The question of whether states adequately fund public higher education has been a common discussion over the last few decades—and the typical answer from the higher education community is a resounding “No.” This is evident in two recent pieces that have gotten a lot of attention in recent weeks.
The first piece is a chart put out by the venerable Tom Mortensen at the Pell Institute that shows that higher education funding effort (as measured by appropriations per $1,000 in state personal income) has fallen to 1966 levels, which was then picked up by the Washington Post with the breathless headline, “How quickly will states get to zero in funding for higher education?” (The answer—based on trendlines—no later than 2050.) The second piece is from Demos and claims that state funding cuts are responsible for between 78% and 79%1 of the increase in tuition at public universities between 2001 and 2011.
Meanwhile, state higher education appropriations are actually up over the last five fiscal years, according to the annual Grapevine survey of states. In Fiscal Year 2010 (during the recession), state funding was approximately $73.9 billion, falling slightly to $72.5 billion by FY 2013. But the last two fiscal years have been better to states, and higher education appropriations have risen to nearly $81 billion. Higher education has traditionally served as a balancing wheel for state budgets, facing big cuts in tough times and getting at least some increases in good times. However, this survey is not adjusted for inflation, making funding increases look slightly larger than they actually are.
So far, I’ve alluded to four different ways to measure state higher education funding effort:
(1) Total funding, not adjusted for inflation (the measure state legislatures often prefer to discuss).
(2) Total funding, adjusted for inflation.
(3) Per-full time equivalent student funding, adjusted for inflation (the most common measure used in the research community).
(4) Funding “effort” per $1,000 in state income (a measure popular with education advocates).
So which measure is the right measure? State legislatures tend not to care about inflation-adjusted or per-student metrics because their revenue streams (primarily taxes) don’t necessarily increase alongside inflation or population growth. Additionally, enrollment for the next year or two can be difficult to accurately predict when budgets are being made, so a perfect per-FTE funding ratio is virtually impossible. But on the other hand, colleges have to make state funding work to educate an often-growing number of students, so the call for the maintenance of funding ratios makes perfect sense.
I raise these points because policymakers and education advocates often seem to talk past each other in terms of what funding effort for higher education should look like. It’s important that both sides understand where the other is coming from in terms of their definition in order to work to find common ground. And I’d love to hear your preferred method of defining ‘appropriate’ funding effort, as well as why you chose that method.
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1 I question the exact percentage here, as it’s the result of a correlational study. To claim causality (as they do in Table 6), the author needs to establish causality—some way to separate the effects of dropping per-student state support from other confounding factors (such as changing preferences toward research). This can be done by using panel regression techniques to essentially compare states with big funding drops to those without, after controlling for other factors that would be affecting higher education across states. But it’s hard to imagine a situation in which per-student state funding cuts aren’t responsible for at least some of the tuition increases over the last decade.
Robert Kelchen 
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