Declining State Aid Translates into Soaring Tuition


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State support for higher education declined by over 40 percent from fiscal year (FY) 2000 to 2015, after adjusting for inflation and changes in enrollment, as reported in the first part of this series. However, the burden of state funding cuts did not fall so much on institutions of higher education, but on college and university students through skyrocketing tuition.

As with the preceding article, the following analysis is based on data from the State Higher Education Finance (SHEF): FY 2015 report prepared by the State Higher Education Executive Officers Association (SHEEO) and an accompanying spreadsheet containing information for all fifty states from FY 2000 to 2015. Amounts will be adjusted for inflation using SHEEO’s Higher Education Cost Adjustment (HECA); unless otherwise noted, all amounts presented below will be expressed in constant FY 2015 dollars. Finally, spending totals will once again be examined per “full-time equivalent” (FTE) enrolled in colleges and universities in order to adjust for changes in the number of students over time.

The SHEF report examines “net tuition” (referred to simply as “tuition” hereafter), defined as:

…the gross amount of tuition and fees, less state and institutional financial aid, tuition waivers or discounts, and medical student tuition and fees. This is a measure of the resources available from tuition and fees to support instruction and related operations at public higher education institutions. Net tuition revenue generally reflects the share of instructional support received from students and their families…

The word “soaring” is often used to describe any increase in costs; however, in reference to tuition at Minnesota colleges and universities, the term truly applies. From FY 2000 to 2015, tuition increased from $3,814 to $8,138—a whopping 113.4 percent increase.

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Minnesota tuition per FTE increased relative to the prior year level in each year from FY 2001 to 2012. Especially large increases were experienced from FY 2003 to 2005 and FY 2010 to 2012. Over the entire period from FY 2000 to 2012, tuition increased by 115.5 percent. It must be remembered that these amounts are adjusted for inflation in costs paid by colleges and universities; the growth in tuition per FTE in nominal dollars (i.e., unadjusted for inflation) from FY 2000 to 2012 was 214.0 percent—more than tripling over this twelve year span. Inflation-adjusted tuition per FTE has declined slightly each year since FY 2012, as the state increased assistance to higher education as part of an effort to freeze tuition.

Total educational revenues as defined by SHEEO equal the sum state higher educational appropriations (defined in the preceding article) and tuition. Total revenues have remained somewhat stable since FY 2000—at least in comparison to state appropriations and tuition separately. Despite some fluctuations over time, total educational revenues per FTE in FY 2015 were $14,126—a scant 1.4 percent greater than in FY 2000.

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The relative stability in total revenues was made possible only because of dramatic increases in tuition, sufficient to replace the dramatic decline in state assistance. During the period from FY 2000 to FY 2012, state appropriations went from nearly three-quarters of total higher educational revenues to well less than one-half. Tuition increases made up the slack resulting from shrinking state appropriations; the tuition share of total revenues doubled over this period, from just over one-quarter to over sixty percent. Thanks to new funding made possible by 2013 tax increases, the state appropriation share increased modestly from FY 2013 to 2015, allowing the tuition share to decline modestly.

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The relationship between state support for higher education and tuition parallels the relationship between state aid to local governments and property taxes. Reductions in state aid to counties, cities, and school districts led to significant local property tax increases during the period from 2002 to 2013, even though the statewide aggregate real per capita and per pupil revenues of these local governments remained constant or declined. Similarly, cuts in state assistance to Minnesota’s institutions of higher learning have contributed to dramatic tuition increases, even though real higher education revenue per FTE has stayed nearly flat.

Minnesota is not the only state to experience dramatic tuition hikes in the 21st century, although tuition increases in Minnesota have surpassed the national average. The final article in this series will examine state support for higher education and tuition levels in Minnesota relative to the rest of the nation.