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With a pandemic-induced recession and unemployment stratified by post-secondary levels, investment in education, including higher education, is needed now more than ever. Nevertheless, the outlook for government finances is bleak, especially if federal investment stops, and declining budgets and financial instability are likely to lead to cuts in public spending.

As we discuss in the accompanying summary, in a time of limited resources, a state handbook should contain three key elements: to ensure that funding for higher education is adequate, to ensure that institutions use funds efficiently, and to direct investment towards those students and the institutions that need it most.

Grant Funding Sources For Education

Grant Funding Sources For Education

Nevertheless, as the Great Recession of 2008 showed, states usually fail to prioritize funding for higher education during economic downturns, in part because there are no clear government or national spending standards that are considered “sufficient” to ensure agreed results. In addition, recent government efforts to encourage colleges and universities to increase graduation rates, mostly through performance-based funding policies (PBFs), have largely failed and in some cases have widened racial and economic disparities in access to colleges. Equity gaps in educational resources, access and completion already existed before the Great Recession in 2008 and the increased use of performance-based funding policies, but few states have formulated funding strategies to direct resources to students and institutions with the greatest need. It is clear that a different strategy for state funding of higher education is needed.

An Overview Of State Higher Education Funding Approaches

To inform about innovative thinking on government funding of higher education, this policy brief explores how public funding in other sectors and jurisdictions supports adequacy, fairness and performance. We draw on relevant approaches in two domestic sectors — preK-12 education and health — and higher education sectors in three countries — Finland, Australia, and South Africa. To guide the conversation, we first provide a national overview of government revenues from higher education and background to understand current government funding approaches.

Government funding is not the only source of income for most colleges and universities, and the extent to which institutions depend on government funds as a source of income varies considerably. While public colleges receive about 41 percent of the total revenue from government sources, that figure is only 12 and 2 percent for private nonprofits and for-profit institutions, respectively. Public colleges receive a fifth of the income from tuition fees and student fees, while private non-profit organizations and profit organizations receive 31 and 94 per cent, respectively.

If we look more closely at public colleges, there are significant differences between two-year and four-year institutions. The total revenue of four-year public institutions is $ 350 billion, compared to $ 55 billion at community colleges. In the 2017-2018 academic year, public four-year colleges received $ 48,000 per full-time equivalent (FTE) of total revenue, compared to $ 17,000 per FTE at community colleges.

At four-year institutions, the three largest sources of income are tuition and fees (20 per cent), government grants (18 per cent) and hospital sales and services (15 per cent). However, colleges receive almost half of their income from public grants, most of which come from government agencies. Non-operating grants and contracts, which include Pell grant revenues, represent 18 percent of total revenues, with tuition and fees accounting for an additional 16 percent of revenues.

Like Nobody’s Business

It is also important to consider how colleges spend their money. As shown in Figure 4, public two-year colleges spend the largest share of their total costs on teaching at 41 per cent. Not surprisingly, public four-year colleges spend a larger share on research and hospitals, each at 16 per cent of total expenditure, than public colleges. Variations in expenditure by sector reflect the differentiation of assignments as well as sources of funding.

Source: National Center for Education Statistics Overview of education statistics. Note: Student services include institutional advertising and marketing costs. Profit colleges tend to spend significantly more on marketing and advertising than their nonprofits, which is likely to skew spending data for this sector. [2]

Each state has a unique strategy for allocating resources to higher education, often by combining multiple approaches and evolving as political winds change. Government strategies usually include one or more of the following approaches: incremental financing, formula financing, and performance-based financing. In this section, we discuss these three primary approaches and discuss how government funding strategies take or do not take into account issues of adequacy, performance and equity.

Grant Funding Sources For Education

For incremental funding, neither the initial level of approved funds nor the size of the annual percentage change in specific adequacy limits depends on the level of funding required to achieve certain results. In fact, because incremental funding formulas do not specifically address enrollment changes or other factors, this approach may result in institutions having less funding to spend per student, especially if the annual fixed percentage increase is insufficient. Furthermore, if the initial levels of funding were insufficient or unfair, these issues of adequacy and equity could easily continue without intervention. Incremental funding does not encourage the efficient use of institutional resources or reward specific performance indicators. Many states therefore combine an incremental funding approach with performance-based funding, for at least part of government funding.

Our Grants To The Schools

Like incremental funding, formula funding does not take into account the adequacy of the resources offered or take into account the success of the student or institution. A formula funding approach can take into account some aspects of equity by including the characteristics of students enrolled in the formula. However, if the different needs of different groups of students are not assessed over time, formulas can maintain funding inequality.

The spirit of the PBF is to encourage institutions to improve student performance – a commendable goal – but there is limited evidence that these incentives lead to the desired results.

However, there is significant evidence that PBF restricts access to under-represented students by encouraging institutions to enroll and retain students they believe are most likely to graduate. Thus, from an equity perspective, the PBF could potentially aggravate the equity gap rather than improve it. The extent to which the PBF assesses adequacy depends on the way in which the country implements the policy. For example, if a state combines PBF with a formal or incremental approach, then the state has determined that a minimum level of funding is required, but has not necessarily defined that amount as appropriate. In addition, some states have included capital premiums to limit unintended consequences and provide institutions with additional funding to serve historically underserved students.

These three approaches are methods of providing government grants directly to government public institutions, but states also provide significant funding directly to students through government financial aid programs. These programs are often separate items from grants, but they serve as a significant source of revenue for government institutions and require significant investment of funds from the state. States do not use financial assistance programs to ensure adequate funding of institutions or to encourage institutional efficiency. However, many states award scholarships to students based on their financial needs as a way to bridge gaps in access to and completion of college. However, the extent to which state aid programs allocate funds varies based on students’ needs rather than other factors (such as academic achievement); Furthermore, many states underfinance their financial aid programs so that not all qualified students receive a scholarship.

Annual Register Of Grant Support 2022: A Directory Of Funding Sources

In addition to these three funding approaches, some states have implemented new and innovative funding mechanisms, such as promise programs, coupons, differentiated funding, and public-private partnerships. These innovations may cross more traditional approaches to finance or may occur outside access to finance. Each approach sought to solve different problems (eg improved efficiency or increased access); however, some have not persisted due to lack of effect, while others are too new to fully assess the effect. However, they suggest that at least some states are open to using alternative financing strategies to achieve their goals, whatever those goals may be. In the next section, we explore ways in which other sectors – both domestic and international – have addressed issues of relevance, justice and performance, and discuss how the US higher education sector should apply these strategies, especially in times of limited resources.

In general, few states have higher education funding approaches that allocate funding based on the characteristics of enrolled students or that assess students’ need to determine funding levels, and when they do, these approaches determine only a small portion of funding based on these factors. Few, if any, states have set thresholds for the minimum amount of funding needed to achieve certain results. Many more states have adopted guidelines to encourage better performance, but so far these guidelines have rarely had the desired effect and may actually increase the disparities in student access and performance.

Experience from other education-related sectors – both foreign and domestic – shows that it is possible to allocate funds in ways that take into account the elements of adequacy, equity and performance (or accountability). US PreK-12 education includes all three elements, and the health sector reflects the responsibility elements. In addition, higher education sectors in Australia, Finland and South Africa incorporate equity and performance into their funding models.

Grant Funding Sources For Education

These sectors are probably similar to the US higher education sector in that their financing approaches and results can be linked. Like higher education, the PreK-12 education and health sectors have a public purpose and often have similar organizational and financial structures as higher education. As public higher education, most direct state funds to

Pdf) Loan And Grant Support For Students In The Context Of The Diversification Of Funding Sources For Higher Education

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