State Higher Education Budgeting Mechanisms in the United States

(Purpose) The purpose of this study was to examine the correlation between certain characteristics of US states and their budgeting systems for higher education (HE), and to derive implications for Japanese HE budgeting policy from the results. (Methodology) The US's State Higher Education Executive Officers (SHEEO) conducted a 30-item questionnaire survey on state higher education budgeting for all 50 states from January to March in 2008 (response rate: 78%). Following general and simple analyses, the following four hypotheses were formed and examined with empirical analyses: (H1) there is a significant correlation between the importance of HE budget in the overall state budget and the adoption of funding formulae; (H2) inflation and fluctuation in enrolment affect whether the funding formula approach or the baseline-incremental approach is selected; (H3) justifications of public financing to the state HE sector are influenced by the cost-sharing status between households and the state government; and (H4) the governors' budget proposal and the legislative passed budget are influenced by certain external factors. (Results) H1 was proved with satisfactory statistical significance. However, H2 showed a result opposite to that originally expected, and H3 could not be proved statistically. These results indicate that the funding formula approach is used more frequently by states which recognize their HE budget as more important comparative to other states and which have experienced greater fluctuations in inflation than the other states over recent years. With regards to H4, the financial burden of households did not affect the justifications selected. Governors' proposals were significantly influenced by the budget volume of primary and secondary education, while legislative passed budgets were largely determined by state unemployment rate. (Conclusions) The results show that funding formulae are in use in more unstable situations and that the decision makers executive and legislative branches do not recognize the importance of the bases of budgeting requests and justifications on the providers' side. (Recommendations) The budgeting system for Japanese national universities is simply dominated by fiscal reform measures, and has much to learn from the strategic decision-making involved in US state HE budgeting systems. (Additional Data) Manuscript contains 16 tables, 13 figures and 35 endnotes.