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Executive Summary
The Context: State Budgeting and Higher Education's Vulnerability
The Continuing Battle to Sustain Current Support for Higher Education
Recent Experience: The Recession of the Early 1990s
What's Different?
Unprecedented Enrollment Growth
The Tuition Conundrum
Student Support
Concluding Observation
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What's Different?

The structural characteristics of state finances and state higher education finance have not changed significantly since the recession of the early 1990s. Other factors, however--demographic in part, policy driven in part--will be different and will influence state and higher education responses.

One difference is "good news": the robust financial condition of higher education at the beginning of the new century. The decade of the 1990s was indeed the best of times for public higher education. Average revenues per student increased (in constant dollars) to an all-time high of $14,459 in 1998 (see Figure 1). State appropriations and tuition and fees account for about 70% of revenues for public colleges and universities. State support, after declining in the late 1980s and early 1990s, increased faster than inflation and enrollment growth in the middle and late 1990s. Revenues from tuition also reached an historic high in 1998. These trends continued through the end of the decade. From 1998 to 2000, as reported by researchers at Illinois State University, state appropriations per FTE (full-time-equivalent) student, measured in constant dollars, increased by 14.5%.17 Tuition at public institutions also continued to increase from 1998 to 2000, by 7% in four-year public institutions and by 10% in community colleges.18
Of course, these national averages conceal unevenness and varying patterns of support among sectors, institutions and states, and even within states. They also mask the bumpy ride of public finance for many states and institutions that suffered the most during the recession in the early 1990s and then benefited the most in the boom times of the middle and late 1990s. Nevertheless, the national data indicate that--whatever the future may hold--public higher education entered the new century financially strong. State appropriations held steady and increased modestly during the 1980s and 1990s. Fears and allegations of state disinvestment were false alarms. Tuition and fees did rise considerably faster than appropriations and other revenue sources during this period, and higher education's share of state appropriations did fall in most states. But the states maintained and improved their support for higher education over these years, and the financial condition of public higher education was significantly strengthened.

I now turn to three less-heartening changes that have taken place since the last recession: the challenges of enrollment growth, the dilemmas of tuition policy, and the "mismatches" between the public policies of the 1990s and the needs of the new decade.

17 Grapevine: A National Database of Tax Support for Higher Education (Normal, IL: Center for Higher Education and Educational Finance, Illinois State University, 19992001). Internet publication:
18 The College Board, Trends in College Pricing, 2001 (New York: College Board Publications, 2001), p. 15.


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