Competing increasingly with roads and welfare, higher education lost ground relatively in its claim on state resources in the interwar generation. But the colleges retrieved lost ground and even gained in the post-World War II years. Moreover, over the years since 1900, higher education has become a much larger factor vis-à-vis public school education: 30 per cent as large at the beginning of the century and about one-half now ($2 billion against $4 billion roughly). By 1970 the respective totals may well be $3-4 billion for higher and $8 billion for lower education.
Heavy incidence of higher education on state finances is especially troublesome because, given the tax systems of most states, the beneficiaries of higher education on the average come from higher-income classes than the taxpayers. As one of my colleagues once said: "Why should the impoverished farmer in Northern Michigan subsidize the sons of the vice- president of General Motors?" At any rate, the case for large subsidies becomes stronger as the tax system becomes more progressive.
An examination of costs of higher education to state governments reveals that costs per student tend to be high in states with much territory and sparse population. Higher education is costly when enrollments are small. Costs to the taxpayers are smaller where, as in the East, the tradition of public higher education is weak, though large variations even in the Northeast are to be found. Some states (e.g., New Jersey) keep outlays down by exporting large numbers of students to other states.
An important area of exploration is the relative position of low- and high-income states. The high-income states, frequently without much interest in public higher education, spend much more per student in private higher education than the low-income states. In general, the high-income states have a smaller proportion of the population in the college-age group, spend much more on higher education, and yet spend a much smaller percentage of personal income (one-third less) and educate twice as large a proportion of the college-age population. The excess of expenditures of the 10 high-income states is reduced to some extent, however, if allowance is made for their heavier outlays on organized research.
One additional point is worth making: the heavy outlays for higher education in the late 1950s reflect in part underspending for capital in the 1930s and 1940s.