Study shows increase in state funding for universities over past year

State funding for higher education increased nationwide last year, but may not have a substantial impact on the University of California, according to researchers from an annual survey.

The Grapevine survey, a joint project undertaken by the Center for the Study of Education Policy at Illinois State University and the State Higher Education Executive Officers, is an annual compilation of state data regarding funding for public higher education, said Andrew Carlson, vice president of finance policy and member services at SHEEO.

The results of the survey, released Jan. 21, showed a 3.7 percent increase in state funding for higher education nationwide, an increase from the previous fiscal year. In 2017-2018, state funding increased by 1.6 percent.

Carlson said Grapevine is housed at Illinois State University and has been run by the university’s faculty since 1960. He added SHEEO took over the data collection for Grapevine around 9 years ago.

He said the most recent Grapevine survey shows continued development and investment in higher education funding across states.

“The overall economy, especially with respect to state budget, is in a period of growth and remains strong,” Carlson said.

With the recent growth in state funding, students and families have been putting more pressure on institutions like the University of California to keep tuition costs low, he added.

“As state funding continues to rebound and continues to increase year (after) year, … that’s an indication of a strong economy and in a lot of cases that means that enrollments are probably declining,” Carlson said. “You also will see more pressure to either freeze tuition increases year (after) year, or at least hold them much lower than typically happens during a downturn.”

James Palmer, a Grapevine editor from Illinois State University, said the survey found state support for higher education was marginally better in fiscal year 2018-2019 than in fiscal year 2017-2018.

“This continues a pattern of fairly modest increases in state fiscal support for higher education over the past five years,” Palmer said.

He added the modesty of these increases reflects the difficulty states face in maintaining the necessary revenues to substantially increase higher education funding.

“Because of competing demands made on state budgets for other state obligations, including health care, in some cases unfunded pension obligations, K-12 education and … because of the desire in many states to lessen the tax burden on taxpayers, the states struggle to sustain the fiscal capacity to make increases to higher education,” Palmer said.

Carlson said many higher education institutions that rely on government funding as their main source of revenue are becoming increasingly cautious of an approaching economic downturn.

Palmer said historical records suggest a recessionary period will likely bring forth declines in state support for higher education.

“As the economy declines, state tax revenues decline,” he said. “As state tax revenues decline, so too does the capacity of states to increase funding for higher education”

He added, during economic recessions, funding for higher education is often a lower priority for states than other financial commitments.

“During economic downturns, it is easier for states to decrease funding for higher education than it is to decrease funding for other state obligations, because higher education is a discretionary item in state budgets,” Palmer said. “Usually there is no state constitutional mandate that states must fund higher education.”

“We have seen a series of increases in state higher education funding since the last recession, but we haven’t necessarily gone back to the level of funding seen prior to the recession,” Palmer said.

He added state funding for higher education increases with each recovery out of a recession, but never quite returns to its original levels.

Palmer said flagship universities such as UCLA and UC Berkeley will not be affected by these declines as much as regional universities such as California State Universities. Flagship universities are often the most well-known and most research-intensive public universities in a state, according to College Board.

He said alternative revenue streams, such as research grant funds and private funds from alumni, allow flagship universities to provide more institutional student aid.

“Flagship universities have more access to alternative revenue streams to make up for this long-term decline in state funding than do regional state universities or community colleges,” Palmer said.

Carlson added that while flagship universities are better equipped to withstand sudden changes in state funding, state support is still an important factor in fiscal security.

“They are definitely less dependent, but state funding does remain a critical funding source for them,” Carlson said. “I think it is a little shortsighted to say that they are not dependent at all on state funding.”

Joel Aberbach, professor emeritus of political science and public policy, said the increase in state funding could have an impact on higher education, but it ultimately will depend on how the money is spent.

He added while a great proportion of university budgets comes from research grants and hospitals, he believes the rise in state funding will likely still have an impact on higher education.

“I think it is important to recognize that state funding counts a lot for the types of experiences that students have, even if it is only a small portion of the total university budget,” he said.