State spending for higher education is on the rebound across the United States after several lean years earlier this decade. A recent annual survey found that general fund appropriations for higher education jumped an average of 7 percent nationally in the current (2006-07) fiscal year, to $72.2 billion. That follows a 6 percent average increase the previous fiscal year.
And certainly one big reason for the increases is a growing awareness among state officials that colleges and universities are engines of economic growth and creators of well-paying jobs. “More governors now realize that higher education is critical to the success of their state’s economy,” says Dane Linn, education division director at the National Governors Association (NGA). Adds Julie Bell, director of the education program at the National Conference of State Legislatures (NCSL): “That argument moves state policymakers to think about higher education in a different way.”
Indeed, in recent years there have been a number of studies linking economic growth to higher education, including a November 2005 report from the NCSL’s Blue Ribbon Commission on Higher Education. Last year, a report commissioned by the Government-University-Industry Research Roundtable (GUIRR) found that proximity to universities is a major criterion when multinational companies determine where to locate research and development facilities. And a recent Council on Competitiveness study determined that, over the past two decades, only households headed by college graduates saw their incomes increase. In 2004, the average net worth of households headed by a college graduate was more than $851,000—four times higher than those headed by a high school graduate.
To be sure, another big reason why states were able to dip deeper into their coffers on behalf of higher education was that most were on better financial footing, mainly because of better tax collections. Overall state spending was up 8.7 percent last fiscal year, according to an NGA report and is expected to increase another 7 percent this year. “It is a good time to be governor,” says Raymond C. Scheppach, NGA executive director. “The stable, healthy fiscal condition of states across the nation affords current governors options their predecessors did not experience.”
And, clearly, one option many governors and lawmakers are opting to exercise is funneling more cash to state-funded universities. Fourteen states increased funding for higher education by 10 percent or more, according to the survey conducted by Illinois State University’s Center for the Study of Education Policy. Alabama was the leader. It increased funding 18.7 percent to $1.67 billion. Other big spenders included Colorado (up 13.9 percent to $680 million); Maryland (up 13.2 percent to $1.44 billion); Oklahoma (up 13.9 percent to $956 million); Mississippi (13.6 percent to $904 million); New Mexico (up 11.2 percent to $784.8 million); and New York (up 10.8 percent to $4.9 billion). States where increases were hefty but not massive included Hawaii (up 9.2 percent to $503.6 million); South Carolina (up 8.8 percent to $859.4 million); California (up 6.9 percent to $10.8 billion); Florida (up 6.9 percent to $3.5 billion; and Tennessee (up 6.7 percent to $1.2 billion). States where increases were fairly anemic included Vermont (up 3.9 percent to $85.2 million); Idaho (up 3.9 percent to $364.2 million); Massachusetts (up 3.1 percent to $996 million); and Indiana (up 1.9 percent to $1.5 billion). Only two states cut spending for higher education: New Jersey (down 2.7 percent to $1.97 billion) and Montana (down 0.7 percent to $171.6 million).
Among the schools that fared well: the University of Alabama System received an 18.7 percent increase in state funding, while Auburn University got a 17.6 percent hike; The University of Colorado got 16.6 percent more, while the Colorado School of Mines enjoyed a 14.9 percent increase; Virginia Tech got a 12.6 percent increase; and the University of North Carolina at Chapel Hill saw state financing rise 11.2 percent. Richard Benson, dean of Virginia Tech’s College of Engineering, called the upturn in state funding “a welcome development” that is “bringing significant benefits” to the college. It’s added 41 people to engineering faculty over the past three years, bringing the total to 330. Some of the money comes from Virginia’s Commonwealth Research Initiative and is administered through the school’s Institute for Critical Technology and Applied Science, which is constructing three new buildings. The first is set to open in March and will be home to a world-class Nanoscale Characterization and Fabrication Laboratory. “These investments will return many benefits to the Commonwealth of Virginia,” Benson says.
But, John Heilman, an Auburn provost and vice president for academic affairs, says the extra state funds don’t necessarily equate to fat bank accounts for schools. “State funding is only a portion of the overall budget, so an 18 percent increase in state dollars would equate to a smaller percentage of overall dollars.” Universities also continue to rely heavily upon money from private sources, and contract and grant sources, he says. The money did help give Auburn faculty a salary increase of around 5 percent. As for Auburn’s College of Engineering, Heilman says it’s made “significant advances,” but mainly because of private funding, contracts and grants. “These funds are being used to develop new facilities, hire top faculty and recruit students.”
Still, it’s got to make life easier for university budgeters when state funds are increasing, not decreasing. And some of the current largesse amounts to replacing what was taken away a few years ago. “They’re making up for some very serious cutbacks from earlier in the decade,” NCSL’s Bell says. “The states really hit higher education hard” back then. Indeed, in fiscal year 2003-04, average state spending for higher education fell 2.1 percent. That year, several big states pared back higher-education spending, including California (down 5.9 percent), New York (down 4.5 percent), Michigan (down 3.3 percent) and Florida (down 2.8 percent). Massachusetts that year whittled back its funding by 19.3 percent. Even with this year’s increases, seven states are spending less on higher education today than in 2001, including Colorado, Illinois, Michigan and Missouri. “The first part of this decade was especially difficult, as deep cuts in state support required Virginia Tech to retrench and delay important investments in instruction and research,” Benson recalls.
Will It Last?
Historically, when hard economic times come around, states tend to cut higher-education funding first and hard. But because colleges and universities are generators of economic growth and jobs, that approach may be counterproductive. It also can lead to tuition increases that put university degrees even farther out of financial reach of lower-income youngsters. Indeed, many poorer students are already priced out. Former University of Michigan President Jim Duderstadt says, for example, that the average family income of Michigan students is more than $100,000. “States are becoming fairly sensitive to those arguments,” Bell says, and many are indicating they’re hoping to not chop at higher education budgets come the next downturn. Merrilea Mayo, GUIRR director, hopes so. The upswing in funding is welcome, she says, but she fears it may be a “mini-trend” of short duration. “We will know whether there is true commitment to higher education from the states when the states maintain their appropriations, even during an economic downturn.”
With the additional state money come a few strings, however. Bell says many states are now setting targets and performance goals for schools, asking them to give priority to programs that can help their state benefit economically. “States in the past largely gave universities a pass and didn’t get into micromanaging, but tight budgets changed all that.” Some states, for instance, see high-tech as the future and are earmarking their higher-education money accordingly. In West Virginia, a good share of the increased funding is stipulated for buying lab equipment and to bolster technical programs.
The NGA’s Linn says to get more out of limited resources, schools need also to rethink their missions and concentrate on those areas at which they excel, perhaps jettisoning some others in the process. Linn also says postsecondary education’s infrastructure needs to be overhauled so that universities can use tight money more effectively. “We need more blending of programs involving K-12 and universities, which now compete for the same pot of money.” For instance, he says, he’d like to see more so-called “early college high schools,” which are aimed at underrepresented students and allow them to work toward a high school diploma and an associate’s degree simultaneously. Students in these programs “begin to see that getting a (bachelor’s) degree is possible.” Moreover, it means more students enter universities halfway toward their undergraduate degree and fewer of them are in need of remedial education—two things that can save students and schools money. Michael Meener, spokesman for the Council on Competitiveness—a coalition of industry, labor and academic leaders—agrees that how postsecondary education is delivered is an area ripe for reconsideration. Indeed, the council is the early stages of an Innovation University Project that will consider “out-of-the-box” suggestions of ways to overhaul the education process.
Meanwhile, the NCSL estimates that the flush economic times should
last a few more years before states start feeling the pinch again.
So now—while more money is available—might be a good
time for postsecondary institutions to start thinking about ways
of creatively doing more with less: Just in case state policymakers
cast aside today’s good intentions when the inevitable bad
times return and once again look to balancing state budgets on the
back of higher education.
Thomas K. Grose is a freelance writer for a number of national publications.