Public research universities serve a distinct and indispensable role in America’s
educational landscape, producing research and scholarship that drive
innovation and graduating thousands of educated citizens, leaders, and professionals
in each state annually. While other institutions may also address this mission,
public research universities hold a unique social contract to meet these challenges
together as effectively, efficiently, and affordably as possible. But today, public
research universities are confronted with unprecedented reductions in state investment.
Higher education is the third-largest priority in state general fund budgets (the
portion financed primarily by taxes), after elementary and secondary education and
In 2014, higher education accounted for approximately 9.4 percent of state general
funding: about half as much as general fund spending on Medicaid, and one-fourth
of state K–12 education spending.2
Measured in inflation-adjusted dollars per full-time equivalent (FTE) student, states
have been cutting this support for well over a decade, and spending cuts accelerated
in response to the Great Recession. Between 2008 and 2013, states cut appropriation
support per FTE student in the median public research university by more than 26
percent (overall, support per FTE student at the median public institution was cut
by more than 20 percent).
The decline in support in part reflects difficult choices states have made in response
to mandatory spending programs like Medicaid, rising pension contributions, and
a desire to preserve K–12 education.3
Today, public research universities still rely on state appropriations for approximately
51 percent of their educational revenue, although the percentage fluctuates widely
by institution—UCLA, for example, receives only 7 percent of its funding from
the state. For most public institutions, further cuts could be devastating.
In this climate, the American Academy of Arts & Sciences created the Lincoln
Project: Excellence and Access in Public Higher Education to study
the importance of public research universities, analyze economic trends affecting
their operations, and recommend new strategies to sustain these critical institutions.
In its first publication, Public Research Universities: Why They Matter, the
Lincoln Project demonstrated the many ways in which public research universities
are a vital public good.4
This publication examines state financing of higher education, describes the challenges
that state governments face, and assesses the prospects for greater state support
in the future.
1 National Association
of State Budget Officers, State Expenditure Report: Examining Fiscal 2012–2014 State
Spending (Washington, D.C.: National Association of State Budget Officers,
2015). These numbers are for general fund spending rather than spending from all
funds. In many states, higher education spending in other funds includes spending
by institutions from tuition revenue and other sources not derived from states’
own resources, and thus does not measure state “effort” to fund higher
education. The data in for 2014 are estimates collected before final fiscal reports
for the 2014 fiscal year were complete. However, they are not forecasts prepared
before the start of the fiscal year, and tend to offer good estimates of actual
expenditures. See ibid., 102: “For higher education, states were requested
to include expenditures made for capital construction, community colleges, vocational
education, law, medical, veterinary, nursing and technical schools, and assistance
to private colleges and universities, as well as tuition, fees and student loan
programs. Higher education expenditures exclude federal research grants and endowments
by universities.” Because the data in are for the general fund, most higher
education capital expenditures are excluded.
2 Some reports have calculated
different spending shares based upon total expenditures rather than general fund
expenditures. Given that our focus is state tax support for higher education, the
general fund is more appropriate here.
3 According to the Pew
Charitable Trusts (The Pew Charitable Trusts, Fiscal Federalism Initiative, “Federal
and State Funding of Higher Education: A Changing Landscape,” June 11, 2015,
federal spending for higher education now exceeds state government spending for
higher education slightly, the result of a surge in federal spending after the Great
Recession and sharp cutbacks in state spending. The nature of federal spending on
higher education is very different from state spending: state funding is primarily
for operating support to institutions, while federal spending is mainly for financial
assistance to students (such as Pell grants), specific federal research projects,
and veterans’ education benefits. In addition, the federal government provides
nearly half again as much support for higher education through tax expenditures
as it does through direct spending, particularly through the American Opportunity
Tax Credit, the successor to the Hope Tax Credit.
4 American Academy of
Arts & Sciences,
Public Research Universities: Why They Matter (Cambridge, Mass.:
American Academy of Arts & Sciences, 2015).