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Business and Policy Areas
Business and Policy Areas

Advocating for Change in Higher Education Financing

March 28, 2013

On March 27, the National Association of State Budget Officers released a report, "Improving Postsecondary Education through the Budget Process: Challenges & Opportunities," advocating for change in how public education in the United States is financed. The full report is available on the NASBO Web site.

The report, from the perspective of state budget officers, highlights concerns that many of our member institutions have been proactively addressing for years: scarce state resources, rising university costs, higher tuition rates, and increased debt loads. The report was financed in part by the Bill & Melinda Gates Foundation. The authors address the current landscape of state higher education finance and opportunities for improving it. The report gives insight into the constrained environments state governments are operating in and the thought processes of state budget officers and their elected officials.

The outlook for increased funding from state government is not optimistic and the authors declare that current levels of state funding are not sustainable. The trend towards performance-based or outcomes-based budgeting will continue. NASBO declares that tuition growth rates will need to slow, and offers five options for states to consider:

  • Funding performance and results
  • Restricting tuition increases
  • Expanding access
  • Improving useful information about higher education spending and results
  • Increasing cost efficiency

The report contains graphical depictions of historical data from IPEDS Analytics and the Delta Cost Project Database. It highlights the fact that public colleges and universities have to educate external stakeholders about the value of a college education, stating, "As stiff competition for state funds is expected to continue, there will be an increasing need for higher education institutions to demonstrate to governors, lawmakers and the public how any increase in state appropriations will be used to improve outcomes associated with such goals."

NASBO offers five opportunities for change to improve public higher education:

  • Using performance funding and a focus on results to build consensus on goals.
  • Rationalizing tuition policy and defining appropriate role for student tuition.
  • Expanding/preserving access and need-based financial aid.
  • Developing common language and metrics to improve information and analysis.
  • Improving fiscal management and efficient use of resources.


Bob Shea
Senior Fellow, Finance and Campus Management