Enrollment Growth and Inflation Outpace State Support of Higher Education

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March 22, 2006

An inflation rate of 3.4 percent and FTE enrollment growth of 2.1 percent at public institutions were too much to overcome for a 3.5 percent increase in state and local support in FY05. The resulting 1.9 percent constant dollar decrease in state and local government support per student in FY05 is part of a larger trend since FY01, according to a new report. The FY05 version of the annual report State Higher Education Finance was released earlier this week by the State Higher Education Executive Officers (SHEEO).

While state and local support for higher education has recovered from a period of decline in recent years, inflation and net enrollment growth over time could decrease the available resources for public institutions. The report concludes that the current state tax structures cannot properly sustain existing levels of support for public services.

Additional findings from the report:

Public institution general operating expenses in the United States during FY05 was a combined $106.1 billion.
State support remains the largest source for public institution general operating expenses (see figure 1 from the report) at an average of 61.6 percent, or $65.3 billion.
Net tuition revenue provided 32.1 percent of funds for operating expenses, or approximately $34.1 billion.
Net tuition as a percentage of public higher education total revenue sources among individual states differed significantly (see figure 7 from the report), from 77 percent to 13.1 percent. The average was 36.7 percent.
Public institution enrollment growth among individual states ranged from 30 percent to 3 percent during the four-year period of fiscal years 2001-05.
Total educational revenues per student decreased 8.8 percent, from $10,100 to $9,212 during the four-year period of fiscal years 2001-05 using constant 2005 dollars.

The press release and executive summary are available on the SHEEO Web site.