Settling a U.S. Senatorial Debate: Understanding Declines in State Higher Education Funding

Overview & Synopsis

This paper examines the debate in the U.S. Senate over the reasons why state governments have decreased funding for higher education. One side believes that federal mandates on states to pay for Medicaid have forced them to reduce spending on higher education. The other side believes that states unwisely reduced taxes, which decreased their revenues and caused cuts to higher education funding. This study finds that important factors regarding revenues and spending are missing from the Senate's debate. Revenues decline for a number of reasons, including the effects of unemployment. Court decisions have required many states to increase spending on K-12 education. As a policy priority, higher education is disadvantaged, in part because lawmakers understand, and perhaps accept, that institutions may increase tuition to replace cuts in appropriations. This acceptance is part of a "grand paradox" between what lawmakers say and what they do regarding higher education. Ultimately, leadership determines states' spending. If governors and legislators have the political will, they can make funding for higher education a priority. [This paper was presented at the Symposium on the Financing of Education presented by the "Journal of Education Finance" at the Oxford Union, Oxford, England on Dec 9, 2014.]