Disinvesting in the Future? A Comprehensive Examination of the Effects of State Appropriations for Public Higher Education 
Over three-quarters of undergraduates attend public colleges and universities in the United States. Given that state appropriations for public higher education decreased by 44 percent per student from 2001-2013, the author of this paper sought to explore the very real effects of declining state appropriations for public higher education—on students and on the institutions themselves.
Existing literature on the effects of state appropriations for public higher education is relatively thin and sometimes inconclusive, typically examining only one or two aspects. The author set out to conduct a more comprehensive inquiry by investigating four areas that state appropriations may affect: tuition and fees, student financial aid, school expenditures, and degree completion. It also examines the effects of state appropriations separately for each of the four types of institutions, including community colleges, which are the largest provider of undergraduate education in the United States.
Key Findings
- Overall, regressions of the data across categories supported the author’s hypothesis that cuts in state appropriations have negative effects on public higher education institutions and their students. Institutions have diverse responses to state funding cuts.
- Tuition and fees: public doctoral institutions increase tuition and fees, especially for out-of-state undergraduates, to partially offset state funding decreases. However, all other types of public institutions—master’s, bachelor’s, and associate’s (community colleges)—have few tuition changes after changes in state appropriations.
- Financial aid: after decreases in state appropriations, institutional grants increase slightly at public doctoral institutions, while students at public master’s institutions are more likely to receive federal grants and student loans.
- Institutional expenditures: cuts in state appropriations have a negative impact on almost all expenditure functions. Education and related expenditures experience the largest impact, regardless of institutional type.
- Degree completions: cuts in state appropriations have a negative impact on degree productivity at all levels. The impact is significantly larger for community colleges than for other types of public institutions.
Implications
Decreases in state appropriations have negative consequences for all categories and levels of public higher education institutions. These consequences cast a wide net, affecting both the student body and the institutions themselves, and are most pronounced for community colleges.
Abstract
In aggregate, state appropriations are the largest revenue source for public higher education in the United States. However, these appropriations have significantly declined over past decades, drawing serious concerns about the potential negative impact on schools and students. This paper provides a more comprehensive study of the effects of state appropriations than previous research, while explicitly exploring and testing the heterogeneity of the effects by institutional type. It finds strong evidence of the negative effects of state appropriation cuts in the areas of tuition and fees, student financial aid, instructional and other school expenditures, and degree completion. Community colleges, which serve the most undergraduates but have not been well studied by past research, are shown to be particularly vulnerable to the negative effects of state funding cuts.