Do public universities and colleges' tuition prices get affected by the decline in state funding? The rapid increase in prices is attributed to the decrease in revenue to fund higher education institutions. This lack of income weakens the economy and strains the state budget. In this paper, the main focus is on how state appropriations influence higher education funding, discussing trends in state appropriations, and citing any benefits associated with state appropriations.
According to some researchers, the price increase is attributed to the failure by state funding to put up with growth in enrollment (Hiltonsmith, 2015). Other scholars have questioned the assertion that state appropriations decline causes price increase, arguing that there is no strong empirical evidence to support this relationship. The scholars add that other factors cause public universities and colleges to raise their prices (Cooper, 2017).
According to a Hypothesis put forward by Howard Bowen (1980), the "revenue theory of costs" stated that institutions' spending is higher when revenue is high. The decline in revenue is directly related to declining in cost per student. However, to some researchers, reductions in state funding explain to a large extent, the significant increase in tuition prices (Williams et al., 1992).
Trends in State Appropriations
One of the most significant concerns is that fees and tuition in public universities and colleges are rapidly increasing more than average economic prices. The figure shown below illustrates costs over 30 years, beginning 1988-2018.
The lines would be horizontal if the tuition and consumer price index rose at the same rate. Tuitions and fees have not increased at a consistent pace over time. The highest increases followed periods when budgets were tight; then, the appropriations grow at a slow rate and an increase in enrollments at weak labor market opportunities. State appropriations depend on government revenue. This statement implies that the higher the income, the higher the funding. The table below shows the trend discussed.
Public institutions administrators need to understand the trends in state appropriations to help them during planning. Running public institutions requires skills since it deals with the handling of large amounts of funds. But it is not always apparent that the state government will fund public institutions, so administrators must always be ready in case of appropriations disappear.
If, in any case, state funding declines, public colleges and universities must spend less or seek alternative revenue. It sounds realistic from this accounting statement that institutions consider raising fees when income from other sources dry up. The institutions will look for students willing to pay higher prices in case of a financial crisis.
State Appropriations Benefits
Most state institutions get their funding from the state government. Revenue collected by the government is put to budget, and each public institution receives a fraction of the total funds. These funds help in the running of the institutions.
This paper gives a brief description of the researches conducted concerning state appropriations. The study also describes how public colleges and universities benefit from state funding. This research is just a short study that gives the limelight for future research. Scholars intending to write on the topic must put into account the laid down tips.
Cooper, P., & Delisle, J. D. (2017). Measuring quality or subsidy? How state appropriations rig the federal gainful employment test. AEI Paper & Studies, COVd.
Hiltonsmith, R. (2015). Pulling up the higher-ed ladder: Myth and reality in the crisis of college affordability.
Kimball, B. A. (2014). The Rising Cost of Higher Education: Charles Eliot's "Free Money" Strategy and the Beginning of Howard Bowen's "Revenue Theory of Cost," 1869-1979. The Journal of Higher Education, 85(6), 886-912.
Williams, G. L. (1992). Changing patterns of finance in higher education. Open University Press.
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