The first post on this blog presented one of the main problems with higher education funding. The exigence as described was that state higher education spending as of the 2017-18 fiscal year has not recovered to the levels held before the Great Recession. This lack of funding was causing tuition to increase faster than even the fastest growing incomes, and leaving students with expanding debt. In my second post, I discussed what I consider to be the primary feasible solution. An increase in taxes at the state level would allow for the funding of public post-secondary education, which would help many households currently burdened with high college tuition prices. In addition, due to evidence submitted by prominent economic theorists, the economy would grow at a faster rate in response to the investment in education and productivity. This would less directly cause all of society to be better off, leading to increases in government revenue and income growth by many, especially the rich who have higher costs associated with a tax increase.

As you may remember from my recent presentation in class, the topics that I have previously discussed became the basis for my issue brief and advocacy project. Particularly for the latter assignment, I have made efforts to change the amount of higher education funding in Pennsylvania, including contacting the governor and a state legislator. It turns out, a lack of higher education spending is a particular problem in Pennsylvania compared to other states. I wasn’t able to address this issue very much in other projects, so I would like to discuss this information here. The following is drawn from Pennsylvania’s proposed budget for next year and an incredibly useful site filled with budget and election information called Ballotpedia.

Addressing fiscal budgets is something that is not easy to do. There is a mass of information, and it is apparent why people need degrees before working for these budget offices in most cases. Regardless, Pennsylvania is relatively similar to some of the nearby states when it comes to spending. Compared to Maryland, New Jersey, and New York, it has a somewhat smaller amount of tax collection per capita, which corresponds to a somewhat lower level of per-person spending. Pennsylvania spends just over $6 million per capita, and the highest of the other three states spends $7.6 million. Each state has a very different approach to the sources of tax dollars, with Maryland having very high property taxes and Pennsylvania having lower property taxes but higher sales taxes. With revenue and subsequent spending at close levels between the four states, educational spending can be compared easily.

When addressing K-12 education, we can see a clear emphasis by governments in all states. New Jersey spends 22.9% of its entire budget on primary and secondary education. Pennsylvania, Maryland, and New York spend 18.5%, 18.3%, and 19% respectively. Obviously, the citizens’ value for education is translated in the amount of spending on K-12 education. However, higher education simply does not get the same treatment. New York, New Jersey, and Maryland have similar funding percentages, spending 7.4%, 8%, and 14.2% on post-secondary schools. Pennsylvania, with comparable tax rates and overall budget allocations, only spends 2.4% of its annual budget on higher education.

This means that New York and New Jersey spend 3-4 times as much as we do on higher education, and Maryland spends over 6 times as much. If you multiply through the percentage-wise allocation, you get the same amounts; Pennsylvania spends significantly less on higher education both as a percentage of total funding and as a per-capita dollar amount. It is no wonder that this state has had some of the largest tuition hikes since the recession.

These statistics made me think of my college search and decision process not too long ago. I applied to University of Maryland, which is quite similar to Penn State in a lot of ways. I remember wondering if I could get a large scholarship from Maryland, because their out-of-state tuition wasn’t incredibly far from Penn State’s in-state price. In retrospect, it makes perfect sense that Maryland was so much cheaper. The levels of spending in each state lead to the cost burden being put on the shoulders of students much more in Pennsylvania than in Maryland. As someone who has grown up here in Pennsylvania, I feel that this has to change. There is no logical reason why we should push higher education to the side, when other states are at least doing better than we are. Funding for colleges and universities helps local and state economies as well as nearly all citizens involved in the system. For these reasons, I hope that Pennsylvania will update the way its budgetary decisions reflect the true values of its constituents.

When government funding of anything is in question, the obvious reaction is a concern for individual disposable income effects with changes in taxation. For all taxpayers, a decrease in the percentage of their paycheck sent back to the government is desired and an increase is treated with disdain. Depending on the individual and the specific policy, taxation can be seen as less or more worth the monetary cost. The following is an argument for a policy of taxation to properly fund higher education in the United States. To numerous groups and society as a whole, the benefits would outweigh the associated losses and unpopularity of government intervention in the school system.

The majority of the supporting theory and statistics can be found in an article by Nicholas Barr in The Economic Journal.

In economics in general, growth is can be seen in changes such as increased investment, higher saving (or financial investment), lower unemployment, and others. These can all be described as cyclical effects. The only true catalyst for long term growth is a change in potential production, also known as higher productivity. Imagine a factory. The way that the current factory can produce more is if the workers become better at their jobs, the machines run more efficiently, or both. In a large scale economy, therefore, long term growth is determined by increases in technology and education. If the government was to intervene in economic affairs at all, its most direct benefits would be found in supporting technology and education. This, I claim, proves that government budgets at the federal and the state levels could be reorganized to better match their true priorities, one of which is economic growth. However, it is somewhat unlikely that we can count on politicians under partisan pressures to arrange the deck perfectly to avoid further taxation.

While taxes are not enjoyed by most citizens, a tax put towards education would help the vast majority of people in the long run. For the relatively poor family, they will pay less than the average household due to prevailing taxation policies. This group will also be able to benefit from cheaper tuition the most because of their socioeconomic status. For the extremely rich, the story is different. This group would surely pay higher amounts into the system than they directly get out. This is part of the give and take of wealth distribution. However, as stated previously, education helps grow the economy long term more than anything else (besides technology). The wealth and incomes of the rich is almost always tied in quite neatly with business and/or markets, which can be expected to pay higher dividends along with advances in the education of a society. Corporate earnings working the way they do, rich households will also see growth by investing in education.

The last socioeconomic category of people is the middle class. The upper middle class can often be separated and treated differently, but in this case the effect should be the same. I discussed in a previous post how average tuition has increased for decades, and recently even surpassed the increases in wealth of the top 1% of families. I take this as evidence that college-level education is expensive enough to effect all middle class households similarly, even the richer side of the group. The middle class is the most likely group to attend higher education, and therefore will receive a significant portion of the benefits as well. Depending on the family in specific, they might also see a notable effect on their incomes in ways similar to the rich.

Looked at in the way I have described, it seems that there are no losers and only winners. While this type of policy is not a zero sum game, it is worth noting that individuals who pay into the education system will not all utilize the benefits and actually attend. There is no real way around this problem other than considering that the greater majority of citizens will benefit directly or from long term production productivity increases. In terms of continued economic growth, nearly everyone in the economy will benefit to some extent. Those who are richer and pay more into the system will also profit most from the markets, while others will profit most from participation in the education system, another incentive to attend higher education and expand the United States’ production possibilities.

Apart from the evidence in support of monetary investment in higher education through taxation, this is not the only option possible, nor is it mutually exclusive of other fixes to the current system in the United States. In a future post, I will look deeper into other ways that our country can approach the significant costs of college and the lack of funding since the Great Recession.

If funding for higher education has a simple solution, we already would have done it.

With the job market being the way it is today, those with a post-secondary degree in the United States hold a significant advantage over those who do not. An increasing number of fields recruit employees mainly from colleges and universities. For many people, higher education isn’t an option in their lives, it’s a necessity. Our society’s emphasis on the value of higher education should logically lead to an increase in the funding coming from our lawmakers. However, the funding coming from states in the past ten years has been well below previous averages. When the 2007 Great Recession hit, revenues decreased and funding had to be reduced. Dustin Weeden, a member of the National Conference of State Legislatures, explains how much state budget issues affect schools. He calls higher education the “balance wheel of state budgets,” and says that “it’s a large discretionary area where states can reduce in bad times, but then in general they also tend to come back” (from npr.org). The economy has grown steadily since then, but the problem is that this time, funding hasn’t come back to the way it was before the recession.

A report from the Center on Budget and Policy Priorities collected data on the situation. In 2017, 44 states were spending less on higher education than they were in 2008. On average, this is around a 16% drop. Adjusting for inflation, the state of Pennsylvania has cut its rate of spending per student by 34.2% since the recession. In the most extreme, Arizona’s spending per student is down 53.8% from 2008 levels. Obviously, the country is not still in recession, so why would anyone want to reduce funds for public universities?

Technically, only 13 states cut spending for the past school year, which means most states are now increasing their educational funding. Demonstrated by the graph above, total state spending has been on the rise since 2013, but it is still not what it used to be. While these changes were occurring, enrollment in higher education was skyrocketing. As the job outlook for high school graduates was diminishing, college seemed more and more worthwhile as a way postpone entering the labor market. The combination of reduced funding and higher enrollment put a massive strain on state-funded colleges and universities.

For a school without as much money as it needs, there are only a few options, all of which are unpopular. The first course of action for schools is to make cuts. Some have laid off faculty, offered fewer courses, limited excess funds for student activities, and many similar things. For someone thinking about enrolling in that particular college, these are all major drawbacks that could lead to them choosing a similar school over that one, which can hurt their budget even further. Additionally, a major portion of the financial burden has been transferred from the universities to their students in the form of tuition hikes. The average tuition for a public college or university has risen 35% since the recession. For Pennsylvania, this increase has been 22.5% statewide. In Louisiana, four-year college tuition has doubled in the past ten years. Even from the 2016-2017 school year, the cost of going to school increased by 1.2% nationally, after adjusting for inflation. These tuition hikes have been causing grief for families for over two decades, and the recent events have merely intensified the issue.

The above visual shows just how significant tuition increases are compared to changes in family income. Costs have been going up more rapidly than the incomes of the median household, as well as the highest earners in this country. For many, high tuition means massive student debt. Since 2008’s recession, the number of students graduating with debt has increased by 5%, and the average price tag on that debt has increased by 26%. In the beginning of 2017, student debt was around $1.3 trillion. College loan troubles have escalated dramatically, affecting low-income students and students of color unequally. On average, these students are much more likely to borrow and therefore graduate with heightened debt.

Clearly, there needs to be some change in the way higher education gets its funding. The current situation is deteriorating because the costs of college are going up while the need for educated employees is also increasing. What should we do? Do we require schools to budget their money more efficiently? Do we pay professors less? Do we develop a tax to provide schools with more money? In the following posts on this blog, I intend to dissect some of these approaches objectively, analyzing their effectiveness and the trade-offs that would be necessary.

If funding for higher education had a simple solution, we already would have done it.