Disinvestment in Higher Ed Has Consequences: Students, Economy Suffer

A research report by the Federal Reserve Bank of Boston into state financial support among the New England states for public higher education is ringing alarm bells across the region, as states go thru their budget-setting process, and some – particularly Connecticut – face tough spending choices.

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The 25-page report on the consequences of “disinvestment” calls on states to “pursue policy options that reduce the chances and severity of state funding cuts for higher education,” indicating that “State funding cuts have implications for employers and the vitality of New England’s economy. When the region’s public institutions grant fewer degrees, it becomes harder to address the demand by its employers for skilled workers.”

Yet, the report outlines, that is what has been occurring for much of the past decade.  Between 2008 and 2017, the period covered by the analysis, state spending on higher education per student dropped by double digits in each of the New England states, down 12.6 percent in Connecticut.

“It will not be easy to make these changes, as policymakers face trade-offs. But as this report shows, public higher education institutions need robust state support to fulfill their missions, help their students graduate, produce skilled workers for employers, and generate the positive social and fiscal benefits we all need.” The report stresses that “a decline in public institution graduates due to state funding cuts will likely exacerbate the shortage of skilled workers.”


The research and analysis also reveals that the negative consequences of state funding cuts “are more pronounced for community colleges than for other types of public institutions. Students at community colleges are more likely to be racial or ethnic minorities and come from low-income families than are students at other types of public institutions.”

“Therefore,” the report concludes, “socioeconomically disadvantaged students are more likely to be affected than other members of the population, even though these students are the ones who need the most help climbing the career and income ladder. Taking these findings into account, states should consider providing more protection to community colleges in future budget crises.”

Estimates in the report suggested that due to state funding cuts, community colleges in New England collectively granted 21,388 fewer associate’s degrees during the 2002–2012 period than they would have granted if they had received per-student state appropriations at the 2001 level (after inflation adjustments) each year since the 2001 recession.

The report also indicates that University-based research needs financial support from the schools, but “finds that reducing state appropriations leads to cuts in research spending at public doctoral institutions that are among the top 250 US research universities.” Another indicator, the report notes, is in research.  “Reductions in research expenditures also hurt research production. Using the number of approved patent applications as a measure of research production, [data] shows that when state appropriations are reduced, research productivity among public doctoral institutions in New England tends to decrease.’

The report was authored by Bo Zhao, a senior economist in the New England Public Policy Center at the Federal Reserve Bank of Boston.