The Financing of Higher EducationEPPL 676

Dr. Pamela Eddy

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Funding of Higher Education

1929

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1949

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1961

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1965

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1969

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1971

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1973

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1975

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1977

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1979

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1981

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1983

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1985

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1987

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1989

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1991

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1993

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1995

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1997

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1999

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2001

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2003

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2005

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...0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Percent of GNP spent on higher ed., 1929-2005

Series1

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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”

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Education Commission of the States:http://www.ecs.org/html/offsite.asp?document=http://www.higheredinfo.org/

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Percentage Change in State Appropriations 2006/7 to 2007/8

Chronicle of Higher Education Almanac 2009

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

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Institutional Differences Research Universities

Grants Endowments

Community Colleges Local funding millage Contract training

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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

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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

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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

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Historical Context—cont’d 1920-1940– increases in junior colleges 1945-1975—GI Bill 1944, idea of mass

education. 1972 Higher Education Act amendments formalized commitment to student aid. Larger social issues.

1975-2002—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.

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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

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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?)

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Johnstone Quality

Access

Efficiency Gatekeeper—class reinforcement Resistance to social welfare/transfer programs

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Size of the Enterprise $373 Billion (2005-06) 4276 Colleges or Universities (2005) 1.29 million faculty (2005-06) 17.5 million enrolled (2005-06)

NCES Digest 2007

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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

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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

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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

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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

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Demands for Accountability Nation at Risk (1983)

No Child Left Behind (2001)

Spellings’ Report (2006)

Accreditation Requirements

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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

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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

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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

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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

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Tough Job Holding costs Efficiency while maintaining equity High labor expenses How to measure outputs

Delayed benefits Degrees of output not same