A while ago I stumbled upon the the Commonfund Institute’s Higher Education Price Index (HEPI), which is self described as:
Compiled from data reported by government agencies and industry sources, HEPI measures the average relative level in the price of a fixed market basket of goods and services purchases by colleges and universities each year through current fund educational and general expenditures, excluding research. A more accurate indicator of cost changes for colleges and universities than the Consumer Price Index (CPI), HEPI is used primarily to project future budget increases required to preserve purchasing power.
And thought that it would be a good measure of how much exactly state funding has declined over the years. As nice as it is for the state to fund such things as increased research expenditures, the HEPI should help tell what the minimum amount the state needs to increase funding by each year in order to keep the same level of support for basic university functions. While it would never be a good idea to say that just because state funding has increased by the same amount as the HEPI that it is acceptable, it is a good approximate standard by which to guess the minimum increases the state should be making every year. It is a better standard against which to measure state funding than percent of the total budget. As we have gained more and more federal research money (we currently get the 5th most of any school) and solicit more and more private donors the state funding cannot reasonably be expected to keep increasing with these added sources of revenue.
In order to compare the HEPI to the UW budget and state funding I consulted the UW-Madison Data Digests, a great source of a wide variety of information about the UW. I entered all the data into spreadsheets and generated a couple of graphs displaying data from the years 1990 to the present. The years displayed on the graphs represent the budget years starting with the given year. Hence 1990 means 1990-1991 and 2007 represents the recently completed 2007-2008 school year. The choice of the year 1990 is really just an arbitrary year and chosen because that is as far back as the numbers available from the data digests go. The way I chose to compare the numbers was to graph the cumulative percent increases* over the 1990 level. The number on the left side of the graph is then the sum total percent increase since 1990. For example if 40 in 1999 means that the total has grown by 40% since 1990, so if the budget or value of the HEPI was 100 in 1990 it would be 140 in 1999. Thus the changes from year to year can be directly compared even though they differ in magnitude by hundreds of millions of dollars (sometimes even a billion). I would also like to point out that the HEPI is based of fiscal years, which are not the same as the budget years for the UW which cover the standard school year. The fiscal years used by the HEPI start and end October 1st of each year. As a result the dates are off by a couple of months and because the 2008 HEPI (corresponding to the 2007-2008 school year) won’t end until this upcoming October, I am using the preliminary estimate.
*calculated by taking the value subtracting the 1990 value then dividing by the 1990 level and multiplying by 100
The most striking thing that I first saw when looking at the graph was the dip in state funding starting in 2002. That’s right, state appropriations to UW-Madison actually went down for 3 straight years from 2002 until 2004. Up until that point they had stayed fairly even with the increases in the HEPI, with the exception of a slight dip in the mid to late 90’s. Another thing to note is that state funding in recent years has begun to catch up to the HEPI in recent years. The gap decreased from 36.02% of the 1990 levels in 2004 to 25.57% of the 1990 levels in 2007. Meaning that over those 4 years the increase in state funding actually outpaced growth in the HEPI by 10.45% of the 1990 levels.
Another aspect of the graph that struck me was that despite decreases in state funding, the growth of the total budget of the UW continued to out pace the growth of the HEPI. Two of the biggest increases in UW funding have been in increased money brought in from federal programs and through increases in private gifts and grants. The largest increase percent wise was clearly in gift money. The 2007 levels show an almost 300% increase from 1990, meaning the total money brought in has increased almost 4 fold ($116.4 million to $436.9 million).
I think the growth comparisons used in these graphs put a little bit more perspective on the shortage of state funding than percent of the UW’s budget. With such huge increases in private money and with federal money coming in a levels that out pace even the growth of the total UW budget, it is unrealistic to expect that money from the state ought to make up a constant percent of the total UW budget. Instead the HEPI provides a better of a reference point by which to gauge support from the state legislature. And so what is the answer to the original question posed by this post? Well, the model I have chosen makes the assumptions that state funding levels in 1990 were perfect and that the HEPI perfectly measures increases in the cost of higher education and thus increases in total state appropriations since 1990 ought to grow by the same amount each year as the HEPI. The first assumption is fair because increases in state funding mirrored those in the HEPI for most of the 1990’s and never truly deviate very far until the 2002 budget. Using the HEPI is justified by its description above and is certainly better than expecting state funding levels to maintain a constant percentage of the total UW budget as argued above. Now for the dramatic conclusion, based off of this prediction method, for the 2007-2008 budget year, state appropriations should have totaled $536.2 million or $75.1 million more than the $461.1 million we did receive. I certainly would like to see that number be even higher in reality, and it definitely should be considering that undergraduate enrollment has increased since 1990, but I think this clearly demonstrates that the state is failing to provide tens of millions of dollars for basic educational functions.
