The Financing of Higher Education EPPL 676 Dr. Pamela Eddy

Funding of Higher Education 2

Sources of Funding Tuition and Fees Subsidized by fed financial aid Subsidized by state financial programs Institutional grants State Support Decreasing over time “State located” 3

Education Commission of the States: 4

Percentage Change in State Appropriations 2006/7 to 2007/8 Chronicle of Higher Education Almanac

Percentage Change in State Appropriations 2005/6 to 2006/7 6

Institutional Differences Research Universities Grants Endowments Community Colleges Local funding millage Contract training 7

Ranges in Tuition 75% of public institutions below $9000 8% of private institutions below $9000 Average Tuition Public 4-year $6185 Public 2-year $2361 Private 4-year $23,712 Chronicle of Higher Education Almanac 8

Financial Support Public 4-year 23% state appropriations 17% tuition and fees Public 2-year 20% state appropriations 17% tuition and fees 18% local appropriations 9

Historical Context of Financing Higher Education Harvard—first university established in 1636— primarily to educate ministers Colonial Colleges—balanced duties to both church and province Morrill Land-Grant Act of 1862—established at least one college of ag & mechanical arts in each state—utilitarian education 1876—Johns Hopkins offer graduate education— the beginning of the research university 10

Historical Context—cont’d – increases in junior colleges —GI Bill 1944, idea of mass education Higher Education Act amendments formalized commitment to student aid. Larger social issues —Shift from grants to loans for students. Title IX. Increase in public criticism of the economic relevance of academic research and assessment of student learning. 11

Economics of Higher Education Functions: Education, Research, Service Productive process—transformation of resources (inputs) into learning (outputs). Resources—labor, land, capital Learning—changes in student knowledge, characteristics, & behavior (varies) Shift in assessment from inputs to outputs 12

Bowen—efficiency and goals Higher Education: Research, teaching, service System—inputs—production—outcomes Trade-offs for efficiency Goals Individual student (cognitive/affective/practical) Accessibility (still?) 13

Johnstone Quality Access Efficiency Gatekeeper—class reinforcement Resistance to social welfare/transfer programs 14

Size of the Enterprise $373 Billion ( ) 4276 Colleges or Universities (2005) 1.29 million faculty ( ) 17.5 million enrolled ( ) NCES Digest

Forces for Expansion Pay off with good jobs Degree accretion (want the next degree— degree creep) Ratchet (Massy/Zemsky) desire of college faculty/administrators to do better 16

Revenue Zero-sum game State Parents Students High-tuition, high-aid model Sticker shock—leave out poor Lessen quality of public due to picking private Not guarantee high aid 17

Paying for Higher Education Bowen (ASHE) Full cost pricing Free public education Conglomerate Higher Education as a Public Good Current shift to students paying more for education Market Model applied to Higher Education Supply and Demand Public Good vs. Perfect Competition 18

Efficiency Arguments Variations in cost Revenue Theory (Bowen)—colleges spend as much as they have Large human personnel costs (80%) labor intense—move to PT faculty Increase in amenities—compare to your college days 19

Demands for Accountability Nation at Risk (1983) No Child Left Behind (2001) Spellings’ Report (2006) Accreditation Requirements 20

Benefits of Higher Education Aims of Higher Education (Bowen, ASHE) Opportunity Varied Programs Student Freedom Academic Freedom Efficiency Equity Balanced Budgets Advancement of the Civilization 21

Higher Education as Investment in Human Capital Social Benefits (Bowen, ASHE) Instruction Center of research and scholarship Versatile pool of talent Patron of the arts Community College—Community improvements 22

Higher Education as Investment in Human Capital--cont’d Private Benefits Students increase earning potential Increase in personal knowledge Public Benefits Increased ability for students to participate in society Increase in productive members of society—more tax revenues, less subsidies, less crime 23

International Context--Finland Bologna Declaration—1999 Easier to move among educational systems Increase demand for European HEd - prestige Currently, 8 US universities are in the “top 10” of world ranked universities Finland (& Europe) moving to “efficiency” models; neo-liberalism and market models for education 24

Tough Job Holding costs Efficiency while maintaining equity High labor expenses How to measure outputs Delayed benefits Degrees of output not same 25