State Support for Higher Education Drops Dramatically Since 2000

A conservative interest group recently claimed that higher education has become a tremendous suck on state resources. A close examination of public higher education revenue in Minnesota tells a different story. Since the turn of the century, state support for higher education has dropped dramatically, after adjusting for inflation and changes in enrollment.

Data for this analysis is from the State Higher Education Finance (SHEF): FY 2015 report prepared by the State Higher Education Executive Officers Association (SHEEO) and an accompanying spreadsheet that provides information for Minnesota and other states from fiscal years (FY) 2000 to 2015. The spending totals presented in the SHEF report will be adjusted for erosion in the purchasing power of the dollar by the Higher Education Cost Adjustment (HECA), an index developed by SHEEO “for estimating inflation in the costs paid by colleges and universities.” Amounts in this article will be presented in constant FY 2015 dollars. In addition, spending totals will be examined per “full-time equivalent” (FTE) enrolled in public colleges and universities in order to adjust for changes in the number of students over time.

Minnesota’s total state support for higher education in FY 2000 was $11,748 per FTE. Over the course of the next fifteen years, state support per FTE plummeted by $4,756 to $6,992—a decline of 40.5 percent. An alternative measure of state assistance to higher education presented in the SHEF report is “educational appropriations,” defined as “that part of state and local support available for public higher education operating expenses.” Educational appropriations equal total state support excluding expenditures for research, agricultural extensions, and medical education, as well as support for independent institutions and students attending them. Educational appropriations fell from $10,119 per FTE in FY 2000 to $5,988 in FY 2015—a decline of 40.8 percent or $4,131 per FTE.

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The sharpest decline in total state support and state educational appropriations per FTE occurred during the first six years of the century (2000 to 2005). From FY 2005 to approximately FY 2009, state support was somewhat level. After 2009, state support resumed its decline, reaching a nadir in approximately FY 2013. From FY 2000 to FY 2013, total state support per FTE declined by 48.4 percent, while educational appropriations per FTE declined by 49.6 percent.

Buoyed by revenues generated through the 2013 tax act, state investment in higher education increased in FY 2014 and 2015. From FY 2013 to 2015, total state support for higher education per FTE increased by 15.3 percent, while state higher educational appropriations per FTE increased by 17.3 percent. For both measures, however, the increases that occurred from FY 2013 to 2015 were sufficient to replace only about one-fifth of the reductions that occurred from FY 2000 to 2013.

State support for higher education over the course of the current century roughly resembles the pattern of state support for E-12 education, as documented in an April 2016 North Star report. For both higher education and E-12 education, increases in state assistance since FY 2013—while significant and badly needed—were sufficient to replace only a small portion of real state funding cuts that occurred earlier in the century.

While state support for higher education has declined dramatically since FY 2000, that does not mean that total higher education revenues also declined. Students made up for the decline in state support through soaring tuition. This trend will be examined in the second part of this series.