Higher Education Expenditures
Higher education spending includes expenditures on the operation, maintenance, and construction of public community colleges, universities, and postgraduate institutions such as law and medical schools.1
- How much do state and local governments spend on higher education?
- How does state spending differ from local spending and what does the federal government contribute?
- How much do tuition and other charges contribute to higher education spending?
- How have higher education expenditures changed over time?
- How and why does spending differ across states?
In 2018, state and local governments spent $302 billion on higher education, or 9 percent of state and local direct general spending.2 As a share of state and local direct spending, higher education was the third-largest expenditure in 2018, and roughly equal to spending on health and hospitals.
In 2018, nearly all (89 percent) of higher education spending went toward operational costs, such as instruction, administration, research, libraries, dormitories, cafeterias, and other student or faculty services. The remaining 11 percent was for capital outlays, such as construction and maintenance.
State governments spend more of their budgets directly on higher education than localities. State spending goes toward public four-year universities and colleges, other state institutions, and state grants given to students, while local spending is typically for community college systems (these systems are still largely funded by state governments, though).
Overall, 86 percent of higher education direct spending occurred at the state level in 2018. In 19 states, 100 percent of higher education spending occurred at the state level. (Additionally, in South Carolina, Virginia, and Utah, 99.9 percent of higher education spending occurred at the state level.) In 2018, California, Florida, Illinois, Mississippi, and Wyoming were the only states where local direct spending on higher education exceeded 25 percent.
As a result, higher education spending is a significant share of state budgets but a small share of local spending. In 2018, 17 percent of state direct general spending went to higher education versus 3 percent of local direct general spending. Among local governments, school districts dedicated the largest share of their budgets to higher education spending (6 percent) in 2017 (the most recent year we have data for these levels of government). This is because some high schools (funded by school districts) have programs that allow students to take community college courses at the school.
Higher education spending was funded almost entirely with state and local revenues. The federal government contributes to higher education mostly by providing financial aid directly to students (e.g., Pell Grants).
The Census data on higher education expenditures include revenue from both government transfers to schools and charges related to higher education, such as tuition, that are paid directly from students to public institutions of higher education.
In addition to tuition and other instruction-related charges (such as laboratory fees), higher education charges include receipts from dormitories, university cafeterias, and bookstores. In 2018, higher education charges totaled $122 billion and accounted for 40 percent of total state and local higher education expenditures. Tuition plus other instruction-related charges were $93 billion (31 percent) and receipts-related charges were $29 billion (10 percent). (These percentages do not sum to the total because of rounding.)
Other services, such as hospitals, also often operate within institutions of higher learning and contribute to higher education revenues. However, these funds are allocated separately within the Census of Governments data. For more on how those revenue streams contribute to higher education, see a separate study of higher education funding from the US Department of Education.
From 1977 to 2018, in 2018 inflation-adjusted dollars, state and local government spending on higher education increased from $108 billion to $302 billion (180 percent increase). Over the same period, all other combined spending increased at roughly the same rate (183 percent). Thus, higher education spending growth tracked spending growth for all other programs. The 400 percent increase in public welfare spending over this period was responsible for much of the combined other spending growth, and much that was driven by federal spending increases on Medicaid.
As a share of total state and local direct general spending, higher education spending has remained relatively constant over time. In both 1977 and 2018, just under 10 percent of direct state and local direct general expenditures went to higher education.
However, the composition of where higher education funding comes from has changed significantly over the past 40-plus years. Specifically, higher education charges as a share of total higher education spending grew from 30 percent in 1977 to 40 percent in 2018. Further, tuition alone grew from 19 percent of higher education expenditures in 1977 to 31 percent in 2018. Tuition as a percentage of higher education spending grew in part because state direct appropriations per student declined over the period. That is, state and local spending on higher education only increased over the period because tuition payments increased.
State and local governments spent $924 per capita on higher education in 2018.3 Utah spent the most per capita on higher education at $1,528, followed by Wyoming ($1,423), Vermont ($1,385), Delaware ($1,375), and North Dakota ($1,377). Among the states, Nevada spent the least on higher education ($533), followed by Florida ($541), Tennessee ($555), Maine ($599), and Georgia ($602). The District of Columbia spent $193 because, unlike the 50 states, the city does not have a statewide university system.
Per capita spending is an incomplete metric because it doesn’t provide any information about a state’s demographics, its policy decisions, administrative procedures, or the choices its residents make. Spending on higher education is mostly driven by the number of students in two- and four- year public universities as well as the cost of college.
For example, California has lots of students and higher payroll and nonpayroll costs (after accounting for tuition and fees), leading to higher spending per capita. Meanwhile, states with lower per-capita spending, such as New Jersey, have sometimes offset high payroll costs by hiring fewer employees per student or spending less per student on nonpayroll functions.4 They also often have more students enrolled in non-public universities.
Spending per full-time equivalent student (FTES) can provide a more nuanced picture because it reflects the spending on students who are enrolled in higher education. According to the National Center for Education Statistics, public higher education enrollment has been increasing since 1980.
The United States, on average, spent $28,687 per FTES in two- and four-year public postsecondary institutions in 2018.5 Alaska spent the most, with $49,260 per FTES, followed by Vermont ($43,190), Delaware ($37,653), Connecticut ($37,610), and Utah ($36,702). Georgia spent the least, with $19,419 per FTES, followed by Florida ($20,295), Louisiana ($20,315), Nevada ($21,071), and Tennessee ($21,313).
While per capita and per FTES numbers are valuable for evaluating state and local spending over time, both miss a valuable distinction in higher education financing: tuition. Once all higher education charges and fees are removed from consideration, state and local governments overall spent $17,135 per FTES—down from $28,687 per FTES overall.
States make different decisions regarding how much to charge students and set different tuition rates for in-state versus out-of-state students. For example, Vermont ranks second in FTES spending ($43,190), but it drops to 26th once charges and fees (mainly tuition) are subtracted ($15,867). In contrast, California moves from 28th place ($28,623) for total per-FTES spending to 9th when tuition is subtracted ($20,285).
Similarly, New York moves from 37th place ($26,165) to 13th place ($19,133). Overall, after subtracting all higher education charges, state and local spending per FTES is highest in Alaska ($37,504), New Mexico ($28,237), Wyoming ($27,785), Hawaii ($24,377), and Utah ($21,815). (See every state's FTES spending data with and without tuition and fees in the table below.) Thus, because the Census of Governments includes tuition and charges in its calculation of public spending on higher education, readers should be careful in interpreting the overall spending numbers.
Interactive Data Tools
Understanding State and Local Higher Education Resources
Sandy Baum and Kim Rueben (2016)
Tuition and State Appropriations
Sandy Baum, Michael McPherson, Breno Braga, and Sarah Minton (2018)
The Federal-State Higher Education Partnership: How States Manage Their Roles
Matthew Chingos and Sandy Baum (2017)
Declining state expenditures on public universities are in fact driving tuition increases
Sandy Baum, Urban Wire (2015)
Financing Higher Education: The Evolution of State Funding
Sandy Baum and Martha C. Johnson (2015)
Financing Public Education: Variation Across States
Sandy Baum and Martha C. Johnson (2015)
Assessing Fiscal Capacities of States: A Representative Revenue System–Representative Expenditure System Approach, Fiscal Year 2012
Tracy Gordon, Richard Auxier, and John Iselin (2016)