New Demos Report Shows State Disinvestment in Public Higher Education is Driving Tuition Increases

Release Date: 
May 5, 2015

New Demos Report Shows State Disinvestment in Public Higher Education is Driving Tuition Increases

Decreased State Funding is Responsible for Nearly 80 Percent of the Rise in Public Education Tuition

Recently, there has been much debate about the real cause of tuition increases, which have risen by nearly $3,000 at public four-year universities in the last decade alone. To meet these costs, U.S. students must take on crushing levels of debt just to access education that was readily affordable for previous generations.

A new Demos report, Pulling Up the Higher Ed Ladder: Myth and Reality in the Crisis of College Affordability by Demos Senior Policy Analyst Robbie Hiltonsmith, finds that declining state support was responsible for nearly 80 percent of the rise in net tuition between 2001 and 2011. Examining public university revenue and spending data, he determines that rising costs for instruction and student services is responsible for much of the remainder, largely due to growing healthcare costs. Hiltonsmith also disproves the theory that colleges are spending beyond what is necessary to support their core academic functions, commonly known as administrative bloat. Increased spending on administration accounted for only six percent of tuition hikes.

“While administrative bloat is a popular theory, the data shows otherwise,” said Hiltonsmith. “This myth is not only blatantly untrue, but takes attention away from the real problem: states aren’t investing in their students. Instead, they’re saddling them with crippling, life-long debt.”

Research institutions employ just seven more staff per thousand students than they did since 1991, and 17 fewer than in 2001. The relative number of full-time faculty has remained constant and the number of executives and administrators has decreased relative to the size of the student body. New technology needs explain much of the increase in professional staff. However, universities have also shifted to employing more adjunct professors as a cost-cutting measure, a problematic trend whose effects have been well-documented.

Other key findings include:

•  Six years after the great recession, state funding of higher education remains 27 percent below its pre-recession level. Over the past decade, state support for research institutions fell by $3,801 per student at research universities and $2,607 per student at master’s and bachelor’s universities, in near-lockstep with tuition increases.

•  Instruction costs are responsible for nine percent of increased tuition at research institutions and 11 percent at master’s and bachelor’s universities, largely due to increases in health insurance premiums.

•  Administrative and support funding is responsible for six percent of increased tuition at research institutions and five percent at master’s and bachelor’s universities, also largely due to increases in health insurance premiums.

•  Campus construction accounts for six percent of increased tuition at both research institutions and master’s and bachelor’s universities.

As a result of this sharp decrease in state funding, more than half of education and related expenses at public universities is now paid by students’ tuition.

“Public higher education in this country no longer exists,” said Hiltonsmith. “Because more than half of core educational expenses at ‘public’ 4-year universities are now funded through tuition, a private source of capital, they have effectively become subsidized private institutions. To eliminate the pile of debt that most students must now borrow just to finance their education, we need comprehensive policy reform that views higher education as a necessity.”

This report continues Demos’ series looking into ways to reinstate the country’s once debt-free system of higher education in the 21st century, and create pathways to ensure a diverse, expanded middle class in a new, sustainable economy. Hiltonsmith previously examined how shifts in higher education funding undermine the future of the middle class, and how student debt impedes upward mobility for those struggling to repay their loans over their lifetime. We will next detail how our debt-financed college system exacerbates racial inequality in The Debt Divide: The Racial and Class Bias Behind the “New Normal” of Student Borrowing, to be released on Tuesday, May 19.

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