The Strategic Alignment of State Appropriations, Tuition, and Financial Aid Policies

Supplement or Supplant? Estimating the Impact of State Lottery Earmarks on Higher Education Funding

Education Finance and Policy ◽

10.1162/edfp_a_00262 ◽

2020 ◽

Vol 15 (1) ◽

pp. 136-163

Author(s):

Elizabeth Bell ◽

Wesley Wehde ◽

Madeleine Stucky

Keyword(s):

Higher Education ◽

Financial Aid ◽

State Funding ◽

State Appropriations ◽

Higher Education Funding ◽

Difference In Differences ◽

Alternative Funding ◽

Funding Mechanism ◽

Percent Increase ◽

The Impact

In the wake of declining state support for higher education, many state leaders have adopted lottery earmark policies, which designate lottery revenue to higher education budgets as an alternative funding mechanism. However, despite the ubiquity of lottery earmarks for higher education, it remains unclear whether this new source of revenue serves to supplement or supplant state funding for higher education. In this paper, we use a difference-in-differences design for the years 1990–2009 to estimate the impact on state appropriations and state financial aid levels of designating lottery earmark funding to higher education. Main findings indicate that lottery earmark policies are associated with a 5 percent increase in higher education appropriations, and a 135 percent increase in merit-based financial aid. However, lottery earmarks are also associated with a decrease in need-based financial aid of approximately 12 percent. These findings have serious distributional implications that should be considered when state lawmakers adopt lottery earmark policies for higher education.

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Financing College Opportunity

The Annals of the American Academy of Political and Social Science ◽

10.1177/0002716214540849 ◽

2014 ◽

Vol 655 (1) ◽

pp. 143-162 ◽

Cited By ~ 14

Author(s):

Michael K. McLendon ◽

David A. Tandberg ◽

Nicholas W. Hillman

Keyword(s):

Higher Education ◽

Financial Aid ◽

State Appropriations ◽

State Spending ◽

Governance Arrangement ◽

Middle Income ◽

Public Subsidy ◽

Spending Patterns ◽

Aid Programs ◽

Higher Education Subsidies

Some states invest relatively heavily in financial aid programs that benefit lower-income citizens, while other states concentrate their investment in programs that benefit students from higher-income backgrounds. States also vary in their levels of direct appropriations to campuses, a form of public subsidy that has long been viewed as benefitting middle-income citizens. What factors influence states to allocate higher education subsidies in a more or a less redistributive manner? This article reports on a study that examined sources of variation in state spending on need-based aid, merit-based aid, and appropriations over the period 1990–2010. Findings document relationships among spending patterns and structural and political conditions of states, indicating a “trade-off” between spending on merit- and need-based aid; as states invest more in the former, they reduce spending on the latter. We also show that the presence of a Republican governor and the strength of Republican representation in statehouses each is associated with increased state spending on need-based financial aid. Our results further show that increased wealth is positively associated with state spending on merit-based financial aid programs and state appropriations for higher education, but not need-based financial aid. We also find distinctive patterns of state support for higher education depending on the degree of centralization of a state’s governance arrangement for higher education; namely, the presence of a highly centralized structure is associated with decreased spending on merit-based aid programs and increased state appropriations to colleges and universities.

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