The highs and lows of higher education appropriations : a business cycle perspective / by Madison Whitcomb.

This paper analyzes whether Pennsylvania’s State System of Higher Education’s (PASSHE) annual state appropriations per full time equivalent student (FTE) are more sensitive to the Pennsylvania’s business cycle compared to the state appropriations of Pennsylvania’s three state-related research universities. I hypothesize that PASSHE’s annual state appropriations per FTE are more sensitive to Pennsylvania’s business cycle than the three state-related research universities. I test my hypothesis by estimating linear regressions at the 5% and 10% levels of significance. Empirical research indicates that the business cycle, measured by unemployment rate, influences the amount of state appropriations toward higher education. Specifically, research indicates the implications of changes in state unemployment rate are typically seen in the following year. Thus, in measuring the business cycle, I consider the current year’s unemployment rate and the unemployment rate lagged one year. My results indicate that the unemployment rate lagged one year is statistically significant in determining PASSHE’s annual state appropriations per FTE, but not for Pennsylvania’s three state-related research universities. Thus, there is evidence to suggest that business cycle fluctuations effect PASSHE funding more than Pennsylvania State University, University of Pittsburgh, and Temple University.