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State Funding: A Race to the Bottom

 

Thomas G. Mortenson

 

State appropriations for public higher education have just faced another tough year. And yet, public institutions have faced many such years over the past three decades. Despite steadily growing student demand for higher education since the mid-1970s, state fiscal investment in higher education has been in retreat in the states since about 1980.


In fact, it is headed for zero.

Based on the trends since 1980, average state fiscal support for higher education will reach zero by 2059, although it could happen much sooner in some states and later in others. Public higher education is gradually being privatized.

In this analysis, state fiscal investment in higher education is measured in two ways: first, as a share of all higher education expenditures as counted in the National Income and Product Accounts (NIPA) of the U.S., and second, as the share of state personal income provided by annual state appropriations for the operations of higher education by Grapevine, an annual compilation of data on state fiscal support for higher education.

The NIPA data count $103.7 billion spent by state and local governments on higher education in 2010. This was 34.1 percent of all federal, state, and local government spending and personal expenditures on higher education in 2010, which totaled $304 billion. The state/local share was down from the peak of 60.3 percent in 1975. The Grapevine data count $76.4 billion for public higher education operations in state fiscal support in fiscal 2011. This was $6.30 per $1,000 of state personal income—down from a peak of $10.58 in fiscal 1976.

The 2011 funding effort was down by 40.2 percent compared with fiscal 1980. Extrapolating that trend, the national average state investment in higher education will reach zero in fiscal 2059. In other words, states are already 40 percent of the way to zero. At this rate of decline, it will take another 48 years to finish off the remaining state support for higher education.

The State Story
States are all over the map on their retreat from higher education. At one extreme are the two states that have managed to maintain their fiscal 1980 investment through 2011: Wyoming (+2.3 percent) and North Dakota (+0.8 percent).

But these are the exceptions. All other states have reduced their support by anywhere from 14.8 percent to 69.4 percent between fiscal 1980 and fiscal 2011. The biggest losers:
  • Colorado has reduced its support for higher education by nearly 69.4 percent, from $10.52 in fiscal 1980 (and a peak of $13.85 in fiscal 1971) to $3.22 by fiscal 2011. At this rate of decline Colorado appropriations will reach zero in 2022, 11 years from now. Projections using more recent data find that Colorado could hit zero as soon as 2019.
  • South Carolina reduced its state investment effort in higher education by 66.8 percent, from $16.72 in fiscal 1980 (and a peak of $18.19 in fiscal 1975) to $5.54 by fiscal 2011. Extrapolating this trend, state funding for higher education will reach zero in 2031.
  • Rhode Island reduced state higher education funding by 62.1 percent between 1980 and 2011, from $9.81 to $3.72. The state effort peaked at $10.35 in fiscal 1981. Extrapolating this trend, state funding for higher education will reach zero in 2031.
  • Arizona has reduced its annual state investment effort by 61.9 percent from $12.27 in fiscal 1980 to $4.68 by fiscal 2011. This effort had peaked earlier at $15.13 in fiscal 1974. The trend between 1980 and 2011 will reach zero in 2032, although more recent data indicates it could be even sooner.
  • Oregon reduced its state higher education investment by 61.5 percent, from $10.85 in fiscal 1980 (and $12.77 in fiscal 1970) to $4.18 in 2011. Extrapolating this trend since fiscal 1980, state investment will reach zero in 2036.
  • Minnesota has reduced its higher education investment by 55.8 percent, from $14.17 in fiscal 1980 (and a peak of $15.08 in fiscal 1978) to $6.27 by fiscal 2011. Extending the trend since 1980 into the future, state funding for higher education will reach zero in 2037. But another extrapolation hits zero in 2032.
  • Montana is scheduled to reach zero, based on extrapolated trends since 1980, in 2034. Montana has reduced its support from $10.88 per $1000 of state personal income in 1980 (and a peak of $12.13 in fiscal 1983), to $5.08 by fiscal 2011.
  • Virginia reduced higher education funding by 53.6 percent from 10.47 in 1980 (and $11.37 in FY1979) to $4.86 in 2011. At this rate, state funding will reach zero in 2038. Another more recent projection reaches zero in 2032.
  • Vermont reduced its investment by 51.3 percent from $7.78 in 1980 (and $10.88 in fiscal 1970) to $3.79 by fiscal 2011. Extending this trend, Vermont will reach zero in fiscal 2032.

Other states that will reach zero funding for higher education before 2050 include Alaska (2025), Massachusetts (2035), Montana (2034), New Hampshire (2048), New York (2038), Texas (2047), Washington (2045) and Wisconsin (2040). And based on trends since 1980, 23 more states will zero out state funding for higher education between 2050 and 2100. Other states have begun reducing their state fiscal investment effort in higher education more recently than 1980. They, too, will zero out state funding for higher education before 2050. These states include:

  • Iowa did not begin its retrenchment of higher education funding until the last decade. Extrapolating the decline in state investment in higher education since 2000 will zero out state funding by 2029.
  • Michigan has accelerated higher education cutbacks during the past decade. This has advanced the date on which state funding will reach zero from 2059 to 2032.
  • Mississippi also has accelerated funding reductions over the past decade. Based on declining state investment efforts since 1980, the state would have reached zero in 2084. But based on trends over just the last decade, state funding will now reach zero four decades earlier than that.
  • Missouri, based on trends since 2000, will now zero out its state higher education support by 2036.
  • Ohio, based on the rate of retrenchment since fiscal 2000, will reach zero in 2039.
  • Pennsylvania has also accelerated its retrenchment efforts in funding higher education. Extrapolating trends since 1980, Pennsylvania was scheduled to reach zero in 2058. But extrapolating trends since 1990 moved this date forward to 2049. And the rate of decline accelerated further in the last decade: the trend since 2000 will take Pennsylvania to zero by 2038.
  • Utah has also accelerated its cutbacks in state fiscal investment effort in higher education. Based on data since 1980 Utah would have reached zero by 2063. But if the extrapolation begins in 1990 then zero is reached by 2050. And if the trend extrapolation begins in 2000 then zero arrives in 2044.

So What Happens?

Declining state support for higher education leads directly to increased tuition charges to students.

  • Inflation-adjusted tuition charges that were declining in the 1970s have surged since 1980. Inflation-adjusted tuition and fee charges have increased by 247 percent at state flagship universities, by 230 percent at state universities and colleges, and by 164 percent at community colleges since 1980.
  • Many public universities are enrolling a shrinking share of students from lower-income families and competing most aggressively for the students that can afford to pay higher tuitions with institutional discounts.
  • Public institutions that can do so are aggressively recruiting non-resident students, for whom tuition charges are typically three times what state residents pay.

Where possible, state universities are turning away from the states at the same time that the states have been turning away from their universities.

The longer-term issues that are being addressed in some states and at some public institutions. If these public institutions are no longer state supported who owns them? Who should govern them? Who should they serve? Should states be contracting for quite specified outcomes? The defunding of public higher education by the states inevitably inaugurates a new conversation about who controls them and whose interests are to be served. The states will play a diminished role in finding answers to these questions if public higher education is to survive and thrive.

Thomas Mortenson is senior scholar at The Pell Institute for the Study of Opportunity in Higher Education in Washington, D.C., and an independent higher education policy analyst living in Oskaloosa, Iowa.