Macroeconomics: A Case Study

The topic of this paper is the states’ decreasing financial support of higher education, the reaction and response from institutions who have lost funding, and the creative ways public institutions are locating additional streams of revenue. States have been the primary backer of public institutions, but since the recession states have shown less commitment financially while still heavily regulating higher education. As a result some institutions have had to change their practices while others have challenged their state’s regulations all together. Many have speculated that state funding may never return to its former highs. Rather than make an enemy of the state, some schools have discovered new and unconvential ways of raising funds for their institution.

Donald E. Heller, (2011), The States and public Higher education policy, Cengage Publications, pp 200-288

Education is the foundation of a person’s success and way of life. Graduating from school is important not only for an individual, but it helps the local and national economy. A study by the Alliance for Excellent Education shows that with higher graduation rates among high school students, the economies of cities, states, and of the country would increase (Rollins). Compared to the rest of the world, the United States spends a large amount of money on education (U.S. Education). While many may think this sufficient, Professor Bruce Baker discusses the correlation between supporting schools with federal funding and the success of students, “When schools have more money, they have greater opportunity to spend productively. When they don’t, they can’t” (ii, Baker). If students are to graduate and contribute to the boost of economies, education must be the forefront of federal funding.

This journal article written by William Zumeta in April, 1992, is an extensive argument to suggest state policymakers would be wise to conduct research to maintain healthy colleges and universities to address the increasing demands of demographics and economics at state level. In addition, Zumeta suggests the private sector should be included more in state planning and addresses the effects of the public sector tuition policies. According to Zumeta, “The goal of state policy in higher education after all must be to serve the broader public interest as fully as possible with limited resources.” Although this journal article is dated, Zumeta and his colleagues challenged state policymakers to include the private sector in forming appropriations

In the past fifty years since the inception of the Higher Education Act, federal policies regarding financial aid have expanded in scope, intent, and access. Prior to this landmark legislation, federal intervention and financial support of higher education was minimal, with most of the control lying with individual states. Whereas financial support for higher education was previously directed at institutions, federal financial aid provided funding for individual students, initially as a means for increasing access for underrepresented and disadvantaged populations. The evolution of federal financial aid represents the historical, political, and policy changes during the past five decades and illustrates the gradual shift in societal values

Public education has historically attempted to educate more people and make higher education more accessible to all students. Thus local school districts, higher education institutions, states, and the U.S. federal government are increasingly dealing with funding issues. Faced with decreases in additional funding, our focus must be on channeling existing resources toward practices that increase the probability of student success. This includes best educational practices and viewing schools and higher education institutions that affect student performance as part of an inter-related system, not as separate institutions. Today, educators acknowledge that there is no straight line to earning college

First, because executive compensation is so high in higher education, it leads the public to question whether pay is really based on performance. One-third of public university presidents now make more than $500,000 according to the Chronicle of Higher Education (Cheng 582). This leads to the common accusation that university presidents are paid like bureaucrats. Presidents of public university’s salaries may not be performance based because even though governing boards hire and fire or determine compensation, most presidents are held to certain objectives distinct to their university such as the wishes of faculty, community, students and alumni. Therefore presidents don’t usually have one clear objective. This makes it hard to evaluate performance because it must be based on each institution’s needs and data availability. There is no set of principles commonly agreed on and consistently used to evaluate performance. But rather, compensation in an earlier period is the strongest indicator for payment in a later period. (Cheng

The report shows that even though “state support for higher education increased by 13 percent from 1982 to 1998, tuition and fees increased by 107 percent over the same interval” (“Losing Ground”). At the federal level, while “more than fifty percent of federal financial aid was in the form of grants in 1982-1983, by 2002-2003 grants made up only forty percent of such aid,” Ronald Ehrenberg and Michael Rizzo state in “Financial Forces and the Future of American Higher Education,” which appeared in the July-August 2004 issue of Academe (Ehrenberg). They add that “during the mid-1970s, the average Pell Grant covered about 46 percent of the average costs, including room and board, of attending a public college or university. Last year, the average grant paid for less than 30 percent of the costs” (Ehrenberg). Low-income students are being squeezed out by middle- and upper- income students for available school

The way higher education is being financed is becoming increasingly dysfunctional. State appropriations are declining; educational cost is rising; and cost per student is increasing faster than inflation or family income. Affordability is directly affected by a financing system that provides limited incentives for colleges and universities to take aggressive steps to improve institutional efficiency and productivity. Public worry about increasing expenses might eventually add to the disintegration of open trust in higher education. Only through reform can confidence in higher education in America be renewed. The Secretary of Education’s report states that America must ensure that our citizens have access to high quality and affordable educational, learning, and training opportunities throughout

When researchers take a historical look, for-profit post-secondary institutions have been in the United States since the colonial days. In the 1967 about seven million people were enrolled and seeking a degree at a post-secondary institution. (Tierney 2011) However, less than ten

Doyle, W. R. (2010). Changes in institutional aid, 1992–2003: The evolving role of merit aid.

Our methodology is built to examine the correlation between the dependent variable, state public higher education appropriation and the three independent variables, healthcare spending, social services spending and spending on political determinants, which were identified in our conceptual framework as it explains factors that affect state public higher education appropriation on 2015. The study is focusing on cross-sectional, secondary data for all 50 U.S states on the fiscal year 2015. We aim to analyze the correlation between all variables in order to explore the affect of the three independent variables on the dependent variable. We specify a particular year to describe the

With this being said, higher education accounts for approximately 18.1% of the total state budget and 8.2% of the general fund. Unfortunately this is still far below the “maintenance level” that is required for the universities to provide the same level of service as they did the year before. A maintenance-level budget includes cost increases over which the institutions have no control, such as negotiated wage and benefit agreements, inflation in the cost of goods and services, and increased energy costs. In

in looking for support. Mullin, Balme, and Honeyman cited Zumata, Brenman, Callan, and Finney (2012) on various topics, such as when Mullin, Balme, and Honeyman discussed that governmental funding for higher education institutions is discretionary, noting that governments should always fund K-12 academic institutions, but it is optional when it comes to funding higher education. Both books gave attention to global competition and technology, but Zumata, Brenman, Callan, and Finney (2012) focused on these two important issues at the beginning of their book, while Mullin, Balme, and Honeyman talked briefly about them in the middle of the book, when aligning budgeting to the institutional mission. While both books suggest many strategies in their

Ralph Martire and Danielle Stanley presented a presentation that covered Illinois disinvestment in higher education. Between 2000 and 2015, Illinois cut nearly $1.4 billion from General Fund appropriations to Higher Education. Ralph Martire, Executive Director of Center for Tax and Budget Accountability (CTBA) went over the drops in funding for higher education. Ralph has a firm stance on how he feel about investing in higher education saying “Investing in higher education has always been important,” “But in today’s economy, the strong correlations between post-secondary education and economic viability make it more important than ever.” Ralph also went over how General Fund Appropriations for Public Universities has been low for universities