Paper outline:
Introduction
Declining Public Funding
Balancing Public Expectation
Supporting Private Funding to Mitigate Reduced Public Funding
Conclusion
Declining direct public support for higher education in USA
Introduction
Higher education in the US has transformed from a post Second World War era characterized by high state funding and minimal tuition charges in public institutions (Phillips & Morell, 1996). As it stands now, state appropriations for public higher education have not increased to match inflation and allocation increases in other economic sectors. As a result, higher education institutions have to look for other financial avenues to fill their budgets. This literature review delineates the declining direct public support of higher education in the USA and highlighting the causes and the responses that higher education institutions have taken. It offers perspectives from the state governments, the federal governments and the public on the approaches taken in funding higher education. To illustrate the complexity facing higher education funding in different US states this paper includes a case of Pennsylvania.
The Declining Public Funding
According to Longanecker (2006), two communities with opposing views show commitment to the task of having all Americans obtain access to quality higher education. These are the providers of higher education and the creators of policy providing a sustainable environment for higher education. There has been a 20 percent drop in the state appropriation for higher education from a high of 7.3 percent of total state spending in the 1970s to less than 6 percent. Additionally, state wealth allocation for higher education dropped significantly from US$ 8.53 for every US$1000 in the 1970s to US$7.50 for every US$1000 in year 2000. Furthermore, the declining rate of state funding mirrors state appropriations that form a source of public university revenue. In 1977, state appropriations were 46.5 percent and reduced to 40 percent in 1996 signifying a loss of US$ 13 billion in terms of potential revenue to public universities. Higher education institutions offset the drop in budgetary allocations by increasing their tuition costs. Tuition costs now forms more than a third of the total revenues of higher education. Average tuition charges have increased from US$ 1,531 in 1990-1991 to US$2,786 in 2001-2002. The Pell Grant is a federal intervention program that guarantees entrance to higher education for poor students. The amount of protection provided by Pell Grant has declined in recent years because the increasing tuition fees have not been catered for by an increase in the program’s funding. Lastly, federal policy makers have shifted their support from funding grants to supporting loan programs (Lyall & Sell, 2006).
Longanecker (2006) explains that, in defense of the state, policy makers argue that actual funding to higher education has increased through an overall increase in the pool of state dollars. Both state and local tax appropriations increased from below US$ 6,500 in 1970 to above US$ 7,000 in 2000. A key issue that has contributed to the relatively slow pace in which state governments have increased their higher education funding after a recession, has been the fact that unlike federal government, the states cannot have budget deficits. Furthermore, education budgetary allowances for elementary and secondary education cannot be trimmed as the federal government mandates them. Policy makers feel that an increases in tuition fees does not infer a reduction in state funding and instead makes higher education more expensive and allows educators to blame policy makers for lack of adequate funding.
Policy makers defend the shift to loans from grants as an enhanced support for student borrowing that allows equitable access to higher education. They shift the blame to higher education for failing to support needy students by increasing grants to middle-income students four times faster than for low-income students. However, this argument is subject to further interpretation. Institutions reduce their funding allocations to needy students when their Pell Grant increases and channels the extra allocation to wealthier students without other forms of aid. So while it seems that wealthier students are getting more support, the overall aid package to needy students is still higher and consequently makes their eventual price lower. In addition, high-end private institutions increased their tuition fees by a greater nominal value because they already charge high fees and are therefore avoided by needy students. Therefore, while the net price for wealthy students attending high-end private institutions increased and warranted an increase in their aid, needy students still come out as the most benefiting of aid because their marginal net price increase was lower than their aid increase.
McLendon, Hearn and Mokher (2009) explain that, the state appropriations have grown however, they fall behind the rate of growth in enrollment levels, the total revenue of the federal government, and the growth institutional budgets. In some cases, institutions have had to accept a third to a tenth of their total institutional revenues. The resulting trend from declining public funding has the increased entrepreneurialism of higher education institutions.
Higher unemployment rates lower the state appropriations for higher education. Similarly, populations compositions where majority are college aged and the elderly receive less appropriations. Higher enrollments levels to private colleges also lead to a decrease in appropriations while similar levels of enrollment to two-year colleges lead to increase appropriations. The latter case might signify that a large population of needy students warrants an increase in budget appropriations. A new trend has emerged where states are limiting their subsidization of every costs of higher education. Instead, states are choosing the option of developing chances for an increase in federal student awards. In addition, state student-aid awards when available are becoming more merit based and target selected needy students (Longanecker, 2006).
Furthermore, McLendon, Hearn and Mokher (2009) content that among all state funding priorities, higher education is most vulnerable because it is less visible in its importance in the public arena. Individual states decide to supplement their institutions when their priorities favor the appropriation. Several factors model the state’s priorities on appropriations such as demography, economy and structural conditions. These conditions include state level of unemployment, trends of higher education enrollment, the state’s population and the extensiveness of private income penetration to higher education (Owens, 2008). Above all the political mood affects the budgetary allocation into higher education.
To reverse the negative associations of unemployment with appropriations for higher education, lobbyist need to reiterate to lawmakers that during recessions higher education’s enrollments increase as labor becomes increasingly competitive to fill the limited formal employment opportunities. Therefore, to maintain the quality of higher education in line with the increase in enrollments, additional funding has to be apportioned (McLendon, Hearn, & Mokher, 2009).
Greenberg (2006) sees the view of a decreasing state funding of higher education as a misappropriated focus on the challenges facing higher education. The author argues that the complaint of inadequate funding arise out of the preoccupation of higher education institutions to become prestigious instead of looking at how they can harness the abundant human capital that can easily and economically address key educational issues. The issues of declining direct public support for higher education has mostly been political. Partisanship interest in the debate for renewal of the Higher Education Act and a Senate inquiry to validate the governance of the non-profit economic sectors of the United States has demonstrated has demonstrated the complexity of public higher education funding. Instead of asking for more money as they already do, faculty of higher education can effectively explain the dynamic missions and diversity of institutional types.
Levy (1982) found out that when legislature becomes more analytical, there is an increase in the robustness of funding higher education. When legislature is composed of individuals, enjoying term-limits there is a higher chance of state appropriation of funds to higher education. This is contrary to the expectation that with term limits, the few patron saints of higher education interests in legislature are vulnerable to losing their position and hence a loss to public funding of higher education.
Therefore Levy (1982) suggests that with a high turnover of lawmakers, a new breed of less experienced lawmakers are easy to fall prey to interest groups and therefore provide the perfect solution to higher education lobbyist seeking more public funding. In increase of one lobbyist for higher education results to an increase of US$0.05 to US$1,000 appropriated to higher education out of personal income. Therefore, the size and density of lobbyist in a community is directly proportional to the appropriations for higher education. A strong governor with the ability to influence budgetary allocations is detrimental to efforts of increasing appropriations for higher education. While normally governors would champion the role of education in development of their states, the fact that higher education is less important in political bargains compared to other socio economic sectors of the state such as healthcare make it the best candidate for withholding increases in appropriations in tandem with increasing state revenues. Therefore, governors’ decisions to fund additional aspects of higher education limit their potential of meeting other gubernatorial priorities.
To address the issue of declining public finding of higher education Greenberg (2006) proposes that more awareness be created to faculty on the other aspects of higher education other than research. This will position future faculty at a better position to champion the needs of higher education institutions because of the awareness of enormous diversity present in America campuses and the politics that affects the academy. Additional awareness can be achieved through campus-wide discussions incorporating regular forums offering campus discourse. Various avenues are attractive for championing this cause such as president and provosts’ addresses to faculty, college retreats and conferences where deans and heads of departments meet. Such meetings usually have guest speakers and this can be a good opportunity to have speakers that salute university-wide issues.
Pennsylvania as an Example
Salerno (2004) offers a detailed description of the situation in Pennsylvania, indicating that the growth of private higher education is salient in Pennsylvania and the United States in general where private providers have had a historical conducive environment. Each state in the country have individualized their approach of higher education. In Pennsylvania, higher education providers are sorted into state system institutions, universities related to the state and institutions assisted by the state. The universities related to the state may be referred to as quasi-public because of their relative autonomy. In 1998-1999, approximately 44 percent of the total student enrollment for higher education was in private institutions, which signifies the important role that private institutions play in higher education. States forms the second best option for first time freshman into college. Out of 85 two-year private colleges in Pennsylvania, 69 are for-profit and this is the highest number of for-profits in a state in the United States.
Pennsylvania had the ninth highest public financial commitment covering higher education and ranks 13th overall on per capita spending per public student. Its students pay the highest tuition nationally. The state had the fourth highest level of student aid when ranked nationally. State system institutions and institutions related to the state obtain annual appropriations aimed at the provision of education and general services with given latitude. In addition, institutions related to the state receive line-item appropriations. Funding for 14 state system universities is driven by enrollment levels such that the structure resembles a single university having 14 campuses. The explanation given for the low funding appropriation to the truly public, state system universities is that they lack strong research component and select lowly (Salerno, 2004).
This classifies state systems slightly above community colleges. The above characteristics pity them against the smallest justification on marginal increase in appropriation. The private sector is superior academically to the public sector higher education. In nominal terms, the state of Pennsylvania has the second highest number of highest ranked best universities and colleges of the United States. The commonwealth of Pennsylvania directly appropriates institutions assisted by the state. Such institutions have to demonstrate that programs receiving the funding are unique and meant for the public interest. Universities receive a larger share of the appropriations compared to colleges (Salerno, 2004).
Additionally, all private institutions receive institutional assistance grants from the state for their role in educating commonwealth students. When private universities graduate a minimum of 40 percent of their students in four years of enrollment, they qualify for a graduation grant. The state offers no merit-based aid to needy student, instead indirect aid occurs in form of tuition grants are available to all students showing academic progress and are residents of Pennsylvania (Salerno, 2004).
The above description highlights United States recognition of private providers as official higher education institutions. Therefore, they qualify for public funding and fall under rigid guidelines.
Balancing Public Expectation
Salerno (2004) confirms that the graduation grant program in the Pennsylvania case was not renewed because none of the public institutions met the criteria for the grant. The public institutions upon missing the grant caused a backlash in defense of their important role in assisting the middle class and needy students. They further claimed that their student ultimately completed their higher education and therefore deserved an equal funding chance given their relatively inferior facilities compared to the private institutions that took all the grant funding.
Ward and Douglass (2006) acknowledge that Higher education in the United States faces a challenge of maintaining and expanding its access while maintaining affordability. The current tax levels make it impossible for governments to be the sole source of funding for public higher education.
According to Lyall and Sell (2006), the public has resented increments in fee, arguing that they high fees will further lock out the underrepresented from higher education. Any advocacy for higher fees needs to be conducted in relation to the relative inputs of individuals, family and the state to the overall cost. Any strategy adopted is supposed to guarantee individuals private gains as well as broad social advantages. Due to the nature and scale of the debate, future funding of higher education must form micro-economic and macroeconomic public policy.
Public funding of private and public institutions of higher learning aims to extend the reach of higher education to the underrepresented as demonstrated in the Pennsylvania case described above. The focus on underrepresented in the U.S. mostly covers race and ethnicity. The federal government of the U.S. has encouraged new paradigms in funding public higher education such as donations to specific programs (Phillips & Morell, 1996).
Supporting Private Funding to Mitigate Reduced Public Funding
Levy (1982) indicates that the United State has a relatively expansive private sector than other countries. Therefore, the United States can still attract private income into public finance. As a result, the higher education in the U.S. is increasingly dependent on private finance.
Ward and Douglass (2006) explain that given the challenges described above, market related interventions are inevitable. Moreover, these interventions make higher education a strategic component of the national and state economy. Low tuition fees are unsustainable in view of the declining government spending on subsidization of higher education. The universal policy of low tuition extends undue benefits to wealthy students who can comfortably afford high tuition. Vigorous need-based financial aid programs tax policies are appropriate for mitigating the transfer of benefits from low to high-income families.
The sharp increase in higher education fees by institutions has occurred during recessions when state shrinks it appropriation. In such a case, lawmakers side with higher education institution’s requests and pass relevant legislature to allow the fee increments (Newfield, 2010).
Fee increments have not deterred an increase in demand for enrollment. To illustrate this point, fees increased 57.2 percent in the 1987-1997 decade in North Carolina and 44 percent over the same period in Illinois and enrollment also jumped up by 18 percent and 20.6 percent respectively. On a national level, matriculation grew by 11 percent over the same period (Phillips & Morell, 1996). Fee increments in the US started with gradual increments on professional courses justified by the private benefit that the students enjoy later through sizable incomes. Secondly, high costs of maintain professional programs justified their fee increments. Thirdly, opportunity costs presented in lucrative fields and lastly the self-sufficiency that the program enjoys allowing public funds to be channeled to other needy but less visible programs.
Conclusion
The overall picture is that higher education is becoming less affordable; however, it is yet to be unaffordable to a majority of Americans. In earlier times, the case of obtaining higher education was justified by the gap between graduate earnings and non-graduate earnings. The gap has continued to grow however; this has not been due to an increase in average graduate earnings but because of a decreasing wage rate of non-graduates. This phenomenon casts a doubt on future arguments on the social economic benefits of higher education (Phillips & Morell, 1996). The US government continues to set political maximums for chargeable fees in higher education and there is a growing trend of public institutions become more autonomous in their determination of fee increments. Differences abound among states on the authority of setting and retaining tuition fees (Newfield, 2010).
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