A Multilevel Analysis of Institutional Fiscal Autonomy and its Effect on Affordability, Operating Efficiency, and Minority Access at Public Colleges and Universities

In recent years, an unstable funding environment for state higher education systems has led to a trend of increasing institutional fiscal autonomy in exchange for reductions in appropriations. With the growing concern that reducing state oversight will result in increased tuition and spending levels, this study was designed to provide a clearer understanding of how fiscal autonomy at public institutions impacts measures important to the state public policy goals of affordability, operating efficiency, and access. To accommodate the diversity and hierarchical structure of public institutions, this study used multilevel modeling techniques to integrate complex, interrelated institution- and state-level data. Institution-level data were provided primarily by the Delta Cost Project and State Higher Education Executive Officers (SHEEO) in the analysis of 395 public four-year institutions across sectors in 43 states. The three dependent variables measured changes in tuition revenue net of institutional grants, education and general spending, and minority student enrollment for academic years ending 2003 through 2009. In addition to other institution- and state-level characteristics and performance measures, explanatory variables included three regulatory or political descriptors: institutional tuition-setting authority, resource control, and state governance structure. Prior to this study, there was little empirical evidence to either support or counter claims that reducing state oversight would lead to increases that could threaten access, particularly for students in low-income and minority populations. This analysis did find evidence of a relationship between tuition-setting authority and institutional outcomes, however, statistical significance varied by outcome measure as well as category of tuition-setting authority. There were also other important factors related to the outcomes including level of appropriations, extent of reliance on state funding, and regional compact affiliation. Although results were mixed, this effort serves as a starting point for future research to help inform state and institutional decision-makers as they search for ways to address funding gaps without sacrificing their public agenda