The steady growth in higher education expenditures that has marked the 1980s and early 1990s is expected to continue throughout the 1990s and beyond with total current fund expenditures projected to increase 40 percent from 1994-95 to 2007-08 in constant dollars. (Note that all percent changes presented in this chapter were calculated using unrounded numbers.) Key assumptions behind these projections include: (1) the economy continues to grow at a steady rate; (2) inflation rates remain near current levels; (3) and enrollments increase as in the middle alternative projections presented in chapter 2. Projections based on alternative economic scenarios are discussed below.
The higher education system is examined by both control of institution (public versus private) and by type of institution (4-year versus 2-year). For each of these sectors of higher education, two different types of expenditures-current-fund expenditures and educational and general expenditures-are examined. Educational and general expenditures consist only of that portion of current-fund expenditures that are for activities that are directly related to the education of students. Expenditures for such activities as auxilary enterprises and university hospitals are excluded. All expenditure data have been adjusted for inflation. Since the historical trends and the projections of current-fund expenditures and educational and general expenditures are similar, emphasis is given to current-fund expenditures.
Following a well-established trend, current-fund expenditures have increased significantly since 1982-83 (table 37 and figure 60). In real terms, current-fund expenditures increased 57 percent from 1982-83 to 1994-95. (1994-95 is the last year for which there are actual data.) From 1982-83 to 1996-97, current-fund expenditures are estimated to have increased 65 percent. The rate of increase in current-fund expenditures during this period has not been consistent. There have been years of rapid growth and others of slow growth. Factors that are associated with current-fund expenditures during these periods include: (1) the economy as a whole, and, for public institutions, the economic situation of state and local governments; (2) the inflation rate; and (3) enrollments.
Current-fund expenditures have risen steadily since 1982-83. The greatest increases occurred from 1982-83 to 1986-87, when current-fund expenditures rose 23 percent. The economy was increasing steadily during that period with disposable income per capita rising 13 percent.
The 28 percent increase that occurred from 1986-87 to 1994-95 was partly due to the rapid increase in enrollments that occurred during that time. The number of students as measured by full-time-equivalent enrollment rose 14 percent. From 1982-83 to 1986-87, full-time-equivalent enrollment fell slightly.
While current-fund expenditures in both public and private institutions rose, they did not rise at the same rate. From 1982-83 to 1994-95, current-fund expenditures increased 52 percent in public institutions and 67 percent in private institutions (table 37).
For the period under examination, educational and general expenditures have been an almost constant percentage of current-fund expenditures (about 78 percent). Hence, the trend for educational and general expenditures is virtually identical to that for current-fund expenditures (table 38 and figure 61). Total educational and general expenditures in constant dollars increased 60 percent from 1982-83 to 1994-95. There was a 51 percent increase in educational and general expenditures in public colleges from 1982-83 to 1994-95 and a 76 percent increase in private colleges.
Since the trends of current-fund expenditures for the different sectors show some differences, the data are examined separately for each sector, except private 2-year institutions. Expenditures are examined both as a total and per student in full-time-equivalent (FTE) enrollment.
The trend for private 2-year projections is not shown separately because there have been significant additions to the universe of private 2-year institutions since 1980-81. Private 2-year institutions comprise the smallest of the higher education sectors. In 1994-95, they accounted for 1 percent of total current-fund expenditures and 2 percent of FTE enrollment.
The trend for current-fund expenditures in public 4-year institutions is very similar to that for all institutions (table 39). From 1982-83 to 1994-95 current-fund expenditures increased 52 percent with the most rapid growth occurring from 1982-83 to 1986-87. Current-fund expenditures rose 22 percent during that time, while full-time-equivalent enrollment increased by 2 percent.
As with total current-fund expenditures, current-fund expenditures per student rose each year from 1982-83 to 1994-95. Most of the increase occurred from 1982-83 to 1986-87 when current-fund expenditures per student rose 19 percent. From 1986-87 to 1994-95, when FTE enrollment rose 11 percent, current-fund expenditures per student rose 13 percent.
The trend for educational and general expenditures (table 40) is similar to that for current-fund expenditures.
Current-fund expenditures in public 2-year institutions increased 15 percent from 1982-83 to 1986-87 (table 41). A further 31-percent increase in current-fund expenditures occurred from 1986-87 to 1994-95, when FTE enrollments rose 22 percent.
A somewhat different pattern emerges when public 2-year current-fund expenditures are placed in per student terms. Between 1982-83 and 1986-87, current-fund expenditures per student rose 22 percent. From 1986-87 to 1994-95, current-fund expenditures per student rose 7 percent.
The trend for educational and general expenditures (table 42) is similar to that for current-fund expenditures.
Like public institutions, current-fund expenditures in private 4-year institutions rose rapidly throughout the 1980s and into the 1990s. From 1982-83 to 1994-95, total current-fund expenditures rose 68 percent (table 43).
Expenditures per student also increased significantly during the period from 1982-83 to 1994-95. The greatest increases occurred from 1982-83 to 1986-87, when current-fund expenditures per student rose 25 percent. After that, as enrollments increased, current expenditures per student have continued to increase, but not at as rapid a rate. From 1986-87 to 1994-95, current expenditures per student rose 14 percent.
The trend for educational and general expenditures (table 44) is similar to that for current-fund expenditures.
Projections have been prepared for each of the sectors of higher education. The methodology and assumptions used to produce these projections are discussed in appendix A6.
There are three sets of projections for the public 4-year, public 2-year, and private 4-year sectors. Due to the short time series of consistent data, only one set of projections was produced for the private 2-year sector. This set of projections for private 2-year institutions is not examined separately.
The projections in this chapter are presented in both constant 1995-96 dollars and current dollars. The projections were developed in constant dollars and then placed in current dollars using projections for the Consumer Price Index (CPI). Three alternative sets of projections for the CPI were used, one for use with the middle alternative projections, one for use with the low alternative projections, and one for use with the high alternative projections. As the set of projections for the CPI developed for use with the low alternative projections is rising at the most rapid rate and that developed for use with the high alternative projections is rising at the slowest rate, it is frequently the case that the current dollar projections from the low alternative set of projections are higher than those from the other two alternative sets of projections.
All of the alternative projections indicate an increase in current-fund expenditures throughout the remainder of the century. In the middle alternative projection, current-fund expenditures are projected to reach $263.7 billion in 2007-08. This is a 40-percent increase from 1994-95, the last year for which there are actual data. In the low alternative projection, current-fund expenditures are projected to increase to $259.6 billion. In the high alternative projection, the figure for 2007-08 is $267.1 billion.
A similar pattern is seen for educational and general expenditures. In the middle alternative projection, educational and general expenditures are projected to be $204.0 billion in 2007-08, a 38-percent increase from 1994-95. In the low alternative projection, educational and general expenditures are projected to increase to $199.9 billion. In the high alternative projection, the figure for 2007-08 is $207.4 billion.
It should be noted that private institutions are in the process of going from one accounting model to another. This change should have an effect on the revenues and expenditures of private institutions beginning, at the earliest, in 1996-97. Work has also begun on changing the accounting model of public institutions but a new accounting model for public institutions will probably not be implemented until the early part of the next century.
There are only small differences in the trends among the various sectors of higher education. In public 4-year institutions, current-fund expenditures are projected to reach $137.0 billion in the middle alternative projection in 2007-08 (table 39). This is a 41-percent increase from 1994-95 to 2007-08. In the low alternative projection, the value for 2007-08 is $135.7 billion, and in the high alternative projection, it is $138.2 billion.
Since full-time-equivalent (FTE) enrollment is projected to increase by 15 percent from 1994-95 to 2007-08, the rate of increase for expenditures is lower on a per student basis. In the middle alternative projection, a 23-percent increase is projected for the period from 1994-95 to 2007-08 compared with 22 percent for the low alternative projection and 24 percent for the high alternative projection.
Expenditures are also projected to increase in public 2-year institutions. For instance, in the middle alternative projection, current-fund expenditures are projected to reach $28.7 billion in 2007-08 and expenditures per student are projected to increase to $8,451. When the low alternative projection is used, with its lower growth path for revenues of state and local governments per capita, lower values for current expenditures are found. When the high alternative projection is used, with its higher growth path for revenues of state and local governments per capita, higher values are found.
The trends for private 4-year institutions exhibit the same patterns as other types of institutions. Total current-fund expenditures are seen as increasing each year. In the middle alternative projection, from 1994-95 to 2007-08, they are projected to increase 42 percent. Current-fund expenditures per student are projected to increase 26 percent during the same time.
