• Introduction
• Current Funds Revenues in FY 1996
• Current Funds Expenditures in FY 1996
• Revenues by State
• Expenditures by State

Since 1987, the Integrated Postsecondary Education Data System (IPEDS) Finance survey has collected information on the current funds revenues and expenditures of higher education institutions. Revenue data are collected by source of revenue, such as tuition and fees and state appropriations, while expenditure data are collected by purpose of expenditure, including instruction, research, and public service. Both revenues and expenditures are separable into two classes: education and general (E&G) and sales and services (i.e., auxiliary enterprises, hospitals, and independent operations). E&G revenues and expenditures are those that are intended for operating the educational, research, and public service missions¹of the institution. Entities listed under sales and services are either ancillary to the mission of the institution or are essentially self-supporting operations, such as bookstores, dormitories, and hospitals (that is, the revenues of these entities support their operating expenditures). As part of current funds expenditures, total expenditures for salaries are also collected in each expenditure category that has associated personnel. Additionally, expenditures on scholarships and fellowships are collected by source in a separate schedule of the IPEDS Finance survey.

This report presents data on revenues and expenditures of higher education institutions in the 50 states and the District of Columbia for fiscal year 1996. In FY 1996, higher education institutions were defined as postsecondary institutions that were eligible for Title IV²federal financial aid programs and that granted an associate's or higher degree. In FY 1995, higher education institutions were defined as those that were accredited at the college level by an agency recognized by the Secretary, U.S. Department of Education. This change in definition came about because the U.S. Department of Education no longer distinguishes postsecondary institutions based solely on their college accreditation status. The new definition resulted in an overall net gain of 7.5 percent in the number of institutions included in the higher education universe, with most of the additions being private, for-profit institutions. Altogether, the FY 1996 higher education universe consisted of 4,100 institutions.

As table A indicates, the change in total current funds revenues between FY 1995 and FY 1996 for all higher education institutions in the nation was 4.68 percent. Of this percentage change, 0.30 percent was due to the change in universe. That is, if the universe definition had remained constant between FY 1995 and FY 1996, the change in current funds revenues would have been 4.38 percent. For current funds expenditures, the total change was 4.10 percent, of which 0.27 percent was due to the change in universe definition. While the change in universe definition had a negligible effect at the national level, it had a fairly large effect for some states and for some institutional sectors in some states. For example, almost half of the change in current funds revenues for all institutions in Arizona was due to the change in universe definition. In South Dakota, more than three-fourths of the change in current funds revenues was due to the change in universe definition. In Louisiana, all of the observed increase in current funds revenues was due to the change in the universe.

Table A.—Total current funds revenues and expenditures of accredited institutions for fiscal year 1995 and Title IV eligible, degree-granting institutions for fiscal year 1996 in current dollars, by state

The change in universe definition did not seem to affect changes in the revenues or expenditures of public 4-year institutions at either the national or the state level, except in the District of Columbia. However, it did have an effect on changes in the aggregate financial statistics of both public 2-year institutions and private, non-profit 4-year institutions, particularly at the state level. Although the national increases in current funds revenues and expenditures of more than 5 percent in the public 2-year sector would have been about 4.5 percent had the universe not changed, the effect of the change was quite profound in several states, such as Arkansas, Georgia, Louisiana, and South Dakota. The change in universe also had a significant effect on the aggregate financial statistics of private, non-profit 4-year institutions in such states as Alaska, Colorado, Illinois, Mississippi, and Oregon.

In FY 1996, public institutions received total current fundsrevenues of about $123.5 billion (table B). The largest source of revenues of public institutions was state appropriations, which accounted for about one-third of their total operating revenues. Tuition and fees, the second largest source of E&G revenues of public institutions, accounted for almost 19 percent of total current funds revenues. The relative shares of revenues accounted for by these two major sources of income tend to confirm public institutions' reliance on state funding. Additionally, public 2-year institutions rely heavily on local funding as well as state funding, with local appropriations accounting for more than 18 percent of their operating revenues.

Table B.—Total current funds revenues of Title IV eligible, degree-granting institutions, by level and control of institution: Fiscal year 1996

Private institutions, in contrast, are not, for the most part, state supported, and they rely heavily on revenues from students. In FY 1996, private institutions had total operating revenues of almost $74.5 billion (table B); tuition and fees constituted the largest source of these revenues.Private, non-profit institutions obtained more than 40 percent of their total operating revenues and more than half of their E&G revenues from tuition and fees. Among private, non-profit 2-year institutions, this reliance on tuition and fees was even greater, accounting for more than 60 percent of their operating revenues. This reliance was greater still among private, for-profit institutions, with tuition and fees accounting for 84 percent of the operating revenues of all for-profit institutions and almost 90 percent of the operating revenues of for-profit 4-year institutions.

While income from the federal government made up more than 14 percent of private, non-profit 4-year institutions' revenues, most of this (11.6 percent) was from restricted grants and contracts and from independent operations. Private gifts, grants, and contracts were another significant source of income for private, non-profit institutions, constituting more than 9 percent of their operating revenues. In private, non-profit 2-year institutions, this share rose to almost 12 percent, most of which (10 percent) was in the form of unrestricted revenues. Surprisingly, revenues from state grants and contracts accounted for about 4 percent of the operating revenues of private, non-profit 2-year institutions, and revenues from state and local governments constituted 7 percent of the revenues of private, for-profit 2-year institutions. These percentages might reflect state student financial aid, which would be reported in these revenue categories.

While sources of revenue seem to be related to the control of the institution, expenditures seem to be more related to the level of the institution, at least among public and private, non-profit institutions. For example, 2-year public and private, non-profit institutions allocated a higher percentage of their total current funds expenditures to instruction in FY 1996 than did their 4-year counterparts. Two-year public institutions spent more than 45 percent of their total current funds expenditures on instruction, compared with the slightly less than 30 percent spent by 4-year public institutions. Two-year private, non-profit institutions spent almost one-third of their operating expenditures on instruction, compared with the almost 27 percent spent by 4-year private, non-profit institutions.

Similarly, 2-year public and private, non-profit institutions allocated significantly higher percentages of their operating expenditures to student services, institutional support, and plant operations and maintenance than did 4-year public and private, non-profit institutions. For example, two-year public and private, non-profit institutions spent more than 10 percent and 12 percent, respectively, of their total current funds expenditures on student services, compared with expenditures of about 4 percent in public and 5 percent in private, non-profit 4-year institutions. Two-year public and private, non-profit institutions also spent about 15 percent and 18 percent, respectively, on institutional support, compared with 8 percent and 10 percent spent by their 4-year counterparts.

The one expenditure category in which control seemed to be a major factor was scholarships and fellowships. Public institutions, regardless of level, spent only about 4 percent of their total current funds expenditures on scholarships and fellowships, while private, non-profit institutions spent about 11 percent on activities in this category.

Private, for-profit 2-year and 4-year institutions spent about the same percentage of their total expenditures on instruction (27 percent and 29 percent, respectively). However, private, for-profit 2-year institutions spent a much higher percentage of their total expenditures on scholarships and fellowships than did private, for-profit 4-year institutions (12 percent and 7 percent, respectively).

It is interesting to note that, as different as the expenditure patterns are between 2- and 4-year institutions, the percentage of expenditures going to salaries and wages falls within a fairly narrow range for a given expenditure function. Overall, salaries and wages constituted between 47 percent and 62 percent of total current funds expenditures, with 2-year public institutions at the high end and 4-year private, for-profit institutions at the low end. Of the major expenditure categories, salaries and wages constituted 65 to 73 percent of instructional expenditures, 49 to 63 percent of student services expenditures, and 35 to 57 percent of expenditures on institutional support.

Examining differences by state in the relative importance of sources of revenues and in the allocation of expenditures can shed light on the support for, and the priorities of, higher education, particularly in the public sector.³In public institutions, for example, the percentage of total revenues from tuition and fees varied substantially across states. For instance, public 4-year institutions in Vermont received 42.9 percent of their total revenues from tuition and fees. Not only is this figure much higher than the average percentage of operating revenues that public 4-year institutions received from tuition and fees nationwide (18 percent), but it also exceeds the national average for private, non-profit 4-year institutions (41.4 percent). In New Mexico , on the other hand, public 4-year institutions received less than 10 percent of their total revenues from tuition and fees, and in California, public 2-year institutions received less than 10 percent of their total revenues from tuition and fees.

In general, public institutions in states that have a relatively high level of state and local funding tended to have a lower percentage of revenues from tuition and fees. There are some clear exceptions, however. Public 4-year institutions in Arizona, Maine, Massachusetts, New York, South Dakota, and West Virginia had higher-than-average shares of revenues both from tuition and fees and from state and local sources. Public 4-year institutions in Alabama, California, Iowa, Minnesota, Nebraska, New Mexico, South Carolina, Utah, and Washington all had lower-than-average shares of revenues from tuition and fees and from state and local sources as well. Among public 2-year institutions, only those in Arizona had higher-than-average shares of revenues from tuition and fees and also from state and local appropriations. Public 2-year institutions in Idaho, Illinois, Montana, Oklahoma, Oregon, and Texas had lower-than-average shares of revenues from tuition and fees as well as from state and local sources.

While it seems reasonable that the distribution of revenues by source in public institutions would vary by state, less anticipated is that the distribution of revenues by source in private, non-profit 4-year institutions would also vary by state. This does, however , appear to be the case. The percentage of revenues from tuition and fees in private, non-profit 4-year institutions ranged from a low of about 21 percent in Utah to a high of more than 78 percent in Arizona. In general, the percentage of revenues from state and local sources was low, with little variability among private, non-profit 4-year institutions, suggesting little state or local support for these institutions. In Florida, New Jersey, New York, and Texas, private, non-profit 4-year institutions received 5 percent or more of their total revenues from state and local sources, compared with a national average of 2.6 percent.

When looking at private, for-profit institutions by state, one of the most interesting aspects is the large variation in the size of this institutional sector. In many states, there are very few private, for-profit institutions and, as a result, their aggregated revenues and expenditures are very small. For example, in 29 states (including 4 states that do not have any degree-granting private, for-profit institutions), total revenues of private, for-profit institutions were less than $15 million in each state. In 7 states, however, revenues in this sector totaled more than $100 million in each state. Among private, for-profit institutions, the percentage of revenues from tuition and fees ranged from 71 percent in Louisiana to 100 percent in Maryland and North Dakota. On average, private, for-profit institutions received about 5.1 percent of their total operating revenues from state and local sources, but in Connecticut, Minnesota, New Jersey, New York, and Pennsylvania, they received about 10 percent or more of their total revenues from state and local sources. In fact, private, for-profit institutions in New York received more than 20 percent of their total revenues from state and local sources.

The distribution of expenditures by purpose in public 4-year institutions does not appear to be a function of their state location. The percentage of total expenditures that public 4-year institutions allocated to instruction ranged from a low of almost 20 percent in New Mexico to a high of 41 percent in Delaware. However, expenditures on instruction in public 4-year institutions were within 5 percent of the national average of 29.5 percent in 41 states. Expenditures on scholarships and fellowships in public 4-year institutions accounted for between 0.9 and 8.9 percent of total expenditures. In 27 states, expenditures on scholarships and fellowships were within 1 percent of the national average of 4.4 percent, and they were within 2 percent of the national average in 42 states. With some exceptions, public 4-year institutions with a relatively high share of expenditures on scholarships and fellowships tended to be in states in which public institutions received a high percentage of their total revenues from tuition and fees.

The percentage of total expenditures that public 2-year institutions allocated to instruction seemed to vary more across states than did the expenditures of public 4-year institutions for this purpose. This percentage ranged from a low of 24 percent in Vermont to a high of 61 percent in Wisconsin. Even among public 2-year institutions, however, expenditures on instruction were within 5 percent of the national average of 45.2 percent in 35 states. The percentage of total expenditures that public 2-year institutions allocated to scholarships and fellowships averaged 3.6 percent nationwide and did not exceed 8 percent except in the states of New York and Vermont.⁴

Although expenditures on instruction among private, non-profit 4-year institutions ranged from a low of about 20 percent in Alaska to a high of 43 percent in Nebraska, these institutions allocated between 25 percent and 30 percent of their total expenditures to instruction in 25 states. The range of allocations to scholarships and fellowships among private, non-profit 4-year institutions was fairly broad, from a low of about 4 percent in Utah to a high of more than 30 percent in North Dakota. In addition, private, non-profit 4-year institutions in 22 states allocated 15 percent or more of their total expenditures to scholarships and fellowships. This compares with a national average of 11.5 percent for private, non-profit 4-year institutions.

Nationally, private, for-profit institutions allocated about 28 percent of their total expenditures to instruction and about 10 percent to scholarships and fellowships. Among these institutions, expenditures on instruction varied widely from state to state, ranging from about 16 percent of total current funds expenditures in Wyoming to more than 50 percent in Nebraska and Maryland. Again, however, private, for-profit institutions in 27 states allocated within 5 percent of the national average of 27.6 percent of their total expenditures to instruction. Significant variation in the percentage of total expenditures allocated to scholarships and fellowships in private, for-profit institutions is fairly evident. In only six states did for-profit institutions allocate within 2 percent of the national average of 9.6 percent for scholarships and fellowships. As might be expected, expenditures on scholarships and fellowships seem to be related to the level of revenues from state and local sources, with some exceptions, such as in Georgia, Louisiana, South Dakota, and Tennessee.