State Funding for Higher Education Slow to Recover

As the U.S. economy continues its slow ascent, some states are still spending less on higher education than before the onset of the latest recession.

During the recession, 48 states — all but Alaska and North Dakota — cut funding for higher education. Today, Alaska, North Dakota, and Wyoming are the only states spending more on higher education than they were during the 2007-2008 academic year, just prior to the economic downturn.

State funding for education has been slow to catch up with the economic recovery because states have made damaging cuts, in an attempt to balance budgets, that have not been counterbalanced with actions to increase revenue, according to researchers at the Center on Budget and Policy Priorities (CBPP). Between 2008 and 2012, states, on average, closed 45 percent of budget gaps through spending cuts but only increased revenue by 16 percent through higher taxes and fees.funding

State funding for higher education went up an average of 4 percent in 37 states last year, but they are still spending 20 percent less per student than before the recession. Additionally, 13 states saw the amount of funding per student drop last year.

Arizona has been one of the hardest hit states and is now spending 40 percent less per student than in 2007, while tuition has increased by 80 percent since that time. California, Florida, Georgia, Hawaii, and Louisiana have all raised tuition by roughly 60 percent since the recession.

Tuition hikes have placed a burden on students and their families, and in recent years, many low-income students are choosing not to attend college. According to the CBPP, in 2012, only half of all high school graduates from families in the lowest income quintile enrolled in postsecondary education. Students from families in the highest quintile saw a rate of 82 percent enrollment.

In a March 2015 Huffington Post article, Walter McMahon, professor emeritus of economics and education at the University of Illinois, said cutting funding for higher education has long-term consequences for states’ economies.

“Spending on education is really an investment,” McMahon said. “As money is invested in human capital formation, each graduate is in the labor force for over 45 years and contributes increased earning and tax revenue to state coffers.”

Tuition hikes also tend to push low-income students to less selective schools, which can result in reduced lifetime earning potential.

The CBPP suggests that a more rational plan for higher education funding would include tax increases and other ways to build state revenue. However, some states — including Alabama, Maine, New Hampshire, North Carolina, and Wisconsin — are looking to change their tax codes, and some have already made cuts.

For example, Arkansas passed a tax cut this year that will reduce revenue by nearly $100 million. At the same time, the state is spending more than $13 million less on higher education than in 2008, which is nearly $1,000 less per student in state support.

At the federal level, Congress is also increasing the burden on low-income students.

The balanced budget resolution the House Budget Committee passed for fiscal year 2016 includes nearly $3.1 trillion in cuts to programs that benefit low- and moderate-income Americans. Although the budget agreement is merely a blueprint that outlines overall spending levels for appropriation bills that Congress will propose in the coming year, the potential impact on low-income students could be devastating.

The Republican congressional budget plan freezes the maximum Pell Grant at $5,775 — its current level — for the next 10 years, regardless of rising tuition and fees, and cuts mandatory funding for the program, which would add up to about $90 billion by 2025. Today’s maximum Pell Grant for eligible students covers roughly 30 percent of the average cost of a four-year public university. In 1980, the maximum Pell Grant covered 70 percent of that cost.