ERIC Identifier: ED332562
Publication Date: 1990-12-00
Author: Layzell, Daniel T. - Lyddon, Jan W.
Source: Association for the Study of Higher Education.| ERIC
Clearinghouse on Higher Education Washington DC.| George Washington Univ.
Washington DC. School of Education and Human Development.
Budgeting for Higher Education at the State Level:
Enigma, Paradox, and Ritual. ERIC Digest.
State budgeting for higher education is a complex set of activities
involving various competing interests and issues. In the broadest sense,
the primary objective of all budgeting is to target resources to meet specific
policy objectives. The budget spans the distance between present choices
and future options (Caiden 1988). While the federal government provides
substantial support to higher education in the form of student aid and
research grants, state governments bear the principal responsibility in
budgeting for higher education operations and thus in shaping the present
and future direction of higher education within the state.
The simplicity of this description belies the underlying interplay of
human and external forces and factors laced throughout the budget process.
Higher education is both similar to and different from other policy areas
in state government like transportation or corrections. It is similar in
that it must compete with these other areas for its share of a sometimes
shrinking budget. It is different in that higher education is relatively
autonomous from the state.
WHAT ARE THE ENVIRONMENTAL FACTORS?
The environmental context is comprised of interrelated historical, political,
economic, and demographic factors. Historical factors include state residents'
traditional values and preferences regarding higher education as well as
the state government's historical involvement in governance of higher education.
Previous budgets also make up part of the historical context. Political
factors include the structure of higher education, gubernatorial influence,
legislative influence, and interest groups' and citizens' influences. Economic
factors include a state's general economic condition, state tax capacity,
and availability of state revenues. Demographic factors include the level
and composition of a state's population, enrollment in higher education,
and student participation rates in higher education.
HOW DO THESE FACTORS AFFECT BUDGETING?
In part, these factors help explain the wide variance in funding for
higher education among the states, although by no means do they explain
all of the variance. A state's historical traditions act as "behavioral
regulators" for the participants in the state budget process. If the state's
residents traditionally have highly valued higher education, state policy
makers will also generally value it, and vice versa. Political factors
determine the extent to which the power of higher education is centralized
at the state level (that is, coordinating agency) or diffused among the
individual institutions and the predominance of the governor and the legislature
in the budget process. In recent years, governors generally have become
much more deeply involved in higher education and hence the budget process.
Legislators have also become increasingly sophisticated in their understanding
of higher education policy. Consequently, as states' involvement in higher
education has increased, so have fears of diminished autonomy within the
State support for higher education is directly related to the general
condition of a state's economy, state tax capacity, and availability of
revenues. As state economies worsen, demands on the state budget from other
services, such as public aid and corrections, also increase. Demographic
forces, such as the aging of the population and the growth of the number
of minority students, will affect state budgeting for higher education
as state governments strive to meet the special needs of these individuals.
Traditionally, enrollments and higher education participation rates have
been important factors in determining the level of funding provided to
higher education, but some evidence suggests that the significance of these
factors may be decreasing.
WHAT ARE THE PRIMARY ELEMENTS
The elements of the state budget process for higher education include
the participants, timing, and strategies to allocate resources. The major
actors in the process are the governor, the legislature, their staffs,
and the higher education community. Both governors and legislatures are
asserting themselves more strongly in this process, albeit for different
reasons, as a result of increasing sophistication, concern about higher
education's outcomes, and recognition of the economic importance of higher
education. The governor must represent the broad spectrum of state needs,
while legislators are more concerned with specific needs of constituents
or regions. The higher education community is comprised of the state-level
coordinating or governing agency (if any) and the various sectors of higher
education, both public and private.
As important as the governor, legislature, and the higher education
governing and coordinating boards are the staffs of these entities. Almost
two decades ago, these individuals were the "anonymous leaders of higher
education" (Glenny 1972). If anything, it is even more true today. Staffs
handle technical details, distinguish the important from the trivial, and
generally serve as gatekeepers in the budget process.
The timing of the budget process presents numerous issues as well. Over
time, most states have shifted from biennial budgeting to annual budgeting
to annual budgeting with mid-year alterations. Legislatures meet with greater
frequency, economic conditions are shifting rapidly, and demands for state
dollars have increased in number and intensity. Even states that still
have biennial budgets meet midterm to make alterations. These changes have
altered the utility of long-term planning for higher education. Further,
participants in the state higher education budget process have different
perspectives of the time frame. Politicians generally focus on short time
frames, while the higher education community has a longer time frame for
meeting objectives. Tensions arise when politicians want quick solutions
to problems that require long-term commitments.
Techniques for allocating resources for higher education vary within
and among states. Several states use a funding formula for some or all
of the higher education budget. Almost half of the states use peer groups
comprised of similar states and/or institutions for making decisions and
justifying the budget for funding libraries, faculty salaries, staffing
levels, and so on. Some states approach the funding of higher education
from a more programmatic basis.
HOW DO STATE HIGHER EDUCATION BUDGETS LINK RESOURCES WITH POLICY
The state higher education budget sets forth the state's major policy
preferences for higher education. Major policy concerns in higher education
in recent years have been accountability, costs, productivity, quality,
affordability, economic development, access for minority and nontraditional
students, and equity for independent higher education.
Accountability mechanisms have begun to evolve from data-collection
instruments to instruments of change. Future accountability mechanisms
will likely be integrated into the state budget process to emphasize feedback.
Costs, productivity, and quality are seen as inextricably linked. It
remains clear that the key to keeping costs down and productivity up, while
maintaining quality in higher education, lies in the ability to formulate
specific goals, exercise constraints on resources, and encourage innovation.
Affordability. Evidence suggests that few states closely link policies
for student aid, tuition, and institutional support, which would indicate
a great deal of inefficiency in states' financing of higher education.
State-funded economic development includes research programs, involvement
in education and training programs for the work force, and fostering partnerships
with business. Numerous potential problems exist, including the highly
political nature of economic development and the fundamental differences
between higher education and business.
Most states have initiated programs designed to increase minority students'
retention and achievement, and some have been effective. Nontraditional
students are becoming the new majority in higher education, but neither
state policy makers nor those in the higher education community have done
enough to meet these students' special needs.
Many states provide financial support to the independent sector in the
higher education budget through student aid and direct institutional aid
programs. Because the independent sector highly values these programs,
they are an important policy lever for the state.
WHAT ARE THE IMPLICATIONS?
As states become more involved with higher education, the budget process
will become even more important in initiating new policies and policy changes.
At the same time, the analysis of the literature indicates several areas
requiring further research. For example, it is necessary to know more about
the cultural and political context of budgeting for higher education. The
effectiveness of higher education policies initiated through the budget
process must be evaluated, including incentive funding for quality and
economic development. The implications are twofold. First, it is evident
that all participants in the state budget process for higher education
would be well served to view the process in the "big picture." Understanding
why certain things happen in the budget process can greatly improve participants'
effectiveness in achieving objectives. Second and simply, state budgeting
for higher education is an area ripe for research.
Caiden, Naomi. 1988. "Shaping Things to Come: Super Budgeters as Heroes
(and Heroines) in the Late Twentieth Century." In NEW DIRECTIONS IN BUDGET
THEORY, edited by I.S. Rubin. Albany, N.Y.: SUNY Press.
Glenny, Lyman A. 1972. "The Anonymous Leaders of Higher Education."
JOURNAL OF HIGHER EDUCATION 43: 9-22.
This ERIC digest is based on a new full-length report in the ASHE-ERIC
Higher Education Report series, prepared by the ERIC Clearinghouse on Higher
Education in cooperation with the Association for the Study of Higher Education,
and published by the School of Education at the George Washington University.