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OCR for page 357
Implications of Changes in the
Financing of Public Higher Education
SUMMARY
Public colleges and universities play a critical role in our nation’s inte-
grated system of education, research, and innovation. They educate the
majority of undergraduates and constitute many of the nation’s top research
universities. They are training grounds for the people and ideas that drive
innovation and improve our lives.
Yet even as public colleges and universities are becoming more impor-
tant than ever in our knowledge-intensive society, many have come under
intense financial pressure. Demographic changes in enrollments are driving
up student enrollment in some places and reducing them in others, forcing
institutions to adapt to new circumstances. The increasing costs of higher
education have led to difficult tradeoffs affecting the quality of the educa-
tion and services students receive. Extremely tight budgets in some states
have reduced the relative appropriations to education in those states even as
more students are looking to college as a means of personal advancement.
Though federal funding for student aid is up, more of this funding is
going toward loans and tax benefits as opposed to student grants. Also,
increases in funding have not been sufficient to match the needs of students.
This paper summarizes findings and recommendations from a variety of recently published
reports and papers as input to the deliberations of the Committee on Prospering in the Global
Economy of the 21st Century. Statements in this paper should not be seen as the conclusions of
the National Academies or the committee.
357
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358 RISING ABOVE THE GATHERING STORM
The result has been a narrowing of educational choices for some students
and concerns over deteriorating quality of public institutions.
Some organizations have proposed that the federal government take
several important steps to improve the funding of public higher education
and to increase student access to these institutions:
• Expand federal matching programs that encourage increased state
appropriations for higher education.
• Reform the Medicaid program to slow the growth of state commit-
ments that crowd out spending on higher education.
• Focus national resources on improving the purchasing power of Pell
awards.
• Offer matching funds to states based on their funding of means-
tested grant aid.
THE ROLE OF HIGHER EDUCATION IN
THE KNOWLEDGE ECONOMY
Higher education has been central to the strength of the US economy
over the last half-century. Broadened access for students has created social
and economic opportunities for millions of Americans. The integration of
education and research has become a key pillar of our research and innova-
tion system. And the new knowledge generated has provided a strong en-
gine for innovation and economic growth.
Public institutions are a particularly important component of America’s
higher education system. They enroll and educate one-quarter of all 4-year
undergraduates (see Figure PHE-1). When community colleges are included,
public schools account for more than 70% of all undergraduate enrollment
(see Figures PHE-2A and B). Many of the nation’s top research institutions,
particularly in the Midwest and West, are public universities.
A strong system of higher education is more critical now than ever.
Global competition in the knowledge economy is growing. Developed and
developing countries are working to create high-quality educational institu-
tions, often using American colleges and universities as a model. They are
developing their own pool of knowledge workers and knowledge-sector
firms.
For the United States to compete in this environment, American higher
education needs to remain preeminent. It must continue to play a central
role in the production of knowledge and innovation. It needs to create
dynamic environments that will entice knowledge-based companies to lo-
cate in this country. The United States should facilitate world leadership
of its higher education system by continuing to invest where it counts
most.
OCR for page 359
359
APPENDIX D
For-profit
7%
Public
23%
For-profit
Nonprofit
Public
Nonprofit
70%
FIGURE PHE-1 Distribution of BA-granting institutions, by sector.
SOURCE: S. Turner. “Policy Implications of Changing Funding for Public Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, April 2005.
STRESSES IN THE FINANCIAL STRUCTURE
OF PUBLIC HIGHER EDUCATION
Public higher education is under severe financial pressures. The first
source of pressure is increasing enrollments. The children of the baby boom
are now reaching college age and will increase enrollments at some institu-
tions over the coming decade (see Figures PHE-3A, B, and C). At the same
time, the value of higher education as a means for students and society to
achieve economic, social, and political goals also is boosting enrollments.
Because public institutions typically do not charge students for the full cost of
their education, the financial demands on these institutions are expected to
grow significantly.1
A second stress on the system is the growing cost of higher education.
Costs per student in higher education have grown consistently since the
1960s and steeply since the 1970s.2 Both internal and external factors ap-
1R. C. Dickeson. Collision Course: Rising College Costs Threaten America’s Future and Re-
quire Shared Solutions. Indianapolis, IN: Lumina Foundation for Education, Inc., 2004.
2J. L. Dionne and T. Kean. Breaking the Social Contract: The Fiscal Crisis in Higher Educa-
tion. Report of the Commission on National Investment in Higher Education. New York:
Council for Aid to Education, 1997.
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360 RISING ABOVE THE GATHERING STORM
Share of
1st time FT
Distribution of students
Undergraduate Enrollment in-state
1967 1996 1996
Community Colleges 21% 37% 92.7%
Other Public 38% 33% 81.5%
Flagship Public 13% 9% 72.0%
All Private 28% 21% 54.2%
Research I Private 3% 2% 23.6%
Liberal Arts Colleges 4% 2% 43.2%
FIGURE PHE-2A Distribution of undergraduate enrollment, by type of college, 1967
and 1996.
SOURCE: S. Turner. “Policy Implications of Changing Funding for Public Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, April 2005.
Enrollment by type of institution
7,000,000
Research Liberal Arts
Two-year
Doctorate-granting
6,000,000
Comprehensive Other
Number of Students Enrolled
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
65
70
75
80
85
90
95
00
19
19
19
19
19
19
19
20
FIGURE PHE-2B Enrollment by type of institution, 1965-2000.
SOURCE: National Science Board. Science and Engineering Indicators 2004. NSB
04-01. Arlington, VA: National Science Foundation, 2004.
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361
APPENDIX D
18,000,000
Total Enrollment
16,000,000 Public Enrollment
14,000,000
12,000,000
Fall Enrollment
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
1920 1930 1940 1950 1960 1970 1980 1990 2000
FIGURE PHE-3A Number of 18- to 24-year-olds enrolled in college, total and public
colleges, 1920-2000.
SOURCE: S. Turner. “Policy Implications of Changing Funding for Public Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, April 2005.
30,000 40
Number of 18- to 24-Year-Olds
Percent Enrolled in College
27,500
35
Population (thousands)
25,000
30
Percent
22,500
25
20,000
20
17,500
15,000 15
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
FIGURE PHE-3B Number and percent of 18- to 24-year-olds enrolled in college,
1967-2001.
SOURCE: T. J. Kane. “The Role of Federal Government in Financing Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, March 21, 2005.
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362 RISING ABOVE THE GATHERING STORM
170
160
Population Index
150
140
130
120
110
100
2000 2005 2015 2025
United States Texas California New York
FIGURE PHE-3C Population growth projection for the United States, Texas,
California, and New York, ages 18-24, 2000-2025.
NOTE: Calculations based on US Census Bureau, Population Projections.
SOURCE: T. J. Kane. “The Role of Federal Government in Financing Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, March 21, 2005.
pear to be driving up costs. Universities need to compete for high-quality
faculty, staff, and students. Computing services, information resources, and
other services for students and faculty have added financial burdens (see
Figure PHE-4). To cut costs in other areas, institutions have increased
student:faculty ratios, shifted toward lower-cost part-time and nontenure-
track faculty, encouraged early retirement, capped or postponed faculty
salary increases, and outsourced noncritical missions3 (see Figure PHE-5).
A third and perhaps the most important stress on public higher educa-
tion has been a changing paradigm for public support at both the state and
federal levels (see Figures PHE-6A, B, and C). Public colleges and universi-
ties—and even private ones that receive state support—have experienced
strong competition for state resources over the last decade. Other state fi-
nancial commitments—such as Medicaid payments—have continued to in-
crease both in real dollars and as a percentage of state budget outlays, which
has crowded out other spending priorities4 (see Figure PHE-7).
3R. G. Ehrenberg and L. Zhang. The Changing Nature of Faculty Employment. Working
Paper 44. Ithaca, NY: Cornell Higher Education Research Institute, 2004.
4T. J. Kane and P. R. Orszag. Higher Education Spending: The Role of Medicaid and the
Business Cycle. Policy Brief #124. Washington, DC: The Brookings Institution, 2003.
OCR for page 363
363
APPENDIX D
Plant Operation
and Maintenance
7%
Public Service
Scholarships
7%
and Fellowships
6%
Mandatory
Research Transfers
16% 2%
Student Services
5%
Instruction
Administration
37%
20%
FIGURE PHE-4 Expenditure of all public institutions, by type of expense, 2001.
SOURCE: National Center for Education Statistics. Enrollment in Postsecondary
Institutions, Fall 2001 and Financial Statistics, Fiscal Year 2001. NCES 2004-155.
Washington, DC: US Department of Education, December 23, 2003. Table 29.
Available at: http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2004155.
23
22
Public
21
Students per FTE faculty
20
19
Private
18
17
16
15
77
78
79
80
81
82
83
85
86
90
91
92
93
94
95
96
97
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
FIGURE PHE-5 Student-faculty ratios, by academic institution sector, 1977-1997.
SOURCE: T. J. Kane. “The Role of Federal Government in Financing Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, March 21, 2005.
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364 RISING ABOVE THE GATHERING STORM
FIGURE PHE-6A Revenue sources for all public degree-granting institutions, 1980-
1981 to 2000-2001.
SOURCE: College Board. Trends in College Pricing, 2004. Washington, DC: College
Board, 2004. P. 20. Available at: http://www.collegeboard.com/prod_downloads/
press/cost04/041264TrendsPricing2004_FINAL.pdf.
FIGURE PHE-6B Federal funds for university research, total and by select agency,
1955-2000.
SOURCE: S. Turner. “Policy Implications of Changing Funding for Public Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, April 2005.
OCR for page 365
365
APPENDIX D
Current Fund Revenues Tuition
State & Aux. Out-of-
In-state
Local Federal Private Endow. Tuition & Other State
Community Colleges 57.5% 11.7% 1.0% 0.1% 20.2% 9.5% $1,814 $4,362
Other Public 36.3% 10.7% 4.0% 0.4% 18.3% 30.2% $2,725 $6,981
Flagship Public 29.0% 14.8% 6.4% 1.3% 17.2% 31.4% $3,493 $9,998
All Private 2.8% 10.3% 9.1% 5.1% 41.9% 30.8% $12,881
Research I Private 2.3% 16.1% 9.5% 5.7% 22.9% 43.5% $19,814
1.4% 3.0% 9.1% 10.5% 55.5% 20.5% $17,648
FIGURE PHE-6C Tuition and source of fund revenues, by academic institution type.
SOURCE: S. Turner. “Policy Implications of Changing Funding for Public Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, April 2005.
.9
State Medical Expenses as Percent
.8
of Gross State Product
.7
.6
.5
.4
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
FIGURE PHE-7 Medicaid expenses as percent of gross state product, 1980-2001.
SOURCE: T. J. Kane. “The Role of Federal Government in Financing Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, March 21, 2005.
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366 RISING ABOVE THE GATHERING STORM
As a consequence of this financial pressure, education funding as a share
of state spending, the percentage of education dollars directed to higher
education, and the percentage of higher education dollars going to institu-
tions (as opposed to students) all have declined5 (see Figures PHE-8A and
B). In brief, state support as a percentage of total revenue for public colleges
and universities is down, and these institutions are adapting by restructur-
ing costs and looking elsewhere (for example, to tuition) for financial sup-
port (see Figures PHE-9A and B).
At the federal level, spending for higher education appears on the sur-
face to be strong. Spending on the Pell grant program, for example,
increased 60% in real terms from 1999-2000 to 2003-20046 (see Figure
PHE-10). However, hiding beneath the overall increases in federal support
are important shifts in its distribution. The mix of federal support in 2003-
2004 was 34% grants, 55% loans, and 5% tax benefits, the latter two of
which have been growing as a percentage of federal support (see Figure
PHE-11). Thus, there hasbeen a shift away from grants to other modes of
support (for example, subsidized loans, tax credits, and tax-sheltered edu-
cation accounts) and a shift from need-based to merit-based aid (see Figures
PHE-12A, B, and C). Together, these changes have tended to shift subsidies
away from students from lower-income families and toward the middle and
upper-middle classes.
In addition, while there have been real increases in per student funding
under the Pell grant program, they have not been adequate to offset larger
increases in college prices. The size of the average grant has increased in real
terms in recent years, but average tuition, fees, and room and board at
public 4-year colleges and universities increased faster. As a result, the aver-
age Pell grant in 2003-2004 covered 23% of the charges at a public 4-year
institution compared with 35% in 1980-19817 (see Figure PHE-13). Mean-
while, the Leveraging Education Assistance Partnerships (LEAP) program,
which provides matching funds to states for providing need-based grant
aid, has declined 31% in real terms over the last decade.8
IMPLICATIONS FOR AFFORDABILITY AND QUALITY
These developments have important implications both for access to
higher education and for educational quality. As tuition increases, the array
5M. Rizzo. “State Preferences for Higher Education Spending: A Panel Data Analysis, 1977-
2001.” Paper presented at Cornell Higher Education Research Institute’s Annual Conference,
“Assessing Public Higher Education at the Start of the 21st Century.” Ithaca, NY, May 22-23,
2005.
6College Board. Trends in Student Aid 2004. Washington, DC: College Board, 2004.
7Ibid.
8Ibid.
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367
APPENDIX D
.08
Higher Education Appropriations
Share of State Expenses
.07
.06
.05
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
FIGURE PHE-8A Higher education appropriations share of state expenses, 1977-
2002.
SOURCE: T. J. Kane. “The Role of Federal Government in Financing Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, March 21, 2005.
9
Higher Education Appropriations
per $1,000 Personal Income
8
7
6
1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
FIGURE PHE-8B Higher education appropriations relative to personal income,
1977-2003.
SOURCE: T. J. Kane. “The Role of Federal Government in Financing Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, March 21, 2005.
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368 RISING ABOVE THE GATHERING STORM
20,000
18,000
16,000
Constant 2004 Dollars
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
7
9
1
3
5
7
9
1
3
5
7
9
1
3
5
-7
-7
-8
-8
-8
-8
-8
-9
-9
-9
-9
-9
-0
-0
-0
76
78
80
82
84
86
88
90
92
94
96
98
00
02
04
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
FIGURE PHE-9A Average published tuition and fee charges, enrollment-weighted,
by institution type, in constant 2004 dollars, 1976-77 to 2004-05.
SOURCE: S. Baum. “Changes in Funding for Public Higher Education: College Prices
and Student Aid.” Presentation to National Academies’ Board on Higher Education
and Workforce, April 2005. Data are from College Board. “Trends in Higher
Education Series 2004.”
15
% Change Tuition
% Change Appropriations/FTE
10
Percentage Change
5
0
–5
–10
1
3
5
7
9
1
3
5
7
9
1
3
-8
-8
-8
-8
-8
-9
-9
-9
-9
-9
-0
-0
80
82
84
86
88
90
92
94
96
98
00
02
19
19
19
19
19
19
19
19
19
19
20
20
FIGURE PHE-9B Percent change in public 4-year institution tuition and
appropriations, 1980-81 to 2002-03.
SOURCE: S. Baum. “Changes in Funding for Public Higher Education: College Prices
and Student Aid.” Presentation to National Academies’ Board on Higher Education
and Workforce, April 2005. Data are from College Board. “Trends in Higher
Education Series 2004.”
OCR for page 369
369
APPENDIX D
6,000
5,000
Number of Recipients
4,000
3,000
2,000
1,000
0
2
4
6
8
0
2
4
6
8
0
2
4
98
98
98
98
99
99
99
99
99
00
00
00
-1
-1
-1
-1
-1
-1
-1
-1
-1
-2
-2
-2
81
83
85
87
89
91
93
95
97
99
01
03
19
19
19
19
19
19
19
19
19
19
20
20
14,000
Pell Expenditures ($ millions)
Maximum Pell Grants
12,000
Average Pell Grant per Recipient
10,000
Constant 2003 Dollars
8,000
6,000
4,000
2,000
0
2
4
6
8
0
19 992
4
6
8
0
2
4
98
98
98
98
99
99
99
99
00
00
00
-1
-1
-1
-1
-1
-1
-1
-1
-1
-2
-2
-2
81
83
85
87
89
91
93
95
97
99
01
03
19
19
19
19
19
19
19
19
19
20
20
FIGURE PHE-10 Pell Grants: Number of recipients and total expenditures,
maximum grant, and average grant, in constant 2003 dollars, 1981-1982 to 2003-
2004.
SOURCE: S. Baum. “Changes in Funding for Public Higher Education: College Prices
and Student Aid.” Presentation to National Academies’ Board on Higher Education
and Workforce, April 2005. Data are from College Board. “Trends in Higher
Education Series 2004.”
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370 RISING ABOVE THE GATHERING STORM
FIGURE PHE-11 Total higher education student aid, by source, in billions of current
dollars, academic year 2003-2004.
SOURCE: S. Baum. “Changes in Funding for Public Higher Education: College Prices
and Student Aid.” Presentation to National Academies’ Board on Higher Education
and Workforce, April 2005. Data are from College Board. “Trends in Higher
Education Series 2004.”
of educational choices for students may be constrained unless the availabil-
ity of financial aid can compensate. Especially for low-income students, the
real and perceived cost increases for college education can limit access and
lifetime opportunity (see Figures PHE-14A and B).
The second implication is for the quality of teaching and research. Re-
ductions in funding for public education combined with constraints on tu-
ition increases appear to be causing deterioration in the quality of public
colleges and universities compared with private institutions.9 Private uni-
versities benefit from larger endowments, have constrained enrollment
growth to control costs, and have steadily increased tuition to offset infla-
tion and provide new resources for qualitative improvement. Public institu-
tions are less able to use these measures for fiscal control and as a result
are falling behind private colleges and universities, in endowments, faculty
salaries, student:faculty ratios, student services, and facilities (see Figure
PHE-15). Also, to the extent that changes in faculty composition—such as
increases in part-time and nontenure-track staff—affect the quality of teach-
ing and mentoring and the availability of tenure-track faculty as role mod-
9J. Kissler. Why It Is in the Interest to Address the Growing Gap Between Public and
Private Universities. Oakland, CA: University of California, 2005.
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371
APPENDIX D
Federally Supported Programs (millions of constant 2003 dollars)
1993-1994 2003-2004
Grants
Pell Grants $7,196 $12,661
Supplemental Educational Opportunity Grants (SEOG) 742 760
Leveraging Educational Assistance Partnership Grant (LEAP) 91 64
Veterans 1,518 2,365
Military 515 981
Other Grants 245 353
Subtotal 10,308 17,184
Federal Work Study 982 1,218
Loans
Perkins Loans 1,169 1,201
Subsidized Stafford 18,018 25,291
Unsubsidized Stafford 2,029 23,105
Parent Loan for Undergraduate Students (PLUS) 1,943 7,072
Supplemental Loans for Students (SLS) 4,415 —
Other Loans 580 125
Subtotal 28,780 56,794
Education Tax Benefits — 6,298
Total Federal Aid 39,998 81,494
State Grant Aid 3,022 6,017
Institutional Grants 11,852 23,253
Total Federal, State Institutional 54,872 110,764
Nonfederal Loans — 11,271
FIGURE PHE-12A Federal aid awarded to students (expenditures), in millions of
constant 2003 dollars, 1993-1994 and 2003-2004.
SOURCE: S. Turner. “Policy Implications of Changing Funding for Public Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, April 2005.
els, they may affect undergraduate persistence, graduation rates, and the
propensity to continue to graduate school. The consequences include a more
stratified, less dynamic society and a more limited workforce available for
generating knowledge and innovation in the economy.
Issues of attainment also have come to the fore. With a growing num-
ber of postsecondary students starting out at community colleges and in-
tending to transfer, 2- and 4-year institutions need to work to improve
transfer and articulation agreements and processes to facilitate smooth
transfers.10 Colleges and universities must make a commitment to the stu-
10National Academy of Engineering and National Research Council. Enhancing the Com-
munity College Pathway to Engineering Careers. Washington, DC: The National Academies
Press, 2005.
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372 RISING ABOVE THE GATHERING STORM
500
Merit-Based/FTE
450
Need-Based/FTE
Grant Aid per Full-Time Student (FTE)
400
in Constant 2003 Dollars
350
300
250
200
150
100
50
0
71
73
75
77
79
81
83
85
87
89
91
93
95
97
99
01
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
FIGURE PHE-12B Merit and need-based state grant aid per full-time student, by
type of grant, 1971-2002.
SOURCE: S. Baum. “Changes in Funding for Public Higher Education: College Prices
and Student Aid.” Presentation to National Academies’ Board on Higher Education
and Workforce, April 2005. Data are from College Board. “Trends in Higher
Education Series 2004.”
Stafford Subsidized
1996-1997
Stafford Unsubsidized
PLUS
1997-1998 Nonfederal
1998-1999
1999-2001
2001-2002
2002-2003
2003-2004
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70
Loan Dollars (in billions)
FIGURE PHE-12C Higher education loans, in billions of dollars, by type, 1996-1997
to 2003-2004.
SOURCE: S. Turner. “Policy Implications of Changing Funding for Public Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, April 2005.
OCR for page 373
373
APPENDIX D
of Attendance at Public and Private 4-Year Colleges
0.70
Max Pell/Private
Maximum Pell Grant as Percentage of Cost
Max Pell/Public
0.60
0.50
0.40
0.30
0.20
0.10
0.00
2
4
6
8
0
2
4
6
8
2
4
0
-8
-8
-8
-8
-9
-9
-9
-9
-9
-0
-0
-0
81
83
85
87
89
91
93
95
97
01
03
99
19
19
19
19
19
19
19
19
19
20
20
19
FIGURE PHE-13 Maximum Pell Grant as percentage of cost of attendance at public
and private four-year colleges, 1981-82 to 2003-04.
SOURCE: S. Baum. “Changes in Funding for Public Higher Education: College Prices
and Student Aid.” Presentation to National Academies’ Board on Higher Education
and Workforce, April 2005. Data are from College Board. “Trends in Higher
Education Series 2004.”
Total High Income
Low Income
(bottom 20%) (top 20%)
1972 49.2% 26.1% 63.8%
1981 53.9% 33.6% 67.6%
1996 65.0% 48.6% 78.0%
FIGURE PHE-14A Enrollment by income, 1972, 1981, and 1986.
SOURCE: S. Turner. “Policy Implications of Changing Funding for Public Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, April 2005.
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374 RISING ABOVE THE GATHERING STORM
Public Two-Year Colleges
Public Four-Year Colleges and Universities
FIGURE PHE-14B Net tuition and fee and net cost of attendance as a percentage of
family income, by family income quartile and institution type, 1989-1990 and 1999-
2000.
SOURCE: S. Baum. “Changes in Funding for Public Higher Education: College Prices
and Student Aid.” Presentation to National Academies’ Board on Higher Education
and Workforce, April 2005. Data are from College Board. “Trends in Higher
Education Series 2004.”
dents they admit by supporting retention efforts so that students do not
drop out of college with high debts and no degree.
ENSURING ADEQUATE FUNDING FOR
PUBLIC HIGHER EDUCATION
The federal government has a number of options that could help public
institutions receive revenues that reflect the true costs of higher education:
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375
APPENDIX D
1.05
Assistant Professors
1
Ratio of Public Salary to Private Salary
Associate Professors
0.95
Full Professors
0.9
0.85
0.8
72
73
75
76
77
78
79
80
81
82
83
85
86
90
91
92
93
94
95
96
97
98
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
FIGURE PHE-15 Ratio of public institution salary to private institution salary, by
faculty rank, 1972-1998.
SOURCE: T. J. Kane. “The Role of Federal Government in Financing Higher
Education.” Presentation to National Academies’ Board on Higher Education and
Workforce, March 21, 2005.
• Design or expand federal matching programs that encourage in-
creased state appropriations for higher education. For example, to encour-
age states to expand means-tested grant aid, the federal government could
offer matching funds to states based on their funding of such programs.
• Reform the Medicaid program to slow the growth of state commit-
ments that crowd out spending on higher education.11
• Create “Learn Grant Universities” through a federal “Learn Grant
Act” as significant as the Morrill Act of 1862 and the GI Bill of 1944.
• Enact a “Higher Education Millennium Partnership Act” that would
integrate technology into the curriculum, create more flexible educational
opportunities for part-time and nonresidential students, and develop new
partnerships with schools, businesses, and local communities.12
11Kane
and Orszag, 2003.
12J.
J. Duderstadt and F. W. Womack. Beyond the Crossroads: The Future of the Public
University in America. Baltimore, MD: Johns Hopkins University Press, 2003.
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376 RISING ABOVE THE GATHERING STORM
• Create a “Millennium Education Trust Fund” using the sale of un-
used communications spectrum over the next few years (with proceeds pos-
sibly greater than $18 billion) to provide students with the skills necessary
for an age of innovation.
IMPROVING ACCESS TO HIGHER EDUCATION
In addition, the federal government can help the states improve access
to higher education for all Americans through several actions:
• Focus national resources on improving the purchasing power of Pell
awards.13
• Increase flexibility for states to buy more subsidized loan eligibility
from the federal government.14
• Expand and restructure the LEAP program to allow private-sector
matches from such organizations as Scholarship America and community
foundations.15
• Institute a voucher program that would give more money to students
from low-income homes.16
• Mandate that both public and private institutions use the average
“net price” of attendance instead of the stated “sticker price” in all federal
grant and loan programs to determine who qualifies for student-aid awards
and how much they should be awarded. Using sticker prices as the official
institutional “cost of attendance” misrepresents the actual average cost of
attendance in most federal and state student-aid programs.17
• Consider eliminating the Free Application for Federal Student Aid.
Changing laws to permit the use of Internal Revenue Service data to assess
qualification for financial aid can simplify processes, save hundreds of mil-
lions of dollars, and remove bureaucratic barriers to postsecondary access.18
13Dickeson, 2004.
14Ibid.
15Ibid.
16R. Vedder. Growing Broke by Degree: Why College Costs Too Much. Washington, DC:
AEI Press, 2004.
17A. F. King. “Policy Implications of Changes in Higher Education Finance.” Presentation
to the National Academies’ Board on Higher Education and Workforce, April 21-22, 2005.
18Dickeson, 2004.
