State Spending on College Construction Does Not Track Economy, Study Finds

November 17, 2010

State spending on college construction is unlike other higher-education expenditures in that it does not reliably rise or fall in tandem with the economy, according to research being presented on Thursday at the annual conference of the Association for the Study of Higher Education.

Spending related to college construction tends to rise both in the best of times and the worst of times, and to fall when state spending on college operations and other areas of the budget are fairly stable, concludes the study, by Jennifer A. Delaney, a professor of educational organization and leadership at the University of Illinois at Urbana-Champaign, and William R. Doyle, an assistant professor of higher education at Vanderbilt University.

Although states' general-fund spending on college operations has been extensively analyzed over the years, the study by Ms. Delaney and Mr. Doyle breaks fairly new ground with its focus on higher-education construction, which often involves one-time projects and is financed through debt.

"This is a welcome analysis," says James C. Palmer, a professor of higher education at Illinois State University who oversees an annual survey of state higher-education spending. The new study, Mr. Palmer says, shows "the planning of capital projects is a different beast than the planning of annual budget cycles that the states go through."

When it comes to tax-dollar support for college operations, the accepted wisdom among policy analysts is that state appropriations function as a "balance wheel," dropping faster than other areas of spending in hard times, when state governments look to cut discretionary expenditures to balance budgets, and rising faster than other areas of spending when times are flush. The examination of state spending on college construction conducted by Ms. Delaney and Mr. Doyle shows that it does not even rise or fall by the same degree as overall state spending, much less track overall spending in an exaggerated "balance wheel" pattern.

In fact, state spending on college construction does not even track state spending on construction in other areas, such as highways, the two researchers say in paper on their study. Such a finding, the paper says, "makes us wonder what forces might be driving higher-education capital budgets."

Along with calling for more research to determine exactly what factors drive state expenditures on college construction, the paper says much also needs to be learned about the economic impact of such appropriations. "While policy makers have and will continue to provide billions of dollars both for the creation and maintenance of buildings for higher education, we know next to nothing about the effects of these expenditures at the state level," the paper says.

The two researchers based their study on U.S. Census Bureau data on state spending on construction from 1985 through 2004. They sought to statistically control for factors that could cloud their analysis, such as population growth, unique characteristics of state higher-education systems, and changes in the partisan makeup of state legislatures.