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Preface

In the wake of the new Taxpayer Relief Act, the National Center for Public Policy and Higher Education has prepared this policy guide to help provide a foundation for state policy discussions about financing higher education. This new federal legislation affords states a unique opportunity to review current higher education finance policies. In responding to the federal initiative, each state should determine the extent and nature of unmet needs, and, if necessary, re-align state dollars with current and prospective public priorities.

On the downside, the federal tax credits create the potential for states to reduce their support of higher education by raising tuition or reducing state financial aid, and shifting the costs to the federal government. Although the new legislation is intended to increase overall public support, there are no assurances that dollars captured by states in this way would necessarily be directed to higher education's needs. And if states in the short term resist raising tuition in response to the new federal tax credits, the temptation to do so will resurface during the next economic downturn. For the past quarter century, even without the incentive of federal tax credits, states have shifted costs to students when state revenues have declined. Whatever policies each state chooses to pursue after considering the impact of the tax credits, the ultimate result should serve the goal of enhanced higher education opportunity.

This report was written by Kristin D. Conklin, Director of the National Center's Washington Office. The National Center wishes to thank the following people who served on an advisory committee for the project, and whose suggestions and comments were valuable throughout the project: Julie Davis Bell, Program Director with the National Conference of State Legislatures; David Breneman, University Professor and Dean at the Curry School of Education at the University of Virginia; and William Pickens, Director of the California Citizens Commission on Higher Education. Jonathan Brown, Lawrence E. Gladieux, Hal Hovey, David Shreve, James B. Stedman, and the State Higher Education Financial Officers provided invaluable reviews of previous drafts. Arthur M. Hauptman, an independent consultant affiliated with RAND, contributed important ideas, background materials and analysis. The editorial assistance of Thad Nodine is gratefully acknowledged.

The National Center encourages discussion and debate about the analysis and policy recommendations raised in this policy guide.

Joni E. Finney

Vice President
National Center for Public Policy and Higher Education

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© 1998 The National Center for Public Policy and Higher Education