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09/25/2012 09:52 am ET Updated Sep 26, 2012

State Budget Cuts Drive Up Tuition At Public Universities: New York Federal Reserve Report

More students are going to college than ever before, but states have continued to cut back on funding for public colleges, and that's leading to some real consequences.

A new study from the New York Federal Reserve shows declining state and local financial support for public higher education is causing tuition to skyrocket, increasing much faster than at private colleges.

Rajashri Chakrabarti, Maricar Mabutas and Basit Zafar write in the report:

As a share of total revenues for America’s public institutions of higher education, state and local appropriations have fallen every year over the past decade, dropping from 70.7 percent in 2000 to 57.1 percent in 2011. At the same time, college enrollment numbers have swelled across the country—public institutions’ rolls grew from 8.6 million full-time students in 2000 to 11.8 million in 2011.

State and local support for public higher education per student has fallen by 21 percent from 2000 to 2010, according to data from the State Higher Education Executive Officers. During that same period, real net average tuition at public universities rose by 33.1 percent. Yet, at private colleges, tuition grew by a much slower rate -- by 21.2 percent.

Tuition also grew especially in states with the largest funding cuts, they observed in the report.

"In the public discourse, federal funding is often blamed for driving up tuition," the authors write. "However, our analysis suggests that public schools are increasing tuition as a way to make up for decreasing state and local appropriations for higher education, and that deeper cuts in public funding may be associated with correspondingly greater tuition hikes."

The report noted state schools "may be inclined to accept a greater proportion of out-of-state students" who pay more in tuition, although they were unable to find a significant amount of data to show that had occurred nationwide from 2000 to 2010.

However, administrators are openly declaring their goals to increase out-of-state students to fill budget gaps, as a way to avoid unpopular tuition hikes. Since this is a relatively new phenomenon, there wouldn't be much conclusive data yet.

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