THOMAS K. LINDSAY: Higher Education Doesn’t Have A Revenue Problem; It Has A Spending Problem

It’s time for universities to stop raising tuition and start cutting costs.

For years, the narrative of “state disinvestment in public higher education” has shaped the national debate about soaring college costs. According to this narrative (as argued by the defenders of the higher education status quo), states have slashed funding, forcing public colleges to raise tuition to survive.

But a new Cato Institute study by Andrew Gillen, “Trends in Higher Education: State Funding and Tuition Revenue at Public Colleges from 1980 to 2024,” dismantles this myth. Drawing on 45 years of inflation-adjusted figures from the State Higher Education Executive Officers Association (SHEEO), Gillen’s study reveals that state funding for public colleges has steadily increased, not declined, and tuition hikes are driven by factors beyond state budgets.

Gillen’s findings carry urgent implications for rethinking higher-education finance.

His central revelation is that state funding per student has grown by $56 annually (±$19) over the past 45 years, adjusted for inflation, using the Personal Consumption Expenditures Price Index (PCEPI). From $7,447 per student in 1980, state funding rose to $11,683 by 2024—a $4,236 increase.

Total educational revenue, combining state appropriations and tuition, has also surged by $213 per student per year, reaching a record $19,000 per student in 2024. These figures directly contradict claims that public colleges are starved for resources, showing instead that both state support and overall revenue have grown substantially.

Why, then, does the disinvestment myth persist? Gillen’s study identifies two culprits: cherry-picked data and flawed inflation adjustments.