Date of Award
8-2011
Document Type
Dissertation
Degree Name
Doctor of Philosophy (PhD)
Legacy Department
Economics
Committee Chair/Advisor
Dougan, William R
Committee Member
Tollison , Robert D
Committee Member
Tsui , Kevin K
Committee Member
Tamura , Robert F
Abstract
This dissertation addresses the consequences of political influence on state higher education funding at the committee level. The State of South Carolina has a long history of using a formula to determine the appropriate amount of funding that is to be allocated to its colleges and universities. I use the funding level implied by the South Carolina Commission on Higher Education's formula as a counterfactual against which actual levels of appropriation are measured. The membership of key state legislative committees with alumni members is used to determine if colleges receive a greater proportion of their performance funding target than those colleges without alumni on those committees. I find that, in most cases, schools with alumni on the committees receive more funding from the state government than schools without representation. Senators redirect funding more effectively than do Representatives, sometimes startlingly so. Research colleges with an alumnus on the on the Senate Finance committee receive 128% more than the average one-year appropriations than research schools without representation. The same figure for teaching universities is 75% of the average. Also, the proclivity to increase a school's funding appears to be stronger for alumni than for legislators who fight for university funding by dint of constituency. The local representative is redirects about 56% of what an alumnus-legislator does.
As a consequence to this tendency for legislative adjustment of budgets, it is important to know if augmentations to university budgets by state governments crowds out private funding of public universities. Over the past decade both state funding for and private donations to institutions of higher education have exhibited similar patterns. Possibly because the recessions of 2001 and 2007 play such a dominant role over this period it appears as if state-government funding attracts private donations to universities which would constitute a startling result. In order to discern the true effect government funding has on private giving to universities, I adapt the standard Andreoni (1989) model of altruism to include income taxation. In the model, public and private universities differ only in the degree to which income taxes are remitted to them. University-level data on institutional characteristics and data on private philanthropy are combined to construct a panel of public and private institutions of higher education from 1999 to 2008. Even though the correlation between state funding and alumni giving is 0.08, the volatility of state funding leads to as much as 94% proportional crowding out of alumni donations for Doctoral universities and 55% proportional crowd out for small baccalaureate colleges.
Finally, the sensitivity of donors to changes in government funding of public universities raises the question of whether they are similarly responsive to comparable changes in other private sources of funding as they are to public sources of funding. An incredible amount of private money has been flowing into institutions of higher education over the last two decades. Yet, with one exception, no study has attempted to analyze the dynamics involved in funding higher education beyond the crowding-out effect the government has on private giving. This chapter examines the 30-year history of five universities to uncover the effect major private gifts have on the giving of other private donors to the universities. Using a comprehensive listing of all major gifts to institutions of higher education (in excess of $50 million) I am able to determine exactly when subsequent responses to the major gift should occur. The data show that giving to most of the universities, and especially the one public institution in the study does not discernibly change during the five years after the announcement of the major gift in relation to its longer-term trend.
That donors to the public university appear to be unresponsive to a $125 million gift to their university seems contradictory to the demonstrated sensitivity alumni have to changes in government funding. This contradiction could mean private donors view the substitutability of government funding for their own giving differently than they view the substitutability of other sources private funding. It could also mean that donors recognize that only a portion of the large gift can be spent in the same manner that the entirety of the government allocation can. If this is so, it may be that $1 from the government would be worth more in the short run to the university than $1 of giving to the university's endowment from private sources. This effect may be the source of the difference in responsiveness by donors to the changes in two sources of university income.
Recommended Citation
Compton, Benjamin, "Essays in the Political Economy of Higher Education Funding" (2011). All Dissertations. 799.
https://open.clemson.edu/all_dissertations/799