Reimagining the Future of Higher Education Funding
Ithaka S+R Releases Two New Issue Briefs on State Higher Education Funding
Since the early 2000s, per student state funding has declined while costs of public higher education have shifted towards students and families. This comes during a period when wealth and income gaps have been climbing. The Great Recession of 2008 accelerated this shifting cost burden at a time when many individuals unable to secure employment returned to postsecondary education for new training or upskilling.
In the wake of the Great Recession, state funding for higher education has rebounded in some states, but few states have returned to their pre-Recession levels of funding. At the same time, states have doubled down on performance-based funding (PBF), which allocates state funding via student outcomes metrics. By 2019, 41 states were either actively using or had used some version of PBF. However, researchers have found little evidence that PBF effectively improves student outcomes. Moreover, there is evidence that suggests PBF incentivizes colleges to game the funding system and exclude lower-income and racial and ethnic minority students.
In late 2019, with generous support from the Joyce Foundation, Ithaka S+R convened a group of experts in higher education finance to identify and discuss new funding models for higher education and generate policy recommendations for how to improve funding efficiency and equity. During the convening, the group discussed the importance of identifying adequate levels of funding for public colleges to serve students, the importance of equity in public higher education funding, and how accountability measures should be designed to improve colleges’ performance rather than be used punitively. Conversations drew on lessons learned from other sectors and international higher education systems, and culminated with tangible policy solutions to improve state higher education funding. The convening sparked the release of two new issue briefs on state higher education funding.
Since late 2019, the COVID-19 global pandemic has drastically changed the higher education landscape: students and their families are making different decisions about where and when to enroll in college; all aspects of college and university normal operations are upended; declines in state revenues will likely to lead to cuts in funding for higher education; and much more. Yet, the discussion from late 2019 is more relevant than ever—the efficient and equitable allocation of resources is more essential in times of economic downturn than in times of prosperity and promoting educational attainment is essential to economic recovery.
In light of recent events, we have adapted the discussion and recommendations from the late 2019 convening to the current context. This adaption takes the form of two briefs:
- An Overview of State Higher Education Funding Approaches: This brief provides an overview of the current state of higher education funding, and explores lessons on the concepts of adequacy, equity, and performance from two domestic sectors—K-12 education and health—and from the higher education sectors of three countries—Finland, Australia, and South Africa. During this period of austerity, it is important for policymakers to learn from lessons in other sectors in order to maximize the benefits of public higher education funding.
- Reimagining State Higher Education Funding: This brief combines the lessons from the prior brief with the insights from the higher education finance experts we convened in late 2019 to make recommendations for how states should approach funding allocation decisions in a time of extreme scarcity.
These briefs strive to provide useful context on the current funding landscape and lessons from other industries that can inform new evolutions of state funding of public higher education that address persistent and emerging issues. We believe it is important for decision makers to consider funding in relation to the purpose of education, and how adequacy, equity, and performance relate to these goals. We encourage policymakers and higher education leaders to evaluate how the recommendations, developed from our convening, will help meet funding priorities in a way that promotes equity and funding adequacy.