Academic journal article Planning for Higher Education

Private vs. Public Higher Education Budgeting

Academic journal article Planning for Higher Education

Private vs. Public Higher Education Budgeting

Article excerpt

Key differences exist between private and public institutions that affect budgeting in critical ways.

Definitions of Private and Public Higher Education

Private higher education institutions are those, typically nonprofit, entities owned and operated by the private sector. These private colleges and universities may be affiliated with other organizations, such as religious orders or other sponsors, or they may be totally independent of any other organization. They typically have their own board of trustees or have a governing group responsible to a broader oversight group, such as a religious order's regional board. Private colleges are usually single institutions without regional systems (as contrasted with public institutions). However, some private institutions develop partnership-style arrangements with other private colleges.

Public institutions, on the other hand, are those established, supported, and controlled by a governmental agency, most often states. By definition, unlike private institutions, public colleges have no affiliation. They are considered to be "owned" by the citizens of the state in which they are located. Most states operate two, and sometimes three, tiers of public colleges. One tier is the community college, which awards two-year degrees. A second tier is the "four-year college," which awards bachelor's and, in most cases, master's degrees. Many states also have a third-tier public university, the research institution, which offers doctoral and advanced professional degree programs. Within a particular public system, students may move around fairly easily, say from a community college to a four-year college. The network of public institutions within a state is referred to as the public college "system" within that state (as contrasted with the typical stand-alone private university).

It should be noted that even though private institutions are not considered to be tied directly to the public, it is state governments that charter and enable them to operate as nonprofit entities. Further, the federal government grants the tax-exempt status to those institutions operating as such (most colleges and universities are not profit-oriented entities). Finally, private institutions often receive grants from state and federal governments. Therefore, the apparent independence from the control of either federal or state governments is somewhat relative. Governing boards and college administrators must take their fiduciary and ethical responsibilities seriously to sustain institutional independence.


Because the governing bodies of higher education institutions ultimately are responsible for their entities' budgets, a word about the differences in governance structure between private and public institutions is relevant to a discussion about the differences in budgeting.

Private institutions typically are governed by boards composed of "independent" members, individuals selected not because of any specific public representation. These private board members often have some relationship to the private entity, perhaps as alumni, donors, or local/regional community members (including individuals from local industry). While a private institution has its own governing group, this board may be responsible to a broader oversight group as previously noted. Although private institutions do not represent a specific public interest, "in this era of heightened public scrutiny and demands for accountability on the part of leaders at all levels" of all institutions, even private universities represent the general public to a degree (Asin 2010, H 1.)The Association of Governing Boards of Universities and Colleges (2011, H 1) notes that, "regardless of the size, mission, or source of support of the institutions they serve, all higher education boards are accountable to and accountable for the . . . public interest and public trust."

Since public institutions are established, supported, and controlled by a governmental agency, they have boards composed of "public" members, individuals often selected by the state or other governing agency. …

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