Support for higher education in the public sector

The State Higher Education Executive Officers (SHEEO) recently published a very informative report, State Higher Education Finance FY 2010.  This report contains a lot of useful information regarding state support of higher education in public institutions, both nationally and state-by-state. The data analysis take into account a number of variations state to state in cost of living, mix of types of educational institutions, etc. The website of SHEEO contains additional data related to this report. 

There are many interesting tables and graphs, but two grabbed my attention. The first shows the growth of public education FTE enrollment over the past 25 years, and compares that to state and local educational appropriations and total educational revenue per FTE over the same period.  Educational appropriations are defined as: that part of state and local support available for public higher education operating expenses, defined to exclude spending for research, agricultural, and medical education, as well as support for independent institutions or students attending them.

Total educational revenue is that appropriation plus the portion of tuition that is not directed towards repayment of capital loans. Thus, I assume that the definition of operating expenses excludes any portion of appropriations that may go to repayment of capital loans.  



The second graph of interest looks at net tuition as a percentage of total education revenue in the publics:

It is worth noting that the first graph above calculates "constant dollars" using the higher education cost adjustment (HECA) rather than the CPI.  Since the former is almost always greater than the latter, a constant dollar graph calculated using CPI adjustments would show lower values in earlier years. Consequently, the baseline around which the total allocation per FTE oscillates would be more nearly horizontal in a CPI adjusted constant dollar graph.  

This raises an interesting "perspective" issue. It is natural for those of us in higher education to want to use the HECA as our inflator- this is what we see when we try to manage.  However, the people who pay the bills - legislators, students, parents, etc.- live in a world in which the CPI is the natural inflator. 

In many ways, the current discussions of cost in higher education are focused on getting the cost per FTE to be constant - or dropping - in CPI cost-adjusted terms. To do so probably requires changing many aspects of how we currently provide education (see e.g. The business model for higher education: II. How might it be fixed?). These changes would naturally lead to a redefining of the HECA formulas, and a greater convergence between HECA and CPI increases.  Use of HECA in calculations such as these seems to me to be unfortunate, in that it implies that these higher costs are forced on us and the outside world must respond appropriately. On the contrary, the outside world clearly is telling us that we need to respond by containing HECA increases. (A recent Center for College Affordability and Productivity report by Andrew Gillen and Jonathon Robe discusses misuses of HECA and the related HEPI in similar analyses.) 

In any case, the first graph shows that the underlying base of state support per FTE has remained relatively constant over time, with some significant oscillations around that base produced by economic cycles. As the report notes:

Some observers have suggested that states are abandoning their historical commitment to public higher education. National data and more careful attention to variable state conditions strongly suggest that such a broad observation is not justified by the available data.

The second graph on tuition as a percentage of total educational revenue clearly shows how tuition has increased in importance in the revenue mix, and how tuition increases have been temporally related to economic downturns. The combined contributions of tuition and state support shown in the first graph show a slow but definite positive slope to the line around which oscillations occur. Were CPI to be used in the constant dollar calculation, the slope would be steeper. Thus, increasing tuition has more than compensated on average for the HECA increases.  This coincides with what we see in the private sector, where tuition increases have generally exceeded HECA.

The detailed state by state data show that this is one of those situations in which no real situation is very well represented by the average. Thus the state by state breakdowns are invaluable for those with special interests in specific states. 

Comments

[Charles C.]

I have felt the pinch of not being able to secure academic funding. How much do the state supported education lottery contribute to higher education?

Lloyd responds: good question - but I have not been able to find any data on this.