Will further state higher-ed funding cuts hinder economic innovation?

New analysis shows Medicaid growth could jeopardize higher education funding.

hed-fundingA new analysis of state spending projects reveal that a slowing in the growth of the labor force will lead to slower economic growth over the next decade, while rising Medicaid costs will further reduce funding available for higher education and other discretionary programs.

These trends will make it more difficult for states to sustain higher education spending at a time when many economists argue that 60 percent of U.S. working-age adults must have a postsecondary credential by 2025 for the nation to maintain its economic edge over the rest of the world.

The study, “Crowded Out: The Outlook for State Higher Education Spending,” was released by the National Commission on Financing 21st Century Higher Education, which is directed by Ray Scheppach, an economic fellow at the University of Virginia’s Miller Center. The commission contracted with Moody’s Analytics to project and analyze state-by-state spending from 2014-2024. Spending categories included Medicaid – which is the major individual entitlement in most states – and higher education, as well as overall spending projections.

(Next page: Critical questions about how states will maintain higher-ed funding commitments)

Laura Ascione