1. State Higher Education Finance David Wright, SHEEO SHEEO/NCES Network Conference Washington, DC March 31, 2004

2. The SHEF Study  Purpose of the Study  Understanding the Data  Analytical Issues  Discussion of Analytical Tools and Individual State Profiles

3. Study Purpose SHEF Can Help Policy Makers:  Understand the extent to which state resources for instruction have kept pace with enrollment and inflation  Examine and compare how state higher education spending is allocated for different purposes  Assess trends in the extent to which students and families are paying the cost of higher education

4. Study Purpose SHEF Can Help Policy Makers:  Evaluate allocation to higher education as a percentage of state and local tax revenues  Assess comparative strength of state’s economy and its capacity to generate tax revenues to support public priorities

5. Understanding the Data

7. SHEF Similarities to “Grapevine”  Focus on state and local support  Focus on operational funding  Exclusion of self-supporting auxiliary enterprises  Inclusion of state funding for private institutions and agencies

8. Understanding the Data SHEF Differences from “Grapevine”  “Nets out” support to private sector  Sets aside special purpose funding  “Educational Appropriations” = State plus Local less Research_Agr_Med  Captures net tuition revenue  Puts funding in context of enrollment  Adjusts for inflation and interstate differences

9. Understanding the Data SHEF Core Data  FTE  State support  Tax and non-tax  Appropriated and non-appropriated  Local appropriations  Research, agricultural, and medical  Net tuition revenue

10. Analytical Issues Improving Comparisons Over Time and Across States  Adjusting for Enrollment  Adjusting for Inflation  Adjusting Interstate Comparisons  Enrollment Mix  Cost of Living

11. The Need to Adjust for Enrollment

13. Adjusting for Inflation Higher Education Cost Adjustment  Provider vs. consumer perspective  HECA attempts to reflect the provider “market basket” without being self- referent  Transparent, accessible, routinely updated  Serves as a benchmark rather than descriptive measure of HE cost inflation

14. Adjusting for Inflation Higher Education Cost Adjustment  75% of the index is based on BLS Employment Cost Index for white-collar workers.  25% of the index is based on BEA’s GDP Implicit Price Deflator.  current $ GDP / constant $ GDP  reflects general price inflation in total U.S. economy

15. Adjusting for Inflation

16. Interstate Comparison Adjustment #1 Enrollment Mix Index (EMI)  Average instructional expenses per student vary by institution type  Enrollments are distributed differently across states’ public HE systems  The EMI adjusts operating revenues to account for both factors

17. Developing the EMI Average Instructional Costs per FTE Fiscal 2001 Source: IPEDS, Fall 2000 Enrollment and 2000-01 Finance.

18. Developing the EMI Public System FTE Distributions for Selected States Research Extensive Research Intensive Masters I & II BaccAssoc North Carolina 20%11%25%3%41% California15%2%23%LT 1%60% Ohio39%23%3% 32% U.S.27%8%22%3%40% Source: IPEDS Fall 2000 Enrollment for Sectors 1 and 4.

19. Developing the EMI Public System Enrollment Mix Index for Selected States

20. Interstate Comparison Adjustment #2 Cost of Living Adjustment (COLA)  State differences driven by housing cost  Adopted index developed by Berry et al (2000)  One value per state  Hawaii and Alaska assigned value of next highest state (Massachusetts)

21. Interstate Comparisons Enrollment Mix and Cost of Living Adjustments for Selected States EMICOLACombined Arkansas.98.89.87 Colorado 1.041.021.06 Oregon 1.02.981.00 U.S. 1.00

22. Analytical Tools

25. Comments/Questions? Contact David Wright Senior Research Analyst (303) 299-3677 dwright@sheeo.org