State Higher Education Finance (SHEF) Report for FY2012 Released!

Wednesday, March 6, 2013

Contact: 

Paul Lingenfelter, President
(303-541-1605) (plingenfelter@sheeo.org)

Andrew Carlson, Senior Policy Analyst
(303-541-1607) (acarlson@sheeo.org)

The full report and supplemental documents are at:
www.sheeo.org/shef12

Boulder, Colorado – The association of State Higher Education Executive Officers (SHEEO) has released its annual State Higher Education Finance (SHEF) report, which provides a comprehensive review of state and local funding, tuition revenue, and enrollment trends for public higher education.

This is the fourth SHEF report since the 2007-2008 academic year when state and local support for higher education was $88.8 billion, enrollment in public institutions reached 10.3 million full-time-equivalent students, and the national economy entered a recession. In 2012, the effects of the recession continue with total state and local support at $81.2 billion–down 7 percent from 2011. In 2012, enrollment declined slightly from the prior year to 11.5 million full-time equivalent students but still 1.2 million more FTE students (12.4 percent) enrolled than in 2008. Although enrollment stabilized in 2012, the reduction in state and local support combined with an increase in inflation contributed to a 9 percent decrease in state and local support per student in constant dollars from 2011. Per student support in 2012 is $5,896, the lowest level in the 25 years shown in the SHEF report.

Due to both enrollment growth and higher tuition rates, net institutional revenue from tuition and fees grew from $41 billion in 2008 to $59.9 billion in 2012. The enrollment growth reflects continuing student demand and real progress toward the goal of restoring U.S. postsecondary attainment to a position of world leadership. But growing student tuition and fees as well as shrinking per student resources, especially where enrollments are expanding most rapidly, are cause for concern.

Adjusted for inflation, total educational revenue (net tuition plus state and local funding) per student dropped by 8 percent, from $12,067 in 2008 to $11,085 in 2012. Net tuition revenue per student reached $5,189 in 2012, an all-time high. Over the past 25 years, the percentage of educational revenue supported by tuition has climbed steadily from 23.3 percent in 1987 to 47.0 percent in 2012.

Data collected through the Grapevine survey (online at www.grapevine.ilstu.edu and in Grapevine Tables 1 and 2 in Appendix A of this report) show Fiscal Year 2013 state tax support grew in 3 out of 5 states, early signs of recovering state revenues. Substantial decreases in several large states, however, offset these gains in the national total. 

In this tenth annual report, the SHEEO study of state higher education finance analyzes state and local funding, net tuition, and enrollment trends to provide a comprehensive view of state higher education finance. It complements the long-standing Grapevine survey of higher education appropriations released by Illinois State University. The data and analysis of this and future SHEF reports are intended to help higher education leaders and state policymakers focus on how discrete, year-to-year decisions fit into broader patterns of change over time, and to help them make decisions in the coming years that will meet the longer-term needs of the American people.

Commentary

Paul Lingenfelter, president of SHEEO, commented, "The depth of the 2008 recession and the economy’s slow recovery are reflected in the funding, enrollment, and net tuition numbers for 2012. Tuition revenues are up substantially due to higher prices and more enrollments, but not enough to offset losses of public funding. Students are paying more, while public institutions are receiving substantially less money to educate them. These one-year decreases in funding and increases in student costs are unprecedented over my forty-year career in higher education. Moreover, the tapering off of enrollment growth in 2012 seems to be more related to enrollment caps and cost increases than to decreases in student demand for higher education. ”

“One year does not make a trend, but SHEEO’s annual studies document a long-term trend toward shifting more of the burden of financing higher education onto tuition and fees. In light of these trends, policymakers should give more attention to the size and effectiveness of state and institutional student assistance programs in providing access and adequate support for full-time enrollment in postsecondary education. The evidence overwhelmingly indicates that students who cannot afford to attend full-time or nearly full-time have unacceptable rates of degree completion.”

“Public higher education in the United States enrolls more than 70% of all postsecondary students. The accessibility and quality of public higher education will largely determine the competitiveness of the U.S. workforce for the next half century and the ability of our people to meet the challenges of citizenship in an increasingly complex world,” observed Marshall Hill, chair of SHEEO’s Executive Committee and Executive Director of the Nebraska Coordinating Commission. “Other countries are rapidly improving the postsecondary education of their citizens; if the United States falls further behind in either quality or the number of students who enroll and graduate it will not be easy to catch up.”

As suggested in the conclusion of the FY 2012 State Higher Education Finance study, the financial realities outlined in this report and the larger economic challenges facing the American people cannot be responsibly ignored. Somehow the nation and its educators must come to grips with these realities and create effective responses to them. Colleges and universities must find ways to reduce student attrition, the cost of instruction, and time to a degree, while improving instruction and increasing the number of students who graduate ready to be productive citizens. Parents, students, institutions, and states must make tough decisions about priorities—what investments are essential for a better future and where can we and should we reduce spending on non-essentials in order to secure what is essential?

But avoiding bad judgments can be difficult when facing tough choices. Institutions may cut too many quality corners or compete with each other to raise revenues from “new” sources (such as out-of-state or international students) rather than make difficult decisions about priorities or the extra effort to create and effectively implement innovative practices. Policymakers may overestimate how many students can be well-educated with existing resources or make unrealistic assumptions about the potential for technology and new delivery methods to rapidly become a panacea offsetting the long-term negative effects of budget cuts or tuition increases on access to higher education and the quality of our workforce. Or the better-off public may be lulled into thinking that the American economy can get by with limited opportunity and 20th century standards for educational attainment, so long as their own families are well-educated.

The educational and economic edge the United States once enjoyed in comparison to other nations is eroding rapidly. Sound judgments about priorities and an extra measure of commitment and creativity are needed in order to regain our educational and economic momentum.

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The State Higher Education Executive Officers is the national association of the chief executives of statewide governing, policy, and coordinating boards of postsecondary education.