A Must-Have for Pennsylvania, Part 2: Investment in Higher Education for Growth and Opportunity

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Pennsylvania’s deep cuts in funding to K-12 education since 2010-11 have drawn a great deal of attention in recent months. Less widely recognized is the fact that Pennsylvania enacted even deeper cuts, on a percentage basis, to funding for public higher education in the same period. Four-year colleges received the largest reductions in funding, including an 18% cut to state support for the Pennsylvania’s most affordable four-year options, the 14 state-owned Pennsylvania State System of Higher Education (PASSHE) universities. Even before these cuts, Pennsylvania ranked low among states in funding for higher education and in the affordability of public higher education. Given the importance of higher education to economic growth and to opportunity for individuals, underinvesting in higher education represents a clear case of shooting ourselves in the foot. Short-sighted decisions to manage the state’s recovery through cuts alone, rather than raise the revenue needed to invest adequately in higher education, sacrificed the longtime well-being of the Commonwealth and its citizens. These cuts have also held back the state’s economic recovery, especially in more rural areas that are home to the state-owned schools.

This report summarizes key insights from the economic research literature on the importance of higher education. It then presents basic information on Pennsylvania’s investment in higher education. We focus especially on the 14 public community colleges and 14 state-owned universities that are the most affordable and accessible to middle- and low-income Pennsylvania families. In many comparisons with other states we also include in our analysis Pennsylvania’s investment in state-related higher education institutions (Penn State University, Pitt, Temple, and Lincoln).State support for those institutions is included in the main national databases that compare public higher education funding and tuition, across the 50 states. Our main findings follow:

States and regions with a well-educated workforce enjoy faster economic growth and higher overall wage levels.

  • In a study of 261 metro areas, each one year increase in average education beyond high-school was associated with a rise in Gross Domestic Product per capita of 17.4% and wages of 17.8%.
  • States with the largest share of college-educated workers enjoy hourly wage levels nearly 50% higher than states near the bottom. Pennsylvania falls in the middle on both college-degree share and wage levels.

High levels of education also powerfully influence opportunity for individuals.

  • Pennsylvania’s college-educated workers earn hourly wages more than three-quarters higher than the wages of workers with only a high-school degree. While this gap has not widened since 2000, it remains far larger than in 1979.
  • The unemployment rate of college-educated workers in Pennsylvania is roughly half that of groups with lower levels of education. This rate remained under 5% throughout the Great Recession and has now fallen to 3.6%.

Despite the strong association of educational attainment with better economic outcomes for the state and for individuals, Pennsylvania sharply underinvests in higher education.

  • Pennsylvania ranks 47th among states in funding for public higher education per $1,000 of personal income and 48th in funding per capita.

o On both measures, Pennsylvania’s funding is only slightly over half (55% to 57%) of the U.S. average, and roughly a quarter of the investment of the leading states.

o The top four states for investment in higher education are resource-rich states with severance taxes that help raise the revenue needed to invest in two- and four-year colleges (Alaska, New Mexico, North Dakota, and Wyoming).

o In terms of college access and affordability, underinvestment in community colleges and four-year State System universities is most pivotal. These institutions serve overwhelmingly Pennsylvania students (87% in the case of PASSHE), including many first-generation students, and other low- and middle-income students who could not otherwise afford college.

  • Pennsylvania has the third-highest tuition and fees at its public four-year colleges, with a cost over 50% above the U.S. average, and tuition and fees 3.35 times those in lowest-cost Wyoming. Even the average tuition and fees at PASSHE schools considered alone (which are lower than tuition and fees at state-relateds universities) would give Pennsylvania the ninth-highest tuition and fees of the 50 states.
  • Pennsylvania has the third-highest average student debt ($31,675) among graduates of four-year colleges, and 70% of graduates have some debt (fourth highest among states). While state-owned schools cost less to attend, their graduates still have average debt of around $30,000.
  • Inadequate funding for higher education perpetuates Pennsylvania’s low ranking for share of adults ages 25-64 with more than a high-school education. The state ranked 41st by this measure in 2013. While the state progressed on this measure from 2000-02 to 2010-11 (climbing from around 45th to 40th), the state has not progressed since 2011.

Even though the state already had a low ranking for higher education funding and affordability, Pennsylvania cut higher education funding more deeply than most states in recent years.

  • In 2011-12, the state slashed funding for state-owned universities by $90 million, and it has kept those cuts in place since.
  • From 2010-11 to 2013-14, Pennsylvania higher education experienced a funding cut of 11.8%, the fifth largest cut nationally.
  • Due to the lack of funding, over 900 positions at the state’s four-year Universities have been eliminated or left vacant, over 95 programs have been cut or placed under a moratorium since 2010-11, and tuition has increased by 15 percent.
  • In the 1980s state financial support accounted two thirds of the budget of the state’s state-owned four-year public Universities. Today that figure has fallen to roughly 25%, placing the financial burden on Pennsylvania students and families.

As a first step towards restoring the promise of affordable higher education for the middle class, Pennsylvania should restore the funding cut from PASSHE schools and community colleges in 2011-12, and invest sufficient state funds to maintain current tuition levels for the next four years. These steps would provide a foundation for a collaborative search for long-term solutions to the crisis in higher education affordability, including creative approaches to raising revenues and “bending the cost curve” so that tuition increases less quickly.

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