

For the nation as a whole, total funding was about the same in 2014?15 as in 2000?01, after adjusting for inflation--declining 1 percent from $82.0 billion (in 2015 dollars) to $81.0 billion. But funding increased in 23 states and decreased in the rest over this 14-year period (see appendix A, table A.1). The largest increases were 83 percent in Wyoming, 63 percent in North Dakota, and 47 percent in Alaska. In contrast, funding declined 41 percent in Michigan, 39 percent in Pennsylvania, and 28 percent in Ohio.

In 2011?12, the year of the largest national decline, when 45 states decreased their funding, there were increases of 7 percent in Illinois, North Dakota, and Rhode Island. The expiration of federal stabilization funds contributed to these widespread funding cuts in 2011?12.4

4

FINANCING PUBLIC HIGHER EDUCATION: THE EVOLUTION OF STATE FUNDING

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