Why public funding for American universities is falling

Over the past decade, state government funding of higher education in the U.S. has fallen by $7 billion after inflation. The implications include increased tuition and a reduction in the relative quality of public higher education, which has gone largely unnoticed.

Surprisingly, the most important driver of these trends at public institutions has little to do with education directly: it is instead the rising cost of health care.

State support for public colleges and universities has been on the wane for a few decades (the precise peak depends on how the measurement is done). The trend, though, shows no sign of slowing: Since 2008, state government outlays have fallen by more than $1,400, or 16 percent, per student on an inflation-adjusted basis. Over that period, the only states with increases in spending were California, Hawaii, North Dakota and Wyoming. In nine states, spending fell by more than 30 percent in real terms.

The much-discussed consequence: More than 30 percent increases in tuition at both four-year and two-year public institutions since 2008, again after accounting for inflation. Historically, state appropriations were much more important than tuition in funding higher education, but the cumulative effect of the constraints in government spending and rises in tuition have flipped that pattern. For the first time, the majority of states now rely more on tuition than educational appropriations as funding sources.

Read the full story at Bloomberg. 
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