By Cory Weinberg

Joyce Hesselberth for The Chronicle

College leaders and policy experts couldn’t help but expect gloom in November when California left the future of its higher-education budget up to voters. Nearly $1-billion for the state’s prestigious but hurting higher-education systems was at stake, with most expecting the ax to fall on Golden State colleges.

But voters delivered a win for California colleges when they approved Proposition 30, Gov. Edmund G. (Jerry) Brown Jr.'s proposal to temporarily raise the sales tax by a quarter of a cent and raise income taxes on wealthy residents.

Soon after, Governor Brown offered some good news to the state’s colleges when he proposed small increases to each of the state’s three higher-education systems. That financial bump was approved by the California Legislature in June, after Mr. Brown dropped his proposal to tie some funds to conditions on colleges, like freezing tuition for four years, improving graduation rates, and enrolling more low-income students.

Still, legislative analysts in California reported that higher-education spending would most likely stay flat for the next five years.

Nationwide, some public colleges got a pinch instead of a punch from state legislatures last year. States whittled appropriations to colleges by an average of just 0.4 percent in the 2013 fiscal year—progress for those institutions after they saw a total 7.5-percent drop the previous year, says a report compiled by researchers at Illinois State University and the State Higher Education Executive Officers Association.

Some states—Arizona, Michigan, New Hampshire, Oregon, and Washington—even saw small budget increases after averaging budget losses over the last five years.

Colleges in Florida were among those that took the worst financial hits. There the state legislature cut higher-education spending by 8 percent. New Jersey and Louisiana also saw drops of at least 5 percent.

But the rosier outlook nationwide came as state budgets began looking a bit healthier because of increased tax revenues after years of deficits.

State lawmakers are still grappling, though, with paying for growing Medicaid and pension costs. Those needs may erode the possibility of continuing increases.

Different Models

States do not expect to give colleges the amounts they did before the economic downturn that began in December 2007, said Julie Davis Bell, group director for education at the National Conference of State Legislatures.

Instead, colleges and states need to focus on new models, like redefining the credit hour or using technology to cut costs.

“While states are able to put a little more money in, it’s pretty clear that the level of state funding will never return to where it was before,” Ms. Bell said. “That’s leading to this very interesting conversation about, fundamentally, can states afford higher ed? Or are we looking at a whole new different model of accountability?”

Though budget pain has dulled for most public colleges, some are experimenting more than ever, mostly out of necessity.

In Texas, Gov. Rick Perry has pushed the creation of a $10,000 undergraduate degree, and more than a dozen colleges have announced their plans to offer such credentials. All 23 of Florida’s public colleges, which offer both two-year and four-year degrees, have agreed to create a $10,000, four-year degree, and a lawmaker in California has proposed a bill to create similar programs in his state.

And more state governments are trying to make sure colleges deserve the taxpayer dollars they’re given. Gov. Tom Corbett of Pennsylvania proposed tying budget increases to proof that universities have improved accessibility and affordability. Such a move would take inspiration from new rules in Tennessee meant to reward colleges that increase the number of students completing degrees.

States are also putting the pressure on community colleges to show results, with California and North Carolina unveiling new scorecards to measure how students at those colleges are faring.

New Revenue Structure

The small rebound in state support comes as public colleges are relying more heavily on tuition revenue. The State Higher Education Executive Officers group reported in March that net tuition revenue at public colleges covered 47 percent of their budgets in 2012, a six-percentage-point increase from the previous year.

That’s a huge shift from a decade ago, when net tuition revenue made up only a third of public colleges’ budgets.

Paul E. Lingenfelter, president of the executive-officers association, said in January that colleges are relying on students’ wallets more because states are cutting back how much they are spending.

“Tuition revenues are up substantially due to higher prices and more enrollments, but not enough to offset losses of public funding,” Mr. Lingenfelter explained in a news release accompanying the report. “Students are paying more, while public institutions are receiving substantially less money to educate them.”

Colleges also put about 6 percent more government money into grant-based financial aid instead of merit scholarships or loans during fiscal year 2012—the largest share they put into that pool since 2003.

For instance, Washington State and Pennsylvania spent about 25 percent more into grants in the 2012 fiscal year than they had the previous year.

The spending is geared toward helping the states’ neediest, J. Ritchie Morrow, president of the National Association of State Student Grant and Aid Programs, said.

But some states are concerned about where the money to help students from poor families is coming from.

Iowa legislators voted in June to ban the use of tuition from state residents to help pay for financial aid. Instead, the money will come from general funds and the tuition of nonresidents, with the goal of keeping tuition down for Iowans.