State governments and public colleges and universities have a symbiotic relationship. Public higher education institutions play an important role in creating an educated citizenry and improving state and local economies, while states bear the primary responsibility of funding postsecondary education. Still, there is widespread evidence that the state-university relationship is eroding, as seen by the drastic cuts in appropriations for higher education during the past two and a half decades. Adjusted to account for inflation, state appropriations for higher education have declined 40% since 1978, and current state investment effort per personal income has dropped $32.1 billion below that of 1980 (Mortenson, 2004).
There are many factors that explain the nationwide decline in state support for public colleges and universities, but the majority of the blame rests on painful economic recessions that have occurred in the last 25 years. Recessions in FY1980-83 and FY1990-94 contributed heavily to the slide in support for higher education. The cuts during FY1990-91 were especially formidable, marking the first time in 33 years that state budgets allotted less money to higher education than the previous year (Schuh, 1993). The freefall in support for higher education has only intensified as state appropriations were slashed $650 per student between FY2001 and FY2004, a period marked by widespread fiscal crisis among states (Jenny & Arbak, 2004).
In addition to these economic hardships, drops in state support for discretionary programs such as higher education have also been attributed to a conservative shift in the federal government's role. During the last 25 years, the federal government has transferred partial or full responsibility for many programs to the state and local level. This shift in philosophy, known as "new federalism," has resulted in steep cuts in federal and state aid for municipal and county governments (Peterson, 1995). Not surprisingly, this shift has resulted in a significant squeeze in higher education appropriations for most states. The funding pinch has occurred because public universities are forced to compete more intensely for dollars with other state programs such as Medicaid, K-12 schools, social services, and corrections (Schuh, 1993). Medicaid is forecasted to put an especially intense squeeze on higher education funding in the next decade as a larger share of public funds will be required to support the aging population of Baby Boomers (Kane, Orszag, & Gunter, 2003).
Due to these economic and political factors, the relationship between states and public higher education is fundamentally changing across the country. This change is especially noticeable at major public research universities that are increasingly becoming quasi-private institutions. For example, state support accounted for approximately 35% of the budget at the University of Wisconsin-Madison in 1988, as opposed to 21% of its budget in 2004 (University of Wisconsin-Madison Office of Budget, Planning, and Analysis, 2004). As at many other research universities, rising tuition and private support have picked up the budget shortfall at the Madison campus. Fundraising especially is emerging as a high priority for colleges and universities, including UW-Madison, which is en route to completing a $1.5 billion campaign (University of Wisconsin Foundation, 2003).
This shift toward an increasingly "private" public research university has been accompanied by an increasing tension between higher education administrators and state legislators. Mark Yudof, President of the University of Texas System, has bemoaned the fact that the compact that once governed states and public research universities "has withered, leaving public research universities in a purgatory of insufficient resources and declining competitiveness" (Yudof, 2002, p. B24). Other public research university presidents have echoed Yudof's concerns, saying that further state cuts will radically change the character of their institutions (Gose, 2002). …