A new report prepared for the National Commission on Financing 21st Century Higher Education has examined the funding difficulties that public institutions of higher education are facing over the next ten years in an effort to create a baseline state funding forecast.
The report, “Crowded Out: The Outlook for State Higher Education Spending,” worked to develop recommendations for policy and funding changes that would help the United States reach its goal of having 60% of the labor force hold either a postsecondary degree or certificate by 2025. In order for this to happen, 62 million Americans need to graduate with such a credential between 2015 and 2025. Currently the country is on pace to have 39 million students graduate. With a gap of 23 million, this would produce a shortfall of 2 million graduates per year.
The authors suggest that in order to reduce that gap, high school graduation and college entrance rates must hold steady at or above 75% and 70% respectively. In addition, college graduation rates must increase from 40% to 60%.
The report claims that this last portion may be difficult to achieve, as many of the students set to enter college are people of color or from low-income families. Both of these student groups have typically been in need of additional counseling, mentoring, academic support, and financial assistance in order to attain a college degree.
The report states that fixing these issues is of the utmost importance as other nations are beginning to catch up to the US in terms of how many students are earning higher education degrees and certificates. The United States currently ranks 13th in the percentage of 25-to-34-year-olds who have a college degree or certificate compared to other Organization for Economic Cooperation and Development countries.
The report found that Medicaid accounts for over 25% of total state spending. Due to this “crowding out,” higher education funding has dropped from 14% of state-sourced spending in the late 1980’s to slightly over 12% today.
With national state Medicaid spending increasing from 15.6% in 2013 to an estimated 17.9% in 2024, the authors state that higher education funding does not look good. In dollar amounts, they state that the percentages equate to $60 billion being spent on Medicaid that would have previously been put toward higher education. Meanwhile, national higher education spending is falling from 12.9% in 2013 to an estimated 12.7% in 2024.
The authors add that while the impact of other mandatory spending programs such as public assistance, pensions, and other post-employment benefits are still quite small, they could cause additional crowding out of higher education spending due to an increase in contribution payments.
“The U.S. higher education system is still the envy of the world, but it must become more affordable for the next generation. It must also become more innovative and adaptable, especially in its use of technology, and be more productive with regard to graduation rates. Finally, additional funding must be available from federal, state, and private-sector sources to reach the goal.”