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 has been mostly 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 do 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 grants given to students.

Higher educational services are often delivered directly by state public university and community college systems. Thus, in 2016, 85 percent of higher education spending occurred at the state level. The remaining 15 percent came from local governments. Higher education revenue comes from a range of sources, including federal, state, and local governments. Higher education is also funded by tuition payments as well as endowments and financial gifts. Tuition and fees have grown as a percent of higher education revenues over time. Often other services, such as hospitals, operate within institutions of higher learning, but these funds are normally allocated separately within the Census of Governments System.

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 spending. Only in Wyoming (35 percent) and Illinois (32 percent) was local spending above 30 percent of total state and local higher education expenditures.

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.

The Census includes both government spending and tuition payments and fees from students in its data, and the latter have grown as a share of higher education revenues over time. Tuition and fees increased from 23 percent of total higher education spending in 1977 to 28 percent in 2016. They reached a peak of 31 percent in 2011.

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 may 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, they miss a valuable part of the higher education financing picture: 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 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.

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, http://slfdqs.taxpolicycenter.org; 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. http://slfdqs.taxpolicycenter.org; 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.