EXECUTIVE SUMMARY ...1INTRODUCTION ...3 FUNCTIONS IN STATE HIGHER EDUCATION ROLE ...4 HISTORICAL PERSPECTIVE ...5 Phase 1: Late 19th century through end of World War II: From single publ
Late 19th century through end of World War II: From single public
institutions to the early development of systems and state coordinating boards
Driven by the drive for efficiency during the Great Depression, the nation's public higher education institutions were established, and their purpose shifted toward societal needs as the country mobilized its human, intellectual, and industrial capacity for war In this period, states began consolidating universities under single statewide boards to achieve economies of scale and to counter political pressures arising from competing regional interests.
Higher education in the United States during the early 19th century was largely private, with only a few notable exceptions The establishment of the University of Georgia in 1785, Ohio University in 1804, and the University of Virginia in 1819 illustrates how a small number of institutions broke the prevailing private pattern and helped shape the evolving landscape of American higher education.
1819 – states played a limited role in higher education until the establishment of Land-Grant universities in the 1860s and 1870s.
From the Morrill Land-Grant Act of 1862 through the Progressive Era and World War I, the United States saw the rapid establishment of new state universities and the initial development of state normal schools to prepare teachers These institutions laid the groundwork for a growing public higher education system, with normal schools evolving into broader programs of teacher training By the mid-20th century, many of these schools had transformed into state colleges and universities, expanding access to higher degrees and strengthening public education nationwide.
By the end of World War II, 18 states and territories had created statewide structures that operated between individual public institutions and state government Fourteen states formed consolidated governing boards to oversee multiple institutions that previously had their own governing boards or a board for a single statewide university Two states had statewide coordinating boards—Kentucky and Oklahoma New York maintains a unique regulatory structure for all education in the state under the Board of Regents, dating back to 1784 Although subject to periodic amendments over the past century, the basic legal framework of most statewide boards remained essentially the same in 2015 as it was 60 years earlier.
Across the states, reformers shared a common objective: to eliminate corruption, modernize—and often centralize—state government, and push back against the centrifugal pull of local and regional politics The changes were framed as a way to curb perceived counterproductive lobbying of the legislature for state funding, reduce the duplication of academic programs and activities, and limit political intrusion and corruption.
In the phase following World War I through World War II, the process of consolidation continued Four states and the Alaska Territory established new consolidated boards prior to 1945: Oregon (1929), Georgia
From 1931 to 1945, reform efforts led to the formation or restructuring of state boards in several states, including Alaska (1934), Rhode Island (1935 and 1939), and Arizona (1945) A review of the debates surrounding the formation of these boards reveals themes that still resonate with policymakers today: concerns about unnecessary duplication, competition among the state’s regions for new institutions, and reactions to corruption and political infighting among agencies lobbying the state legislature in the budget and appropriations processes Severe economic conditions, coupled with controversies over institutional lobbying and political intrusion, motivated several states to revise their prior state-level structures (George, Mississippi, North Dakota and Oregon).
As noted earlier, two states established statewide coordinating boards: Kentucky (1934) and Oklahoma
By 1941, three states, including New York, had established an overarching coordinating structure These boards were responsible for overseeing the fiscal relationship between the institutions and the state, including budget development and resource allocation The issues that led to the formation of these boards were similar to those that spurred consolidated governing boards—efforts to introduce rational, centralized governance to otherwise contentious political relationships.
During the first half of the 20th century, the state's primary role was to provide funding to relatively autonomous governing boards of public universities The relationship between public higher education and state government was direct, with governing boards reporting to the governor and the state legislature and without an intermediary entity The main state duties included chartering institutions, appointing and confirming governing board members, and supplying financial resources for both development and day-to-day operations In this era, the link between the state and public institutions remained straightforward and uncomplicated.
In the first half of the 20th century, states frequently granted public colleges and universities substantial autonomy as they established new higher education institutions The main exception to this pattern concerned the governance of normal schools and teachers’ colleges, which were largely administered by state education departments under the oversight of state boards of education.
STATUS AT THE CONCLUSION OF PHASE 1
The state role in terms of the six functions is summarized in Figure 1.
FIGURE 1: SIX STATE HIGHER EDUCATION FUNCTIONS IN EARLY 20TH CENTURY
State finance policy: budgeting, appropriations and resource allocation
Governing board staff develops consolidated budget request; state legislature appropriates funds directly to the board No intermediary agency
Use of information Limited as required in the budget process: to institutional data on expenditures and revenues, students, human resources and facilities
Administration/service agency functions None
System and institutional governance Limited number of consolidated governing boards that functioned more as single boards for multiple public institutions rather than as systems
End of World War II to 1972: Massive enrollment growth, dramatic increase in state
increase in state coordinating boards and more complex state/higher education relationships
The second phase, from the end of World War II to 1972, marked a dramatic expansion in which higher education in the United States moved decisively from an elite to a mass system The year 1972 is pivotal because the federal Education Amendments of 1972 directly affected state-level structures World War II reshaped the public benefits of a strong higher education system, turning what had been considered private benefits—aside from narrowly defined public workforce needs—into a broader public good Before the war, higher education benefits were regarded as private; after the war, the case for public benefits grew stronger The Truman Commission and the Vannevar Bush report helped catalyze this shift, underpinning reforms and policy changes that supported the expansion.
Science – The Endless Frontier linked public investment in higher education to national security and to the nation's future as a democracy, a view that helped catalyze the establishment of the National Science Foundation By presenting basic research as a public good that strengthens national security and democratic resilience, it tied federal support for universities to both security and economic competitiveness This enduring perspective shaped U.S science policy for decades by formalizing the connection between science funding, national security, and democratic vitality.
During this phase, the state's role in higher education shifted from a relatively passive funder to an active architect of capacity, access, and opportunity Statewide coordinating boards emerged as the dominant mechanism to implement this new mandate, charged with developing master plans, overseeing the creation of new academic programs, institutions, and branch campuses, and establishing methodologies for rational resource allocation among colleges and universities This transformation—from viewing higher education as a private benefit to treating it as a public good—has been underscored by a dramatic increase in the state’s share of financing relative to student contributions in the post‑war era.
Before World War II, 53 percent of funding came from state and local appropriations and 47 percent from tuition and fees By 1949–50, the state and local share rose to 58 percent, while the contribution from tuition and fees declined to 43 percent (Figure 2).
FIGURE 2: BALANCE BETWEEN TUITION AND FEE REVENUE AND STATE AND LOCAL REVENUE, ALL HIGHER EDUCATION INSTITUTIONS, 1919-20 TO 1976-77*
Source: NCES, Digest of Education Statistics (2011), Table 333, Current Fund Revenue of Institutions of Higher Education,
*Each revenue source as a percent of the total of student tuition and fees plus state and local of revenue Revenue includes current fund revenue for all degree-granting institutions both public and private
Student State and local revenue
Stimulated by the GI Bill, enrollment increased 64 percent after the war from a pre-war level of 1.5 million to 2.4 million by 1949-50 In the following decade, enrollment continued to grow by another 49 percent to 3.6 million by 1959-60 14
The major explosion of enrollments occurred beginning in the late 1950s, roughly at the time of the Russian launch of Sputnik in 1957 and the United States’ response with the enactment of the National Defense Education Act of 1958 The states were a driving force behind this expansion After gradual growth directly following the war, both the number of institutions and enrollments took off in the following decade with a
120 percent increase in enrollment, from 3.6 million in 1959-60 to 8 million by 1969-70 In the same phase, the number of institutions increased from 2,004 to 2,525 (Figure 3) 15
FIGURE 3: TOTAL FALL ENROLLMENT AND TOTAL NUMBER OF INSTITUTIONS, 1939-40 TO 1979-80
NCES, Digest of Education Statistics, Historical Data
From 1960 through the early 1970s, public higher education experienced a surge in enrollments alongside its most significant move toward centralization, as institutions reorganized around multi-campus systems rather than isolated, freestanding campuses Clark Kerr, in 1971 in the introduction to the Carnegie Commission report on multi-campus universities, observed that the freestanding campus—with its own board, its president, its alumni, its faculty and student body, all in a single location and without a coordinating council above it—had become the exception, whereas in 1945 it was the rule He suggested that the expanding multi-campus system could be understood as the new normal for public higher education, signaling a shift toward centralized governance and coordinated administration across campuses.
“as one facet of bureaucratic centralism in American society – in its government, its industry, its trade unions, its education at all levels.” 16
Total fall enrollment Total institutions
The shape of state higher education systems had changed dramatically from a limited number of public universities and normal schools to a complex and more diversified network of public institutions
Four developments in governing structures contributed to this complexity:
Multi-campus universities originated from the expansion of branch campuses tied to a major state university, extending access to higher education across regions As enrollment and academic offerings grew, these branches gradually evolved into full-scale institutions themselves, developing independent governance, degree programs, and campus identities while maintaining ties to the original university system.
During the transformation of normal schools and teachers’ colleges into comprehensive state colleges and universities, states often separated governance from the state education department and formed consolidated governing boards with authority over several institutions In contrast, a few states—such as New Jersey and Virginia—established separate governing boards for each institution, though these boards remained under the regulatory oversight of a state coordinating board.
The development of community colleges produced two primary state-structure models, distinguished mainly by local governance and funding levels The first model relies on state regulatory or coordinating agencies—typically housed within state education departments—to oversee locally governed and funded colleges, as seen in Iowa and Kansas The second model uses state community college governing systems in states where the state is the principal funding source, as exemplified by Virginia.
State vocational and technical schools evolved into postsecondary institutions, often developing in parallel with the existing community college system These state technical college systems were most often controlled and funded through the state board of education, which serves as the federally designated board of vocational education This arrangement positioned vocational education within a postsecondary framework and linked training to the broader governance of state and federal vocational education programs.
States pursued multiple strategies to manage the growing complexity of state higher education relationships The issues varied with the prewar structure and the diversity of public institutions, prompting both the creation of new statewide boards and the realignment and consolidation of major sectors within the state system Many reforms accompanied the transfer of formal normal schools into state college and university system boards The rapid expansion of community colleges and postsecondary technical institutions added new governance and coordination challenges for state higher education.
Each of the 18 states that had established statewide coordinating and governing structures in the pre-war period took different approaches to managing growth.
Prior to the war, Kentucky, Oklahoma, and New York had already established statewide coordinating entities, and as demands intensified these bodies were granted expanded powers As these states expanded access to higher education through community colleges and other two‑year institutions, they did so within the framework of their statewide coordinating structures.
In the group of 15 states with consolidated governing boards, Georgia was the exception, and these states generally had relatively small populations Governors and legislators could rely on the governing board to manage most—though not all—issues related to expansion and state funding priorities The development of new community colleges and postsecondary vocational/technical institutions presented a challenge because the existing boards were responsible only for the state’s four-year institutions Of these 15 states, seven—Arizona, Florida, Iowa, Kansas, Mississippi, Oregon, and South Dakota—also developed locally governed and financed community colleges or postsecondary technical institutions In most cases, oversight of these two-year institutions fell to the state education department rather than the higher education governing board As a result, these states had no single state-level entity responsible for coordinating all public institutions, both four-year and two-year.
1972 through mid-1980s: Impact of the Education Amendments of 1972,
This phase marked a gradual slowing of the expansion of the prior decade and growing concerns about overexpansion and the potential need for retrenchment in the face of projected enrollment decline The Education Amendments of 1972 began this phase and would have profound, long-term impact on the nation’s higher education system An immediate impact was the requirement that states establish so-called 1202 State Commissions to be eligible for certain federal funding The more profound long-term impact would be the restructuring of governance and funding in higher education at the federal and state levels, shaping policy directions for years to come.
JRejection of proposals for federal direct aid to institutions.
JEnactment of the new federal Basic Grant student aid program (subsequently renamed Pell Grants).
JFederal recognition of a broader definition of providers, especially for-profit institutions, eligible for federal student financial aid.
This phase also included changes in the state budgeting processes and the statutory responsibilities of state higher education agencies.
In the third phase, the federal government enacted landmark laws with provisions that required states to establish new governance structures During Phase 2, several federal laws required states to establish or designate state agencies, including the Higher Education Facilities Act of 1963, which mandated states to establish state facilities commissions Provisions of the Higher Education Act of 1965 further required the states to establish or designate state agencies and to strengthen state capacity for licensure or authorization of institutions The Education Amendments of 1972 extended these mandates even further by requiring the states to establish so-called 1202 State Commissions in order to be eligible for federal assistance for comprehensive statewide planning and funding for expansion and improvement of community colleges and postsecondary occupational education.
Implementation of the 1202 commissioners raised controversial questions about the federal government's role and the perceived threats to institutional autonomy A central challenge for states—and especially for existing SHEEO agencies—was the federal requirement that a single state entity assume responsibility for comprehensive statewide planning of the entire postsecondary education system As noted earlier in describing state structures in 1972, at least half of the current SHEEO agencies did not meet federal standards for either membership or the scope of their planning authority, and these deficiencies highlighted the principal conflicts.
J The powers of consolidated governing boards, as noted earlier, were focused on governing public institutions, not on comprehensive planning for the whole postsecondary education system
Furthermore, they were composed of public lay members, not institutional members, especially not the range of providers specified in section 1202.
Few of the most respected statewide coordinating boards—such as those in Illinois and Tennessee—had the breadth of planning mandate implied by Section 1202, and few of these boards could meet its membership requirements; by contrast, most coordinating boards did not satisfy the requirements of Section 1202.
Did not have responsibility for statewide planning encompassing the independent and for-profit sectors.
Did not include in their membership the kind of “broad and equitable” representation of these sectors
To meet the 1202 commission requirements for a single statewide planning entity, several states established new entities by statute or governor’s executive order, while a few—such as California and Washington—reconfigured their existing state coordinating boards to satisfy the commission’s criteria Florida established the Postsecondary Education Planning Commission (PEPC) in partial response to the federal requirements, though the State Education Department had already performed some of the functions assigned to the new entity Nebraska subsequently established the Nebraska Postsecondary Education Commission as the state’s statutory coordinating entity.
Federal appropriations for section 1203, comprehensive planning, lasted only for two or three years Title X was never funded Section 1202 was subsequently repealed.
Only a handful of the new entities created in 1974–75 continued to play a meaningful role after federal funding ended In several states with consolidated governing boards, the commissions were retained to provide a venue for administrative and regulatory functions that span all postsecondary education sectors—functions such as student aid and institutional licensure or authorization that the SHEEO governing board could not perform Notable examples include the state commissions in Alaska, Delaware, and New Hampshire None of these newly established entities carried a state legal mandate for comprehensive planning of the higher education system as a whole.
The 1202 commission experience illustrates the difficulty of designating a single state entity to oversee the broad and comprehensive planning envisioned in sections 1202 and 1203 When states responded by creating new agencies through a governor’s executive order, the commission’s mandate became limited and could not sustain a meaningful impact on state policy Because the structural requirements were highly specific, few existing agencies qualified, even though they were already engaged in statewide planning that aligned with the federal law.
Thirty years later, as the National Center and similar organizations urged states to establish an entity dedicated to policy leadership for a coherent public agenda, states still faced a central challenge in implementing the 1202 State Commissions: many existing SHEEO agencies could not meet the criteria to operate as genuine state‑level policy leadership entities.
SHIFT IN FOCUS OF STATE HIGHER EDUCATION POLICY
Phase 3 marks a significant shift in state higher education policy, transitioning from Phase 2’s focus on building new capacity to meet rising demand to a focus on more effectively utilizing existing capacity and cutting costs Escalating expenses driven by inflation and sharp reductions in state funding during recessions raised concerns about efficiency and unnecessary duplication Consequently, the annual SHEEO meetings’ discussions moved from expanding capacity to retrenchment and promoting more cost-effective institutional operations.
To reflect these trends, several states amended the statutes governing statewide coordinating boards, expanding their authority to review existing academic programs and identify those with low enrollment or weak degree production Some boards were authorized to mandate program closures or to discontinue state funding for low-performing programs These powers remained in the authorizing statutes of certain SHEEO agencies as of 2016.
CHANGES IN STATE FINANCING OF HIGHER EDUCATION
Phase 3 marks the beginning of a long-term trend toward shifting more of the costs of higher education onto students and families, expanding the states’ role in providing student financial aid, and fueling more aggressive concerns from state budget officers and legislatures about cost containment and the efficient use of existing resources While states such as California, Illinois, New Jersey, and Pennsylvania already had long-standing state student financial aid programs, many others began developing these programs in response to incentives created by the State Student Incentive Grant Program enacted in the Education policy framework.
These changes affected state higher education agencies in different ways Governing boards focused on managing in an environment of stable or declining enrollments and state appropriations, while coordinating boards faced similar pressures plus the added challenge of funding both institutions and developing state student aid programs Affordability concerns rose as institutions pressed to raise tuition.
During the late 1970s, a climate of retrenchment and economic crisis amplified existing tensions between colleges and universities and state higher education agencies New state mandates expanded the regulatory and budgetary reach of these agencies, tightening oversight over institutional governance and funding decisions Consequently, the relationship between higher education institutions and state agencies grew more strained, shaping how institutions plan, allocate resources, and navigate compliance.
Coordinating boards formed from the 1950s through the 1970s focused primarily on higher education issues, using master plans that defined goals for access, quality, mission diversity, and efficient use of resources, while outlining capacity-building strategies such as developing new academic programs, expanding facilities, and adding campuses to meet those goals By contrast, the powers and functions of these coordinating boards reflected an internal focus, differing from the external emphasis on public agenda reforms that emerged in the mid-1990s and beyond (as described later in this paper).
CHANGING ROLE OF STATE HIGHER EDUCATION AGENCIES IN STATE DECISION-MAKING AND BUDGET PROCESS
During the early development of state coordinating boards, governors and state legislators relied on these bodies as the primary source of objective analysis on budget issues and as key arbiters in decisions about competing institutional interests As Phase 2 notes, the actual powers of these entities varied widely: in some states the SHEEO agency had a limited role in the state budget process, while in others it occupied a central position within the process.
1980s through mid-1990s: Fundamental change in the state role away from
The early 1980s marked a turning point in the states’ role in higher education, a shift that over the next three decades evolved into a more aggressive push to link higher education with state priorities The changes involved four basic elements that together reshaped policy, funding, governance, and accountability to embed higher education within public aims.
J More aggressive leadership of governors in defining public priorities
J A shift in accountability from accountability for inputs and efficient resource utilization to accountability for outcomes – especially accountability for student learning outcomes.
J A change in state finance policy from cost-reimbursement and building capacity to strategic investment and use of state finance policy to leverage institutional change toward state priorities
J Decentralization and deregulation: granting public institutions more management flexibility.
Decentralization emerged as a counterforce to the earlier push for centralization and tighter state regulation Many of these reforms were driven by state leaders, who sought to expand their influence by devolving authority to regional and local levels, enabling governance to be more responsive to local conditions while preserving overall state cohesion.
“reinventing government,” the growing impact of market forces on higher education and interest in
These broader forces helped spur proposals for radical decentralization, deregulation, greater reliance on market mechanisms, and a shift in funding priorities and accountability from inputs to outcomes under the banner of new public management In Europe, the debate intensified about redefining the government's role—from centralized control and subsidy of institutions to steering at a distance and employing new policy tools to mobilize markets in the public interest The same themes emerged in U.S higher education debates during the period.
These changes would carry significant implications for state higher education agencies: some would adjust to the new demands, while others would remain focused on statutory mandates defined in Phase 2 and 3, resulting in a drift away from the center of state higher education policymaking.
Clark Kerr foresaw a shift in the U.S higher education landscape from a federal-centered period (1955–85) to a new era he called a "state period," with governors and other state leaders becoming among the most influential actors in higher education He argued that these leaders were increasingly recognizing higher education's critical role in interstate and global competition, especially as concerns about jobs and economic development grew In this context, states were intensifying efforts to strengthen their higher education systems, viewing them as essential assets in competing with other states and with foreign countries.
Rising urgency from the 1983 report A Nation at Risk, along with its follow-up Involvement in Learning, expanded governors’ influence on higher education policy As a result, institutions began shifting accountability away from inputs such as enrollment and credit hours toward measurable outcomes, with a stronger emphasis on the assessment of student learning Before the 1980s, states mainly focused on resource allocation and utilization and seldom questioned the actual outcomes of a college or university education.
By the end of the 1980s, questions about outcomes (especially student learning outcomes) dominated states’ agendas A major impetus for this change was a National Governors Association task force report,
Time for Results marked a period when state policies requiring colleges and universities to assess student learning and disclose outcomes to state authorities and the public pushed higher education toward greater accountability Among the forces driving change, state-mandated outcome measurement and public reporting elevated attention to student learning and institutional performance By the mid-1990s, support for state assessment initiatives waned, in part due to budget constraints and in part because of strong institutional opposition Nevertheless, these state-led reforms left a lasting imprint on accountability expectations, influencing regional accreditation standards and other requirements that shape how higher education is evaluated today.
State higher education agencies across the country joined early in state assessment initiatives, with initial leaders including the Missouri Commission on Higher Education and the New Jersey Board and Department of Higher Education However, strong institutional resistance to these initiatives soon led many states to withdraw As noted, opposition to the aggressive leadership of the New Jersey Department of Higher Education in assessing student learning directly contributed to the agency’s demise in 1994.
Across the 1980s, states advanced new funding approaches for public institutions, notably competitive, incentive, and performance funding This sharper state role accompanied a shift from enrollment-based, cost-reimbursement funding toward targeted finance and regulation designed to link institutional capacity to explicit state goals (37, 38).
Nationwide, the pattern of change was mixed: some states moved to consolidate, while others rejected consolidation and opted for decentralization, deregulation, and greater flexibility in institutional management In the early 1980s, several states strengthened statewide coordinating boards, whereas other states pursued centralized governance and weakened or eliminated the capacity for coordination across the public sector.
By the mid-1990s, the policy environment for state higher education coordination and governance had become uncertain:
Many long-serving executive officers of state coordinating boards were no longer in their positions, creating a leadership gap for state agencies Agencies faced growing challenges in recruiting leaders who could win the confidence and respect of both state political leadership and the state higher education community.
J Legislative leaders who had sponsored legislation establishing the first state coordinating agencies had left office The beginning of legislative term limits increased the turnover of legislative leaders and the loss of memory regarding the intended role of coordinating agencies in advising the legislature on appropriations and other issues.
Many state coordinating boards struggled to shift away from their statutory mandates established in Phases 2 and 3, even as Phase 3 brought more sophisticated policy staffs into the governor’s office and legislature, leaving some SHEEO agencies increasingly marginalized in the state budget and appropriations process This loss of capacity largely reflected staffing and budget cuts, with the SHEEO agency viewed as just another interest in the state policy arena In several cases, regulatory authority was weakened, and in others, policy analysis capacity declined as the agency redirected effort toward licensing non-public institutions and administering state programs.
The push toward decentralization and deregulation has weakened the role of state governing boards and prompted questions about the value and effectiveness of existing systems As illustrated by the Illinois case, decentralization of institutional governance amplifies centrifugal political forces within states, making statewide coordination more difficult.
STATUS AT CONCLUSION OF PHASE 4
By the mid-1990s, the state's role in higher education had evolved in fundamental ways since Phase 2, the period when most state higher education entities were formed Yet the degree to which states and state agencies made this transition varied greatly across the country, as the remainder of the paper emphasizes Figure 6 summarizes the major policy shift across six functions.
FIGURE 6: SIX STATE HIGHER EDUCATION FUNCTIONS 1980S THROUGH MID-1990S
Weakening of centralized planning authority of some state agencies.
J From master planning for rational development of public institutions and systems; planning for static institutional models.
J To strategic planning linking higher education to state priorities; planning for dynamic market models in a more decentralized and deregulated system.
Beginning of more aggressive role of governors in establishing state priorities external to the higher education system: contributions to workforce needs and R&D linked to state economic development.
State finance policy: budgeting and resource allocation
J From state subsidy of public institutions to build capacity.
J To selective state investment on the margin to meet state priorities
The Great Recession and Economic Recovery (2008 to the present)
The current sixth phase, which began with the Great Recession and extends to the present, continues the core themes of earlier periods while adding a heightened urgency for fundamental reform Heightened concerns about the economic crisis and competitiveness are pushing states to adopt long‑term public‑policy goals President Obama set a bold aim for the United States to achieve the highest college‑graduation rate in the world by 2020 The Lumina Foundation’s Big Goal targets raising the share of Americans with high‑quality degrees and credentials to 60 percent by 2025 Initiatives such as Complete College America and other programs supported by the Bill & Melinda Gates Foundation are shaping state policy and driving meaningful change.
CHANGES IN STATE CAPACITY FOR POLICY LEADERSHIP
During the early years of the economic crisis, state capacity for policy leadership weakened, illustrating how periods of governance change tend to coincide with severe economic pressure The Great Recession of 2008–2010 followed this pattern, and across the country responses were mixed: a few states took dramatic steps to centralize governance, but the dominant trend continued to favor deregulation and decentralization.
The economic and political environment of the Great Recession further eroded the capacity of other state higher education entities:
In several states, governors have asserted control over previously independent coordinating agencies by requiring executive officers to be appointed to serve at the governor’s pleasure or by tying the agencies directly to the governor’s office In the short term, these changes increase the likelihood that the governor will consider the agencies’ advice, but they also erode the agencies’ independence and their ability to provide objective analysis to both the governor and the state legislature, as well as to maintain a trusting relationship with higher education leadership Because agency leadership typically changes with a new governor, the agencies’ capacity to sustain attention to long-term goals and reforms is weakened.
As agencies have tried to shrink their regulatory footprint and avoid involvement in institution-level governance and management, they have been drawn back into regulatory tasks that mirror their former responsibilities Legislators, frustrated by decisions of governing boards and presidents—especially on sensitive issues like tuition increases and in the face of institutional lobbying and governance controversies—often issue mandates that require the coordinating agency to intervene, creating potential conflicts with institutional leaders These legislative mandates expand the coordinating boards’ remit to regulate faculty workload, curricular content, and other substantive issues, thereby heightening tensions between regulators and campus administration The trend signals a cycle where attempts to limit oversight backfire by pulling agencies into core governance debates, rekindling governance friction at the institutional level.
States that operate with two or more large governing systems but lack an overarching coordinating entity struggle to shape a unified public agenda for the state as a whole, across all sectors and institutions The absence of a single coordinating authority leads to divergent policy priorities between systems, hindering cross-sector collaboration and consistent implementation across health, education, infrastructure, and governance.
During the budget crisis and the push to shrink the state workforce, higher education agencies cut staff, reducing their ability to undertake a more strategic leadership mission This diminished capacity leaves these agencies ill-equipped to pursue broader, strategic initiatives and reforms.
Salary limitations for state employees restrict the higher education agency’s ability to compete with public universities for qualified staff, especially those who bring both academic credibility and public policy expertise These wage constraints hinder the recruitment and retention of top researchers, policy analysts, and faculty who bridge academia and government, undermining the agency’s capacity to advance research, teaching, and policy development Consequently, the agency faces a talent gap that challenges its competitiveness relative to public universities and its mission to deliver high-quality education and policy impact.
DISCONNECT BETWEEN STATE BUDGET PROCESS AND FINANCING
State finance policy remains detached from the public agenda for higher education, marking a key policy gap The Phase 2–3 trend review shows that, in the early years of the system (1960–1980), many statewide coordinating boards served as advisers to the governor on higher education finance policy As policy expertise shifted to the governor’s budget office and legislative staffs, the influence of these coordinating boards declined.
Over the past 25 years, state coordinating boards have drifted further from the core decision-making processes of the state budget and appropriations, with Tennessee as a notable exception In the early days of statewide coordinating in Phase 3, boards composed primarily of public (lay) members served as the venue to develop statewide plans and issue budget recommendations Governors and state legislatures relied on the board decision-making process to help resolve tensions between state and institutional priorities outside the politics of the legislative appropriations process Although legislatures reserved the final authority, they looked to board recommendations to frame and guide the overall decision-making process.
Today, a coordinating board’s debate and approval of a strategic plan or budget recommendations often carries limited credibility in the legislative process That credibility increases when the board actively engages the governor and state legislature in its decision-making, signaling alignment with executive and legislative priorities The governor’s budget office and legislature typically rely on the data and technical analysis produced by coordinating agency staff, while placing less weight on recommendations from lay board members, highlighting the importance of solid staff work and transparent processes for effective budget planning.
States that lack a statewide coordinating entity and have two or more statewide governing boards face a gap: there is no formal link between governing boards and the state budget office and legislature to formulate state higher education policy across all sectors As a result, most states lack a venue where top state leaders can jointly set long-term strategic goals for the performance and sustainability of the higher education system and design a strategic financing plan to achieve those goals Public funding remains limited, raising serious questions about affordability for students and families.
In the ideal world state finance policy would:
JFrame funding decisions by relating them to clear state goals.
State decision-makers should synchronize state appropriations, tuition and fees, and student financial aid to preserve affordable access for low-income students When reductions in appropriations necessitate higher tuition and fees, the state must ensure adequate funding for student financial aid to maintain affordable access for these students.
JRecognize that both students and institutions need a degree of predictability in financing:
For students and families as they plan to pay for tuition, living and other costs.
For institutions to carry out their teaching and research missions (for example, academic programs and faculty must be in place as students begin the academic year).
The reality is that decisions regarding state appropriations, tuition and fees, and student financial aid are often:
JNot made with reference to state goals.
JMade by different policymakers on different schedules.
State decisions on higher education funding are fragmented across multiple budget areas Budgets for public employees’ fringe benefits are set separately from the operating budgets of public institutions, while research funding is often allocated within economic development budgets, and workforce training funding is decided in a separate arena.
In many states, particularly where public institutions operate as state agencies, state budget offices and legislative appropriations committees treat state appropriations—and, in some cases, tuition revenues—as resources that can be used to cover budget shortfalls or to balance the overall state budget during the fiscal year The budget office may reallocate funds that were previously appropriated, sometimes including tuition revenue, from the institutions’ budgets mid-year to fund other state priorities, such as healthcare mandates.
Amid a political dispute, the governor and legislature are questioning why the state university system should maintain reserves—unexpended funds carried over from prior years meant to stabilize budgets Too often, these decisions fail to account for how state appropriations, tuition, and student financial aid interact, and they overlook the effect on institutional leaders’ ability to chart multi-year strategies or reallocate resources to ensure sufficient academic staff for students and continued momentum in research projects.
OVERALL POLICY ENVIRONMENT FOR CHANGE