Higher Education and the 2007 Recession: Examining the Relationship Between State Agency Structure, Fiscal Support, and the State Fiscal Stabilization Fund

Author

Christopher J. Crumrine, University of Kentucky

Year of Publication

2010

College

Martin School of Public Policy and Administration

Date Available

8-20-2014

Executive Summary

The United States public post-secondary education system varies in its reliance on state support. Some states have a historic predisposition to a private post-secondary education sector, while others have a tradition of strong public institutions. In all cases, public post-secondary relies on state revenue for their general operating and capital budgets. Effective operation in the current fiscal environment requires a clear understanding of different factors affecting a state’s funding level and the challenges presented in periods of slow economic growth.

Over the past six years, higher education, on average, saw positive growth in state support. However, impressive increases in support throughout the early part of the decade are the primary reason for the positive change in funding over the entire period. To a certain extent, the growth was stymied by considerable funding cuts in fiscal years 2008-2010 as states were forced to make expenditure cuts as a result of the recession.

In 2008, the United States felt the full weight of the looming economic recession. The financial markets crumpled with the collapse of major financial players and the over-leveraged sub-prime market. Five months later, in an effort to aid states in the upcoming budget cycle, the federal government passed the American Recovery and Reinvestment Act (ARRA). One component of ARRA was the State Fiscal Stabilization Fund, which allocated resources to K-12 and higher education under strict federal and state guidelines.

The research presented here focuses on the central state higher education authority and the budget appropriations request mechanism used during the state budget process and the impact each variable has on funding trends for higher education. The research and analysis provide state policy makers with necessary information to operate in a post-stimulus fiscal environment.

RQ1: Is there a relationship between the state higher education agency structure and the total higher education appropriation from the state?

RQ2: Is there a relationship between the higher education appropriations request mechanism and the level of funding they receive from the state?

The study suggests that while agency structure does not have an effect on the change in appropriations from 2005-2010 and 2008-2010, the nature of the appropriations request mechanism does have an effect. Further, the change in total state general fund spending affects higher education expenditure levels in a recession.

The study adds another contributing factor to a body of research focusing on elements affecting higher education finance. This study does not imply that one mechanism is superior to another for any given state. Each state has a unique set of factors that affect the amount of state support higher education receives.

Recommended Citation

Crumrine, Christopher J., "Higher Education and the 2007 Recession: Examining the Relationship Between State Agency Structure, Fiscal Support, and the State Fiscal Stabilization Fund" (2010). MPA/MPP/MPFM Capstone Projects. 124.
https://uknowledge.uky.edu/mpampp_etds/124