‘changes in tuition were not driven by changes in state appropriations’

by Grace

What have been the primary reasons for rising college costs?  Andrew Gillen says declining state funding is not one, and has research to back it up.

Changes in state funding and college tuition do not track closely over a ten-year period.

It is clear that the two bars are not equal. The 2003-2004 changes are the only ones that fit Fethke’s story, while the rest show a tenuous relationship (correlation of 0.21). Particularly striking are the increases in tuition even when state appropriations were increasing (2000-2001 and 2004-05 through 2007-08). The conclusion is that historically, changes in tuition were not driven by changes in state appropriations. Examining longer time periods rather than yearly changes does strengthen the connection, but it is still nowhere near 1 to 1 (e.g. a one dollar change in appropriations is associated with only a $0.06 to $0.15 change in tuition in the long run).

I don’t doubt that declining state funding contributes to rising tuition costs, but I agree that other factors figure more importantly in the equation.  Gillen has argued that increases in financial aid are a major cause of higher tuition, describing an updated Bennett hypothesis arising from the dysfunctional competition in higher education.  I plan to write about that soon.

This recently released report – The Great Cost Shift: How Higher Education Cuts Undermine the Future Middle Class – highlights state cuts as a reason for tuition increases.  However, in my quick review I did not find that the evidence presented was sufficiently compelling to prove it as the most important factor.

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11 Comments to “‘changes in tuition were not driven by changes in state appropriations’”

  1. I agree that expecting to see a yearly correlation is wrong, but I didn’t think of this before your comment. I’m still unconvinced of the bigger point that state funding is a major driver of rising costs.

    Oversimplification happens a lot. A few days ago I saw a news program about rising student debt in which the reporter said costs were rising due to decreased state funding. No mention of other reasons.

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  2. I think you are being misled here. Take a look at my post http://gasstationwithoutpumps.wordpress.com/2012/05/15/cost-of-college-remarkably-stable/

    I think it is pretty clear that public colleges have been keeping remarkably constant costs over the past 25 years, and that the difference in tuition is almost entirely due to declines in state funding per student.

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  3. Those charts appear to be quite convincing about the effect of state funding. Looking at them, I am led to the old question whether too many students are in college who don’t belong, leading the states to spend money less efficiently over the years. Add in the longer average time spent to graduate, and it’s easy to see how taxpayers have found it challenging to keep paying more per student even though state spending overall for higher education keeps increasing. I wonder what the overall increases have been.

    But I also wonder if all state funds are captured in these charts, and are they in the right place. IOW, do “state appropriations” per student include state financial aid awards. Probably. I’ll try to find that information.

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  4. I took another look at gasstation’s charts.

    “I think it is pretty clear that public colleges have been keeping remarkably constant costs over the past 25 years”

    But public college costs have increased significantly more than inflation over that time, something the chart does not seem to capture. The chart is tracking revenues from two sources, but without total revenues and total costs, I would not conclude that declining state funding is “driving” rising tuition. If administrative costs have skyrocketed, for example, it could be argued that they are driving rising prices. It appears many factors are in play here, and I am interested in learning more. At this point, I would agree that it’s a “murky business”

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  5. Grace, you contradict yourself. You claim that “public college costs have increased significantly more than inflation” despite the evidence. The tuition has definitely increased, but the overall cost has been remarkably stable.

    The increase in administrative compensation and in compensation for athletics may be driving savings in other parts of the institution (lower relative faculty salaries or larger class sizes, for example), but are not driving the overall cost, which hasn’t changed much.

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  6. Wait, I’m referring to the costs to attend college, specifically tuition and fees. Besides room and board, what other costs are there? Are you saying that room and board costs have remained stable? I’ll have to check sources for that because I can’t remember seeing it reported. If you have that info I’d be interested.

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  7. Maybe I misunderstood your statement about costs remaining constant. I took that as costs to attend college, but perhaps you meant something else.

    Okay, I plead Friday afternoon wind-down for my confusion. 🙂

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  8. There are primarily two groups of people paying for public colleges: the taxpayers and the students’ families. The price to the students’ families has been going up dramatically, but the total price (taxpayers’ contribution + families’ contribution) has been constant. So the problem is not that public colleges have been gouging students, but that the “public” part of the public colleges has been shrinking.

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  9. “the problem is not that public colleges have been gouging students”

    In the sense that administrative bloat and other skyrocketing expenses are contributing to the rising tuition costs, some would argue that they are gouging students. (I would not characterize it that way, although with a kid in college I sometimes feel “gouged”.) It appears that declining state appropriations are a factor, and probably a major factor in public colleges, but they’re only part of the picture. And I haven’t seen evidence that they are a major factor in private schools.

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  10. “They want access to those “quality” networks for their kids, and will pay ridiculous prices for it. Thus, the amazing price-imperviousness that we see,,,”

    I just learned a new term that describes this: College is a “Veblen good” – “Goods that are perceived to be exclusive as long as prices remain high or increase.”

    I haven’t read the article yet, but Gillen wrote about the dysfunctional competition in higher education as being a major factor in driving cost up.

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  11. Changes in tuition is so the college presidents can reap the rewards of HUGE paychecks. I just saw some statistics on salaries of these guys. Sickening.

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