1. ELPA 9451

2. Government Involvement Possible justifications for government involvement in higher education: 1. Higher education is a public good and produces positive externalities through teaching and research 2. Outputs are difficult to measure, thus a non-profit organizational form is preferred 3. Equality of access is a desired goal that is not achieved through private provision

3. State Finance Characteristics State funding to institutions is based primarily on the number of students enrolled and the costs per student, or Tuition is set through a political process or a matter of cost recovery State student aid plays a relatively modest role, averaging about 11% of total state funding. (NASSGAP)

4. History of States Role Low-tuition, low-aid model (until the 60’s-70’s) Rationale: Low price for all, an outgrowth of the public schools movement Education provides benefits beyond those that accrue to the individual Critique: High per-student costs to taxpayers Inefficient – majority of students can afford to pay Inequitable - disproportionate amount of the subsidy goes to upper income students

5. History of States Role High-Tuition, High-Aid (More recently) – Rationale: Price charged reflects the true cost of college for those than can afford it Price is reduced below cost based on ability to pay More efficiently allocates limited state funds – Critique: Narrowly focused government programs are politically ineffective Constrains educational equity and opportunity for the middle classes In bad fiscal times - tuition rises, aid does not follow

6. 27% 70% 3 % Trends at Mizzou TUITION STATE SUPPORT Source: University of Missouri Budget Office

7. National Trends Source: Delta Cost ProjectDelta Cost Project

8. Increasing tuition reliance Median revenues for public universities by 2000 Carnegie Classification ($ millions, 2012 CPI) Source: Jaquette & Curs, 2015

9. Privatization? Public institutions have responded by becoming more like private universities – Charge higher tuition – Raise endowments “For all We Call Mizzou” – Certain programs have become self-sustaining – Industry Collaboration – Commercialization All in response to tighter state budgets and increased oversight

10. Empirical Research Research on university revenue increases through tuition in response to declining state support Increased tuition levels (e.g. Koshal & Koshal, 2000) Increased pursuit of nonresident students (e.g. Jaquette & Curs, 2015; Rizzo & Ehrenberg, 2004) Research on university revenue-seeking behavior in response to declining state support Commercialization of research (e.g., Slaughter & Leslie, 1997) Reliance on donations and endowment (Cheslock & Gianneschi, 2008)

11. State Funding Mechanism Formula-based funding (17 states)– State appropriations are allocated based upon a pre-determined formula. All include a measure of instructional activities. Most include components for the physical plant Performance funding(e.g. graduation rates) Non-formula based (20 states) – Funding is determined through legislative decisions Base-plus Legislative priorities Hybrid (13 states) – a mix of both

12. Activity In groups of 3 choose a state and answer: How has state support for higher education changed over the last 10 years in your state? Be specific – use data – look up Grapevine at Illinois State How do states make the appropriation decisions with regard to higher education funding allocations? Who decides how much to allocate? Who decides how to allocate across institutions? How are community colleges considered in these decisions? Which institutions (or types) seem to benefit from this allocation procedure?