Thursday, May 18, 2017

New Jersey Underfunds Higher Education


This post is on a seldom-discussed paradox of in New Jersey's budget landscape:

New Jersey's PreK and K-12 spending are the country's highest, but our higher education spending is actually average or below average.

Although one sometimes sees discussion of how New Jersey underfunds higher education spending relative to itself in the recent past, eg, like this report from the New Jersey Policy Perspective, one less often sees state-by-state comparisons, nor the stark contrast between New Jersey's exceptionally high PreK-12 spending and its middling to below average higher education funding.

Not Only Does NJ Spend Less on Higher Ed
Per Student Than it Used to, It Spends Less
Than Most Other States


I'm not an expert on higher education finance, and even if I were, a single blog post couldn't be a comprehensive analysis of state-by-state higher education funding.  However, I'm an enthusiastic researcher and I hope this post sheds at least some light on the insufficiency of New Jersey's funding for its public colleges and universities.

I've already made the point many times on this blog that New Jersey cannot fully fund SFRA just through new money and that therefore redistribution is necessary.  The point of this post is that even if we could stretch ourselves and fully fund SFRA without redistribution, we should not fully fund SFRA without redistribution either, since to do so would deprive other essential state services like higher education of the resources they need.

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There are several different valid methods to make state-to-state budget comparisons for higher ed:

  • Higher ed funding in per student terms.
  • State funding as a percentage of the public higher ed system's total budget.
  • Higher ed funding in per capita terms.
  • Higher ed funding as a percentage of total state budget.
The bottom line is that New Jersey does average-to-badly just on the raw numbers and does even worse when you consider our cost of living and unusually high taxes.

1.  Funding Per Student

Without local cost adjustments, New Jersey's spending basically equal to the unweighted national average ($6,982 versus $6,954) and is in 17th place, so slightly above the median.  We rank beyond much poorer states such as New Mexico and are just above Arkansas.

Source: "State By State Wave Charts"
http://www.sheeo.org/projects/shef-fy16

However, if you use local costs adjustments, New Jersey's per student higher education funding is only in 30th place.

2.  State funding as a percentage of the public higher ed system's total budget.

New Jersey's higher education system is more reliant on tuition than most other systems, with 59.5% of resources coming from tuition, putting us at the 17th most tuition reliant, versus a national average of 49.9%.


Source: "State By State Wave Charts"
http://www.sheeo.org/projects/shef-fy16

Like most other states, New Jersey has become more tuition-reliant over time, but we have lost ground relative to the rest of the country and our ranking has declined.

For example.

  • In 1991, only 26.6% of NJ higher education spending came from tuition, which put New Jersey 27th from the top, so slightly below average in tuition-reliance.
  • In 2000, 32.4% of NJ higher education spending came from tuition, which put New Jersey 23rd from the top and above average in tuition reliance.

Source: : "State By State Wave Charts"http://www.sheeo.org/projects/shef-fy16


3.  Spending Per Resident

Yeah, we're below average here too.

In the most recent data I could find, from 2011, New Jersey spent $232 per capita on higher education, which is close to the national average of $242 per student, but only enough to put New Jersey in 30th place again.

4.  As a Percentage of the State Budget

We're even more below average here.

According to the Center for Budget and Policy Priorities, the average state devotes 13% of its budget to higher education.

What does New Jersey devote?

6%.  ($2.2 billion out of $35.5 billion)

Source vary, but a picture still emerges that New Jersey is below average.  According to the Kaiser Foundation, the national average is 10% of a state's budget, with New Jersey at 7%, still putting us in 40th place.*

I don't consider spending as a percentage of state budget to be the most valid comparative measure of funding though, since budgets differ in proportion to dollars per capita, percentage of GDP etc.  Perhaps New Jersey's devoting 6%-7% of its budget to higher education shouldn't be seen as low funding for higher ed so much as high spending for other purposes.  After all, 6%-7% of a high-tax state's spending could equal the same amount of money as 12% of a low-tax state's spending.

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Our PreK-12 Spending is at the Country's Peak

The Great Paradox of New Jersey is that while our higher education funding is average, our PreK-12 spending is incredibly high.

For FY2014, New Jersey's spending per K-12 student was the country's third highest, at $17,907 per student, behind New York at $20,610 per student and Alaska at $18,416 per student.

One might attribute that high spending solely to our superior wealth, but that would be significantly incomplete because New Jersey spends the second highest percentage of its GDP on education, 4.6%, in the country too. (after Vermont).

Source: Education Law Center/Rutgers Graduate School of Education
https://drive.google.com/file/d/0BxtYmwryVI00VDhjRGlDOUh3VE0/view

Yes, while the Education Law Center constantly denounces Chris Christie for underfunding SFRA, it also recognizes that, all-in, New Jersey's "Tax Effort" is almost the country's highest.

This K-12 Funding Effort comparison factors in local taxes too, so comparing K-12 school spending, which is  local+state, to higher ed funding, which is almost entirely state isn't a perfectly apples-to-apples comparison, but, according to Kaiser and other public data, the state government's own efforts for K-12 aid are above average in per student terms, high in per capita terms, and average as a percentage of our (high) state budget.

In the Era of the Pension Crisis and Slow Growth,
Budgeting is Zero-Sum
Conclusion:

There are several reasons for New Jersey's higher education funding to be so low proportionally other than that our PreK-12 spending is the country's highest.  A major reason would be low federal assistance for Medicaid that the state must compensate for, but, despite the Medicaid factor and others, it would not be credible to deny that our extremely high PreK-12 spending (and the Abbott Regime is one reason for the neglect of our higher education system.

Since higher education is a middle-class service par excellence, our long-term abandonment of it is yet another instance of how New Jersey's middle class has been under siege since the early 1990s.

I take it to be self-evident that New Jersey's underfunded higher education harms the state. According to the SHEEO, tuition here $10,263 per student, the country's 7th highest for in-state students, compared to a national average of $6,305.  The sticker shock of our state universities is probably one reason New Jersey has the country's worst student outmigration.  It's undeniably a reason 60% of Rutgers grads have debt, with an average debtload of $25,000.  It's probably a reason that many students don't even attempt college and our public college enrollment peaked in 2011.  At some level, our starved higher education system hurts our economic competitiveness too, although New Jersey's educational attainment remains among the country's highest.

In any case, in the era of the Pension Crisis something has to change.  New Jersey has to increase K-12 education aid overall, but we must use our dollars the most efficiently and fairly as possible and that means eliminate Adjustment Aid, in order to free up money for our many other government obligations.



* Something I wasn't able to address in this blog post is that New Jersey's funding per student at different colleges and universities is totally irrational too.

** Kaiser's data has NJ spending $2.4 billion on higher ed, not the $2.2 billion that appears in NJ's budgets for the past few years.  I don't know where they get that extra $200 million, although I don't think it affects their finding.

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