For public 4-year institutions, revenue from state appropriations remains the largest source of revenue and is the single most important factor associated with changes in tuition.
State appropriations revenue decreased relative to other sources of revenue for all types of public 4-year institutions, and in fact experienced real annual decreases for research/doctoral and comprehensive institutions over the time period examined (figure 3).
Decreasing revenue from government appropriations (in which state appropriations make up the majority) was the most important factor associated with tuition increases at public 4-year institutions over the period of analysis. At public research/doctoral institutions, the correlation between change in appropriations and change in tuition was 0.315, a medium sized relationship (the relationships were small at the other two groups of public 4-year institutions).
Although increases in instruction expenditures were associated with increases in tuition at public 4-year institutions, they did not explain as much of the variation in tuition changes as decreases in state appropriations revenue did. At public research/doctoral institutions, the correlation between change in instruction expenditures and change in tuition was 0.087, a small sized relationship (the relationships also were small at the other two groups of public 4-year institutions). In addition, the proportion of total E&G expenditures for instruction for these groups of institutions declined slightly over the time period examined.
For public 2-year institutions, the model found that changes in revenue and expenditure categories accounted for a very low percentage of the variation in tuition changes over the entire period of analysis7.3 percentin comparison with the public 4-year sector, which had values ranging from 39.1 percent for research/doctoral institutions to 61.3 percent for comprehensive institutions. This suggests there are some important differences between public 2-year and 4-year institutions that are not captured in this model.
The findings suggest that prices at private not-for-profit 4-year institutions were related to both "internal" institutional budget constraints and "external" market conditions. In the private not-for-profit sector, there is no single overriding factor as strongly related to tuition as state appropriations revenue is in the public 4-year sector.
For all types of private not-for-profit 4-year institutions, certain "internal" factorshigher costs in two areas (institutional aid and average faculty compensation levels) and lower levels of revenue from two nontuition sources (endowment income and private gifts, grants, and contracts, together considered philanthropic revenue)were associated with higher levels of undergraduate tuition. At private not-for-profit research/doctoral institutions, the correlation between the tuition and institutional aid variables was 0.801 and the correlation between the tuition and faculty compensation variables was 0.547, both of these large sized relationships (the relationships also were large at comprehensive and bachelors institutions, with the exception of the relationship with institutional aid at bachelors institutions, which was a medium sized relationship). The correlation between tuition and philanthropic revenue was 0.511, also a large relationship (the relationships also were large for the other two groups of institutions).
In addition, certain "external" factorssuch as the availability of institutional aid for students, the price of attending public institutions in the same state, and per capita income in the statewere associated with tuition levels for all types of private not-for-profit 4-year institutions. At private not-for-profit research/doctoral institutions, the correlation between tuition and average tuition at public 4-year institutions in the state was 0.357 and the correlation between tuition and per capita state income was 0.294, both of these medium sized relationships (the relationships also were medium sized at comprehensive and bachelors institutions).
Some differences were found regarding whether and the extent to which other factorsfor example, instruction expenditureswere related to tuition, suggesting that the three types of private not-for-profit 4-year institutions face different competitive environments.