AAC&U News, May 2018
Facts & Figures

More States Rely on Tuition Revenue to Finance Public Education

In the United States, nearly half of all revenue spent on public higher education came from tuition in 2017, the first year that over half of US states used more revenue from tuition than from state or local appropriations. These findings, part of the State Higher Education Finance (SHEF) report released in April by the State Higher Education Executive Officers (SHEEO), highlight the increasing importance of tuition revenue to institutions as the cost of attendance rises for students. The report also highlights the rebound of appropriations and state revenue spent on financial aid since the recession. While these trends are for the nation as a whole, the report found large disparities between states, including some that are seeing the revenue spent on higher education decrease.

Note: Most of the funds mentioned below refer to state governments and public higher education institutions. Years primarily refer to fiscal years running from July to June.

Enrollment, Appropriations, and Tuition

  • The report bases many of its findings on the full-time equivalent enrollment (FTE) of students at public institutions, which it says “peaked during the Great Recession in 2011 and has decreased each year since.” FTE nationwide is now eleven million students, a 7.7 percent increase since the recession started in 2008.
  • At $83.9 billion, appropriations from state taxes and other state revenue provided the largest amount of financial support to public institutions in 2017. Tuition revenue provided another $72.3 billion, and twenty-nine states had $10.6 billion in local appropriations.
  • Overall, net tuition revenue provided nearly half (46.4 percent) of all US educational revenue for public colleges and universities. According to the report, “For the first time, more than half of all states relied more heavily on tuition than on educational appropriations.”
  • Though revenue from tuition only increased slightly (0.4 percent) from 2016 to 2017, it “is up 34.4 percent since before the Great Recession in 2008,” the report said.
  • Appropriations for higher education have also increased for each of the last five years, including a 2.5 percent increase in 2017. However, in constant dollars (after adjusting for inflation), appropriations remain “$1,000 below 2008 and nearly $2,000 below 2001 levels” per full-time enrolled student, the report said. See figure 1 for historical trends in FTE enrollment (the red line), educational appropriations per FTE (the blue bars), and tuition revenue per FTE (the green bars).
  • Because tuition revenue increases have balanced cutbacks in appropriations, “total educational revenues are 5.8 percent above 2008 and are currently the highest seen in the SHEF dataset, which goes back to 1980,” the report said.

Figure 1: Public FTE Enrollment and Educational Appropriations per FTE, US FY 1992-2017

Where the Money Goes

  • Though tuition has increased, so has financial aid from states. The 2017 fiscal year was a high-water mark, with state financial aid at an all-time high of $673 per full-time student, an increase of 86 percent since 2000 (see figure 2). As a share of overall educational appropriations, financial aid has increased from 3.9 percent to 8.8 percent in that time.
  • The vast majority of revenue for public institutions went to general operating expenses in 2017. These expenses, totaling 76.7 billion (or 78.8 percent of the money spent on higher education from states and local governments), have grown 23 percent since 2012. Other funds were spent on research, agricultural extension programs, and medical education ($10.4 billion); state-run financial aid ($10.4 billion); and independent institutions, non-credit programs, and continuing education.

Figure 2: State public aid per FTE and as a percent of educational appropriations in the US, FY 2000-2017

Variations across States

  • Changes in enrollment, appropriations, and tuition from 2016 to 2017 varied greatly across different states. Twenty states saw their FTE enrollment increase. Utah, at 11 percent, saw the biggest increase, while Louisiana and New Mexico saw the biggest decreases (each at 4.7 percent).
  • Educational appropriations per FTE increased in twenty-seven states, including Illinois (a 32.8 percent increase) and South Dakota (15.7 percent). According to the report, “Wyoming had the highest educational appropriations per FTE at over $18,200; Vermont and New Hampshire had the lowest, both below $3,000 per FTE.”
  • While thirty-three states saw their tuition revenue per FTE increase, including Louisiana (22.6 percent). In Missouri, tuition revenue per FTE decreased 10.8 percent. Michigan’s tuition revenue per FTE is the highest in the nation ($15,000), while California’s is the lowest ($2,100).
  • In thirty-two states, the overall revenue (including both appropriations and tuition) increased, with the highest increases in Illinois and Hawaii (20.8 and 10 percents, respectively). Missouri and Utah decreased the most at 9.4 and 8.1 percent, respectively. At $9,712, Florida had the least revenue per FTE, while Wyoming, Michigan, and Illinois each spent more than $20,000 per FTE.

Images and figures in this article have been included from the 2017 State Higher Education Finance (SHEF) report from State Higher Education Executive Officers (SHEEO).

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AAC&U News is written and edited by Ben Dedman. If you have questions or comments about the newsletter's contents, please e-mail dedman@aacu.org.

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