State Relations

May 8, 2008

Is Reduced State Support for Higher Education A Good Thing?

Interesting report released on Tuesday of this week from Moody’s Investors Service and a follow-up story in the Chronicle of Higher Education yesterday.

For years now, higher education leaders have decried the steady decline in the percentage of higher education funding supported by state tax dollars and the corresponding shift in funding to tuition, private fund-raising campaigns and public-private partnerships.

The Moody’s report concludes that public universities are actually economically stronger today because of these changes, but, must now learn to actually operate less like governmental entities and more like large, complex nonprofit organizations.  Most importantly, states need to give them the flexibility to do so.

The Moody’s study finds that as state support has dropped as a percentage of overall higher education funding, many institutions have out of necessity become “fundamental economic engines” with deeper ties to local businesses and the surrounding community.  Moody’s praise this diversification but also calls for more professionalism among the membership of higher education governing boards who have the business background to make market-driven decisions.

State’s can help higher education insitutions take full advantage of these economic transformations by giving governing boards authority to set tuition and financial aid policies that will permit their institutions to attract the most students.  Moody’s contends that although legislators often want to keep tuition low for state residents, it makes better financial sense to attract students nationally and internationally and help local students with larger amounts of financial aid.

Food for thought for all state higher education officials, particularly as the state’s six four-year universities enter into discussions with the state on performance agreements later this year.