Higher Education Expenditures and State Balanced Budget Requirements: Is There a Relationship?

While recent research has shown that restrictive state fiscal policies, such as tax and expenditure limitations (TELs), matter for state spending to public higher education, no study has examined the impacts that other restrictive state fiscal policies might have on expenditures to this same sector. In this analysis we examine the relationship between state expenditures to public higher education and the stringency of balanced-budget requirements (BBRs). Using a Hausman-Taylor estimator which allows for estimation of parameter coefficients on time-invariant variables, our results show no systematic relationship between BBR stringency and expenditures to state-supported colleges and universities. We conclude that expenditures to this sector are influenced by a number of state-specific factors, including the state’s economic standing, the demand for enrollments, certain public services, budgetary processes, and TELs. We also suggest that by understanding the economic, political, and institutional contexts surrounding state expenditures to higher education, institutional policy makers may be better positioned to respond to changes in public policy, especially when it takes the form of state fiscal policy.