Introduction to the Special Issue on Higher Education

This special issue of the Journal of Education Finance was compiled at a time of considerable economic uncertainty. The United States is recovering from what has been termed the worst economic downturn since the Great Depression (Willis 2009). These economic conditions have had a profound impact on the U.S. According to the Center on Budget and Policy Priorities, "The worst recession since the 1930s has caused the steepest decline in state tax receipts on record. State tax collections, adjusted for inflation are now 12% below pre-recession levels, while the need for state-funded services has not declined" (McNichol, Oliff, and Johnson 2011).

One area of state funding that has been particularly hard hit has been higher education. State funding is an important component of higher education budgets comprising 58.5% ($78 billion) of general operating expenses nationally in FY2009 (SHEEO 2010). However, state funding for higher education declined in this most recent economic downturn. "After adjusting for inflation, state appropriations per full-time equivalent (FTE) student declined by 9% in 2008–09 and by another 5% in 2009–2010. Federal stimulus funds accounted for 3% of these state appropriations in 2008–2009 and 5% in 2009–2010" (College Board 2010). These declines would have been more severe in 2009 and 2010 if not for federal stimulus funds from the American Recovery and Reinvestment Act passed by Congress in 2009.

Cuts in state funding for higher education have often led institutions to turn to students and families as an alternative revenue stream. "Over the decade from 2000–2001 to 2010–2011, published tuition and fees at public four-year colleges and universities increased at an average rate of 5.6% per year beyond the rate of general inflation" (College Board 2010).

Taken together, these economic conditions have led to substantial hardship and have brought to the fore important issues of higher education finance. This special issue gathers together empirical scholarship on higher education finance that seeks to better understand these changing economic contexts and their impact on higher education. Because of the importance of state support, the articles in this special issue focus on state-level financing issues for higher education. In addition, most of the articles gathered for this special issue conduct comparative cross-state analyses. Although not a new technique in the field, this approach has allowed the authors to ask different research questions than are possible in more typical within-state, campus, or national-level studies.

The first article in this issue, by Delaney and Doyle, offers a model for understanding patterns in state funding for higher education. The balance wheel model, first suggested by Hovey (1999), posits that, because higher education is an attractive area for investment, states increase spending on higher education during economic boom times faster than other state budget categories. During economic downturns, higher education is cut more than other state budget categories due in part to its ability to raise outside revenue through charging tuition. Delaney and Doyle find empirical evidence that the balance wheel model describes higher education funding patterns between 1985 and 2004. These findings are robust to specifications that include tests of the economic, political, and higher education characteristics of each state.

The second article explores differences in state funding for higher education that are often hidden in national data. Cheslock and Hughes show empirical evidence of the differences found across states in their public two-year and four-year tuition and fees, share of two-year enrollment, total state grant aid, and total need-based and non-need-based aid. Using data from 1989–1990 and 2008–2009, they find substantial differences across states, but also find that those differences have decreased over time. Their study serves as a reminder of the diversity of higher education funding across the U.S. and the ways in which national trends can sometimes be driven by a few large states.

Shifting the focus away from state general appropriations and student aid, the third article, by Tandberg and Ness, explores state capital expenditures for higher education. Although offering substantial resources to institutions, capital outlays remain an under...