Abstract: This article considers the role of higher education in state budgets. It empirically models and tests the balance wheel hypothesis in a robust framework. The balance wheel model posits that in good economic times, higher education is an attractive area for states to fund and tends to be funded at a higher rate than other state budget categories. In bad economic times, the reverse is true. Higher education is often one of the first state budget categories to be cut, and it is cut more than other state budget categories due in part to its ability to raise outside revenue by charging tuition. This article expands upon previous work on the non-linear balance wheel model by including extensive controls for the economic, political, and higher education characteristics of each state. It finds evidence, robust to alternative specifications, of the balance wheel model over the time period from 1985–2004.
Journal of Education Finance – University of Illinois Press
Published: May 8, 2011
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