Higher Education Expenditures

State and Local Backgrounders Homepage

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?

In 2016, state and local governments spent $288 billion, or 10 percent of state and local direct general spending, on higher education .2 Higher education was the third-largest source of state and local direct general spending in 2016, and typically has been since 1977.

Nearly all (88 percent) of higher education spending went toward operational costs, such as instruction, administration, research, libraries, dormitories, cafeterias, and other student or faculty services in 2016. The remaining 12 percent was for capital outlays, including construction, maintenance, and equipment.

How does state spending differ from local spending?

State governments spend more of their budgets on higher education than localities. In 2016, 18 percent of state direct general spending went to higher education versus 3 percent of local direct general spending. Local spending is typically for community college systems; state spending goes toward public four-year universities, other state institutions, and any state grants given to students.

In 2016, 100 percent of state and local higher education spending occurred at the state level in 19 states. In 45 states, local spending accounted for less than 25 percent of total spending on higher education. In only Wyoming (35 percent) and Illinois (32 percent) was local spending on higher education greater than 30 percent of total state and local higher education expenditures.

How much do tuition and other charges contribute to higher education spending?

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 charges related to instruction (such as laboratory fees), higher education charges include receipts from dormitories, university cafeterias and bookstores, and other similar commercial activities at higher education institutions. In 2016, higher education charges totaled $113 billion and accounted for 39 percent of total state and local higher education expenditures. Tuition plus other instruction-related charges were $85 billion (30 percent) and receipts-related charges were $27 billion (9 percent).

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.

How have higher education expenditures changed over time?

In 1977, state and local governments spent $103 billion on higher education (in 2016 inflation-adjusted dollars). In 2016, they spent $288 billion.

Higher education spending has remained relatively constant as a share of total spending over time. In both 1977 and 2016, 10 percent of direct state and local general expenditures went to higher education.

However, the composition of where the funding came from has changed over time. Specifically, higher education charges as a share of total higher education spending grew from 30 percent in 1977 to 39 percent in 2016. Further, tuition alone grew from 19 percent of higher education expenditures in 1977 to 30 percent in 2016. Tuition as a percentage of higher education spending grew in part because state direct appropriations per student declined. That is, state and local spending on higher education increased over the period in large part because tuition payments increased.

How and why does spending differ across states?

Across the US, state and local governments spent $890 per capita on higher education in 2016.3 North Dakota spent the most per capita on higher education at $1,615, followed by Wyoming ($1,536), Alaska ($1,474), Utah ($1,446), and Vermont ($1,399).  The District of Columbia spent the least on higher education at $232 per person,4 followed by Nevada ($483), Florida ($523), Georgia ($555), and Tennessee ($558).

Data: View and download each state's per capita spending by spending category

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 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. Low spending per-capita states, such as New Jersey, have sometimes offset high payroll costs by hiring fewer employees per student or spending less per student on nonpayroll functions.5 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 $27,226 per FTES in two- and four-year public postsecondary institutions in 2016.6 Among the states, Alaska spent the most, with $60,788 per FTES, followed by Vermont ($43,137), Connecticut ($39,179), and Wyoming ($38,951).7 Georgia spent the least, with $17,882 per FTES, followed by Nevada ($19,199), Florida ($19,327), and Idaho ($21,098).

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. Overall, state and local governments collected $113 billion from charges and fees in 2016, equal to 39 percent of state and local direct higher education spending. States make different decisions regarding how much to charge students. Beyond that, states also set different tuition rates for in-state versus out-of-state students. Once charges and fees are removed from consideration, state and local governments overall spent $16,569 per FTES, down from $27,226 per FTES overall. Among the states, Delaware ranks sixth in terms of spending per FTES ($36,029) in public postsecondary institutions, but it drops to 40th ($12,453) once charges and fees (mainly tuition) are subtracted. In contrast, California moves from 33rd place ($26,494) for total per-FTES spending to tenth place ($20,382) when tuition is subtracted. 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

Financing Public Higher Education

What everyone should know about their state’s budget

Further Reading

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)

Notes
1 Data are from the census expenditure functions E16, E18, F16, F18, G16, G18, K16, and K18. 

2 Unless otherwise noted, all data are from the US Bureau of the Census, Survey of State and Local Government Finance, 1977–2016, accessed via the Urban-Brookings Tax Policy Center Data Query System, January 29, 2019, http://slfdqs.taxpolicycenter.org. The census recognizes five types of local government in addition to state government: counties, municipalities, townships, special districts (e.g., a water and sewer authority), and school districts. All dates in sections about expenditures reference the fiscal year unless explicitly stated otherwise. 

3 Calculation from the US Bureau of the Census, Survey of State and Local Government Finance, 1977-2016, accessed via the Urban-Brookings Tax Policy Center Data Query System, January 29, 2019, https://slfdqs.taxpolicycenter.org/index.cfm; and National Center for Education Statistics, Digest of Education Statistics, Table 307.20. Full-time-equivalent fall enrollment in degree-granting postsecondary institutions, by control and level of institution and state or jurisdiction: 2000, 2010, and 2015.

4 The District of Columbia is often an outlier because, although it functions as a state and a locality, it most closely resembles a central city in terms of its population and economic activity, much of which comes from nonresidents. Its ranking among states should be interpreted within this context.

5 For an analysis of components of state and local spending using 2012 data, see the Urban Institute’s interactive tool, “What everyone should know about their state’s budget,” http://apps.urban.org/features/what-drives-state-spending/.

6 Calculations using the US Bureau of the Census, Survey of State and Local Government Finance, 1977-2016, accessed via the Urban-Brookings Tax Policy Center Data Query System, accessed March 2019, https://slfdqs.taxpolicycenter.org/index.cfm; and US Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS), Spring 2001, Spring 2011, and Spring 2017, Fall Enrollment component, accessed March 2019.

7 The District of Columbia had the second highest spending per FTES, with $50,474, likely due to its Tuition Assistance Grant (DCTAG) program that provides financial assistance to District residents attending out-of-state two- and four-year public institutions.