Moderator:Hans L’Orange Presenter:David Wright Discussants:James Palmer William Bowes Deborah...

Moderator: Hans L’Orange

Presenter: David Wright

Discussants: James PalmerWilliam BowesDeborah Greene

ProfessionalDevelopmentConference

Philadelphia, PAAugust 12, 2004

SState tate HHigher igher

EEducation ducation FFinanceinance

FY 2003FY 2003



FY 2003FY 2003

Making Sense of Interstate Higher Education Finance Data

SHEF can help educators and policy makers:

• Understand the extent to which state resources for colleges and universities have kept pace with enrollment and cost increases;

• Examine and compare how state higher education spending is allocated for different purposes;

• Assess trends in how much students are paying for higher education;

• Gain a perspective on the funding of their state’s higher education system in the context of other states; and

• Assess the capacity of their state economy to generate revenues to support public priorities.

Diverse Perspectives on State Higher Education Finance Data

Value added by SHEF:

• Captures state tax and non-tax support (lottery revenue, lease income, endowment earnings);

• Adds revenue from local government and student sources;

• Sets aside special purpose appropriations for research, agriculture, and medicine;

• Accounts for inflation and enrollment growth; and

• Adjusts interstate comparisons for differences in state cost of living and public system enrollment mix.

Funding Sources and Uses

Distribution of State, Local, and Net Tuition Revenue, U.S.Fiscal 2003

Net Tuition Revenue

Local Taxes

State Support

(Tax and Non-Tax)29.0%

6.6%

64.4%

Source: SHEEO SHEF

State and local governments provided $67.9 billion to public and independent higher education in 2003.

An additional $27.7 billion in net tuition revenue brought the amount available from state, local, and student sources for general operating expenses to $95.5 billion.

National Trends since 1970

State Tax Appropriations per FTE, U.S.,Fiscal 1970-2003, Constant 2003 Dollars Adjusted by CPI-U

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Sources: Enrollment data from NCES “Digest of Education Statistics.” Funding data from “Grapevine” database of state tax support for higher education, Center for the Study of Education Policy, Illinois State University.

Enrollment in public institutions has virtually doubled since 1970.

Growth since 2001 has already outstripped that of each of the previous two decades.

+9.1%

+6.2%

+8.5%


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Over the long term, state funding kept pace with enrollment and inflation as measured by the CPI.

The level of support has varied from year to year, at times dramatically.



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Economic downturns tend to depress state funding per student because budgets are constrained while enrollment grows rapidly.

In the past, state support per FTE has rebounded following a downturn.


Total Educational Funding per FTE, by Component, U.S., Fiscal 1991-2003

Source: SHEEO SHEF

In constant 2003 dollars adjusted by the HECA, educational appropriations per FTE in public institutions dipped during the early 1990s recession and recovered by 2000.

However, recent constant dollar decreases in educational appropriations per student result in a net decrease of 7.3%, from $6,283 in 1991 to $5,823 in 2003.

National Trends from 1991-2003

Net Tuition Revenue as a Percentage of Total Educational Funding,

U.S., Fiscal 1991-2003

Source: SHEEO SHEF

In public institutions, net tuition tends to grow as a percentage of funding when the state appropriation per student decreases in economic downturns.

Nationally, net tuition accounted for 26% of total educational funding in 1991; remained level at about 31% from 1993 to 2002, then increased again to 33% in 2003.

National Trends from 1991-2003

Full-Time Equivalent Enrollment, Percent Change by State, Fiscal 1991-2003

Source: SHEEO SHEF

Enrollments in public institutions increased 18.7% from 1991 to 2003. Half of this increase occurred since 2001, the beginning of the current downturn.

Changes in enrollment ranged from a 76.5% increase in Nevada to a decline of 3.5% in Rhode Island.

Interstate Comparisons from 1991-2003

Educational Appropriations per FTE, Percent Change by State, Fiscal 1991-2003

Source: SHEEO SHEF

In constant dollars, educational appropriations per FTE in public institutions declined by an average of 7.3% from 1991 to 2003.

The change in educational appropriations ranged from 22.3% growth in Georgia to a decrease of 42.6% in South Carolina.


Net Tuition Revenue per FTE, Percent Change by State, Fiscal 1991-2003

Source: SHEEO SHEF

In constant dollars, net tuition per FTE increased by an average of 28.6% from 1991 to 2003, and all but five states experienced increases.

-19.3%

130.4%

28.6%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

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State Reliance on Net Tuition as a Source of Public Higher Education Revenue, by State, Fiscal 2003

Source: SHEEO SHEF

The average share of educational funding represented by net tuition in 2003 was 32%, ranging from a high of 73% in Vermont to a low of 14% in Georgia.

New England and Midwestern states tended to exceed the national average on this measure, and Western states were beneath it.


Increase in Tuition Revenue Needed to Replace a 1% Decrease in State Appropriations,

by State, Fiscal 2003

Source: SHEEO SHEF

Notes: State dollars include Research-Ag-Med. Net tuition revenues are from all levels (undergraduate, graduate, first professional) except medical schools.

A state’s vulnerability to state appropriation decreases is largely determined by its reliance on tuition as a revenue stream.

Based on 2003 SHEF data, net tuition revenues would have had to increase 2.1% to offset a 1% decrease in state appropriations.

6.0%

0.4%

2.1%

0%

1%

2%

3%

4%

5%

6%

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Total Educational Funding per FTE, Percent Change by State, Fiscal 1991-2003

Source: SHEEO SHEF

When aggregated nationally, increases in net tuition revenue offset decreases in state appropriations to yield an average 2.1% increase in total educational funding per FTE.

Individual state circumstances, however, varied around that mean substantially.


Total Educational Funding per FTE by State: Percent Change and Current Standing Relative to U.S.

Average

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Total Ed Funding per FTE, Percent Over/Under the U.S. Average in Fiscal 2003

% CHANGE: above average

CURRENT: below average

% CHANGE: above average

CURRENT: above average

% CHANGE: below average

CURRENT: below average

% CHANGE: below average

CURRENT: above average

Source: SHEEO SHEF

Plotting the SHEF data along two dimensions can bring recent state fiscal policy findings and trends into sharper relief.

The first such analysis allows states to assess total educational funding per FTE relative to the national average, currently (on the horizontal axis) and over time (on the vertical).

Putting the Pieces Together

Percent Change by State in Educational Appropriationsand Net Tuition Revenues per FTE, Fiscal 1991-2003

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Percent Change in Educational Appropriations per FTE(Constant 2003 HECA Dollars)

APPROPS % CHANGE: below avg.

NET TUIT % CHANGE: above avg.

APPROPS % CHANGE: above avg.

NET TUIT % CHANGE: above avg.

APPROPS % CHANGE:

below avg.

NET TUIT % CHANGE:

below avg.

APPROPS % CHANGE: above avg.

NET TUIT % CHANGE: below avg.

Source: SHEEO SHEF


This figure shows each state’s rate of change in the two components of total educational funding per student – educational appropriations and net tuition – relative to the national average.

States in the upper right quadrant have exceeded the national average on both dimensions.

Net Tuition Revenue per FTE and Total State Student Grant Aid per FTE, Fiscal 2003

NET TUITION

REVENUE: below avg.

STATE GRANT AID: above avg.

NET TUITION REVENUE: above avg.

STATE GRANT AID: above avg.

NET TUITION REVENUE: below avg.

STATE GRANT AID: below avg.

NET TUITION REVENUE: above avg.

STATE GRANT AID: below avg.

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Net Tuition Revenue per FTE

Sources: SHEEO SHEF (horizontal axis) and NASSGAP (vertical).

States that rely heavily on net tuition revenues might also try to fund a balanced state financial aid program.

In this figure, the horizontal axis shows FY03 net tuition revenues per FTE for each state. The vertical axis shows FY03 state-funded grant aid per FTE. States in the upper right quadrant exceed the U.S. average on both.


Perspectives on Taxes and State Support of Higher Education

Taxable Resources and Effective Tax Rate Indexed to the U.S. Average,

by State, Fiscal 2000

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Total Taxable Resources (TTR) Index (U.S. Average = 100)

STATE WEALTH: below avg.

EFFECTIVE TAX RATE: above avg.

STATE WEALTH: above avg.

EFFECTIVE TAX RATE: above avg.

STATE WEALTH: below avg.

EFFECTIVE TAX RATE: below avg.

STATE WEALTH: above avg.

EFFECTIVE TAX RATE: below avg.

Source: SHEEO SHEF

States whose effective tax rate exceeds the national average are plotted above the horizontal axis, and states with above average wealth (total taxable resources per capita) are plotted to the right of the vertical line.

Shaded states have tax revenues per capita within +/-10% of the national average.

NH

WI

In making funding decisions, a state must answer the following key questions:

• What kind of higher education system do we want?

• What will it take, given our circumstances, to obtain and sustain such a system?

• Are we making effective use of our current investments?

• What can we afford to invest in order to meet our goals?

What is the Point?

Proposed Timeline

Looking Ahead: SHEF FY04

Collect data Sep 1 – Oct 17

Follow up with non-respondents Oct 20 – Nov 1

Impute non-respondent data Nov 2 – Nov 5

Conduct analysis & write report Nov 6 – Dec 10

Send proof copy to SHEEO agencies

Dec 13 – Dec 31

(no changes after Dec 31)

Report production (professional editing, formatting, printing)

Jan 3 – Jan 28

Issue report & press release; publish new data to web for interactive analysis

Jan 31



FY 2003FY 2003



FY 2003FY 2003

STUDY CONTACT:

David L. Wright,Senior Research Analyst

[email protected](303) 299-3677

mailto:[email protected]

Moderator:Hans L’Orange Presenter:David Wright Discussants:James Palmer William Bowes Deborah...

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