It’s a commonly heard argument in the higher education community—state disinvestment is a major, if not the only, contributor to the rapid rise in college tuition, as public institutions have fought to maintain level funding.
But is this actually the case?
No, according to a new policy analysis by Neal McCluskey, director of the Cato Institute’s Center for Educational Freedom, which argues that state and local support for higher education has, in fact, increased in the aggregate over the last couple of decades and that significant increases in enrollment have led to apparent “cuts” in aid per student.
The argument that state and local disinvestment in higher education has led to rises in the sticker price of college “has problems,” McCluskey writes. First, the argument cannot be applied to private institutions, which have seen a slower increase in prices than public four-year institutions or community colleges. While it might be tempting to blame these increases in declining direct support from state and local governments, that is “only part of the explanation, and that part varies from state to state,” he writes.
Using data from the 2016 edition of the State Higher Education Executive Officers’ (SHEEO) State Higher Education Financing (SHEF) report that covers the 25-year span from 1990 to 2015, McCluskey analyzes the appropriations and tuition-and-fee revenue for each of the 50 states, finding that total direct public appropriations have actually increased by about $580 million per year over the last 25 years.
Thirty-one states (see a full list below) have seen declines in per student appropriations, but their tuition-and-fee revenues have at the same time increased annually, resulting in an average net change of $63 per student. “If that seems small,” McCluskey writes, “note that this finding is over a 25-year period, and enrollment tended to rise significantly during that time.” The result is average total revenue increases of about $44 million per state per year for this group.
Eleven states—California, Florida, Georgia, Idaho, Iowa, New Jersey, North Carolina, Ohio, Pennsylvania, Washington, and Wisconsin—saw declines in per student appropriations that were not equalized by increases in revenue from tuition and fees. However, the net loss was only about $30 per students per year in this group, and these states saw the highest increase in total revenue, which rose on average by $68 million annually due to enrollment increases.
Six states—Alaska, Illinois, Kentucky, Nebraska, North Dakota, and West Virginia—saw increases in both per-student appropriations (an average increase of $169 per year) and tuition-and-fee revenue (an average increase of $35 million per year). Two states—Wyoming and Louisiana—saw increases in per-student appropriations and decreases in tuition-and-fee revenues, resulting in an average revenue increase per student of $83 per year, for an average revenue boost of $15 million per year.
“By all indications, the state of higher education financing over the last quarter-century is not how is has been portrayed: institutions treading water just to stay financially afloat as state and local governments have withdrawn their support,” McCluskey writes. “Most states have seen their schools do better than that on a per pupil basis, and all have seen significant increases in total revenue.”
So, if state disinvestment is not the cause of increasing sticker prices, what is? Well, according to McCluskey, it is likely a combination of several popular explanations including:
“What may well be enabling much of this is federal student aid, and colleges taking not just whatever they need, but whatever they want,” McCluskey writes.
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Editor's Note: The 31 states mentioned above are: Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, Hawaii, Indiana, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, New York, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, and Virginia.
Publication Date: 2/22/2017