According a new report, there is no correlation between the amount of money spent on public higher education by states and those universities' academic performance.

Discussions about funding in most states usually leave evidence about the overall adequacy of public-institution funding off the table. As a result, in times of decreasing state appropriations, institutions often attempt to offset revenue shortfalls by simply raising tuition and fees. In response to the question of 'how much funding is needed?' the typical answer of 'more' or 'as much as our peers' leaves out all consideration of performance and affordability to students.

There is also no evidence of correlation between spending on higher education and economic growth. Philip Trostel argues that there's a Say's Law of college graduates -- an increase in the number of college degree-holders in the workforce creates demand for more high-skilled workers -- but even then, a 10% increase in state spending on higher education may lead to only a 1% increase in college graduates, because the money isn't targeted to just marginal students (meaning here students who otherwise would not attend and graduate). What this new report adds is that there are systems spending public education dollars inefficiently. Alas, the report declines to identify which states.

(Source: Chronicle of Higher Ed, subscriber link.)

Categories: higher_ed, economics