New Record High Revenue per Student for Public Colleges in Fiscal Year 2016

Reanalysis of SHEEO data reveal that public college revenue per student reached a new record high for the second year in a row. For the most recent year (fiscal year 2016), revenues increased by $140 to set the new record of $13,259.

(Previous posts describe why reanalysis of SHEEO data is necessary – to adjust for inflation rather than costs.)

Three points stand out from this reanalysis.

  1. There is a small upward trend in revenue per student at public colleges.

As the chart below shows, there is a slight upward trend in revenue per student at public colleges. Revenue in 2016, was $2,789 higher than in 1991, an average increase of $107 per year.

  1. There is no long-term trend of state disinvestment. State funding is cyclical while tuition revenue steadily increases.

The second chart unstacks the bars by revenue source which makes it easier to see two things.

First, despite numerous assertions to the contrary, there is no long-term trend of state disinvestment in higher education. While educational appropriations in 2016 were $780 less than in 1991, the pattern is driven by the business cycle rather than showing a consistent long run trend. Indeed, appropriations are up $885 from the recession low of 2012.

Second, in contrast to changes in state funding, which swing from positive to negative with the business cycle, tuition almost always increases. Only two years saw decreases in tuition revenue (2000 and 2008). In 2016, tuition revenue per student was $3,569 higher than in 1991, an average annual increase of $137.

  1. Increases in tuition are not driven by changes in state funding.

Declines in state funding are the most common explanation for why tuition keeps increasing. But as the chart below shows, there is little relationship between the two. Each year label illustrates the change in state funding and the change in tuition revenue for that year. For example, the 2012 in the upper left corner indicates that between 2011 and 2012, state funding per student fell by $645 and tuition revenue per student increased by $391.

If tuition increased to offset declines in state funding, then each of the years should fall along the red line, which simply plots a $1 for $1 relationship. But statistical analysis does not support the idea that changes in tuition are driven by changes in state funding. In fact, historically, tuition only changes by 8 cents when state funding changes by $1, as shown in the blue line, a relationship that is not even statistically significant at conventional levels (p = 0.27). A more promising avenue for exploration is hinted at by the intercept term ($140, p < 0.01), which indicates that even if there is no change in state funding, tuition revenue would still increase by $140. Figuring out what’s driving this result is more likely to yield solutions to the problem of rising tuition than continuing to believe in the myth that tuition increases are driven by cuts in state funding.