State Funding for Higher Education: The Squeeze Continues

Article excerpt

While the national economy shows renewed signs of life, governors and lawmakers in most states are facing another year of tough fiscal choices and trade-offs. This contrast can be traced in part to the lag between economic recovery and improved revenue performance. The sluggish improvement in states' finances, however, also reflects a growing mismatch between economic activity and the ability of state tax systems to capture it.

The combination of these factors means that 2004 legislative sessions will focus on more spending cuts and tax/fee hikes. State general fund spending has slowed to less than the rate of inflation over the past two years, and more than 40 states have reduced budgets after the beginning of the fiscal year. At the same time, nearly three quarters of the states (36) raised taxes and fees a total of $9.6 billion for Fiscal Year 2004.

The lingering slump spells bad news for higher education, which has historically functioned as the "balance wheel" of state budgets. New data from the Center for the Study of Education Policy at Illinois State University confirm this, showing a second consecutive year of reduced state funding for colleges and universities. The short-term loss feeds-and exacerbates-a longer term trend toward the privatization of public higher education. The ramifications of this trend are increasingly evident in statehouses, as more proposals for enterprise/charter/state-related status surface in the year ahead. …