Thursday, April 23, 2015
Higher Ed Getting Pushed Out?
Crowded Out: The Outlook for State Higher Education Spending
In an effort to better understand the funding difficulties faced by public higher education institutions over the next decade, this study derives baseline state funding projections for higher education from underlying measures of economic growth. It does this by incorporating historical state government spending data with Moody’s Analytics proprietary models for state tax revenue and Medicaid spending. Over the past several decades, the growth in state funding for discretionary spending categories has declined at an alarming rate. Mandatory spending programs, specifically Medicaid, are requiring more and more state funds, which in the zero-sum world of state spending, has left fewer and fewer dollars for other programs. Medicaid spending, for example, was less than 10 percent of state sourced spending 30 years ago, but today accounts for nearly 16 percent. Taking all funding sources into account, Medicaid has grown to more than a quarter of total state spending. Higher education funding has borne the brunt of much of this crowding out, falling from around 14 percent of state sourced spending in the late 1980s to just over 12 percent today. Our baseline forecasts show that trend continuing throughout the next decade and beyond...
Full study at http://web1.millercenter.org/commissions/higher-ed/2015-higherEdFunding-Moodys.pdf
Inside Higher Ed summary at https://www.insidehighered.com/news/2015/04/23/state-budget-projections-higher-education-look-bleak-thanks-medicaid-costs
It might be noted that back when the Master Plan for Higher Ed was created, there was no Medicaid (Medi-Cal). However, the projections for California in the report above don't show much change in the share of state revenue going to higher ed out to 2024. It's pretty much a flat 7%. See Appendix D.1. Moreover, the share of California state revenue going to Medicaid (Medi-Cal) doesn't show much growth and its projected values seem out of line with recent actual values. See Appendix B.1. Undoubtedly, there has been some pushing out of higher ed historically, particularly when you take the numbers back to the 1960s. It is also worth noting that the outlook for the health care system is uncertain. Baby boom retirements will put pressure on the system but the direct effects will be more on Medicare, which is not a state program, than on Medicaid (Medi-Cal).