Nicky Patton

Current Topics in Budgeting for Student Affairs

5/19/2021

Private vs. Public Funding Models

There are many ways to differentiate between the higher education institutions across the

world. They might be considered big or small, primarily white or historically black, they might

liberal arts institutions, research universities, or trade schools. In the United States, one of the

main ways that we differentiate between these schools is by labeling them private or public.

At the core of the private vs. public discussion is the assumption that private schools are

entirely funded by non-governmental money, and that public schools are entirely funded by the

government. We often assume that private schools are small or incredibly prestigious, while

public schools are incredibly large, as M. Douglas points out in their article “Public and Private:

What's the Difference?” In reality, much of the public sector is made up of community colleges

that are almost entirely funded publicly. In addition, private institutions also owe some of their

revenue to the public, whether through federal grants or in a less obvious way, through the tax

exemption donors get for their gifts, as pointed out by Douglas.

At the core of any higher education institution’s funding are five main sources, as

reported by the National Center for Education Statistics: tuition, private gifts or investments,

government grants and funding, auxiliary income, and other revenue. Most institutions have a

mix of all of these types of funding, regardless of whether they are private or public. However,

public institutions do tend to receive higher amounts of government funding, while private

institutions receive higher amounts of gifts and investments, and charge more for tuition.
 As with all things financial in a capitalist economy, sources of funding for higher

education fluctuate based on how the economy is doing. Douglas stated in his article that “the

public, tax supported percentage of public university budgets has been in decline for over a

decade, even though the public investment in public higher education in total dollars continues to

rise as more and more students enter postsecondary education.” However, Wesley Whistle points

out in his article, “What a Likely Recession Means for Higher Education,” that recessions often

lead to job loss and more people enrolling in colleges and universities. While this might provide

a temporary boost in revenue through tuition, federal and state funding for schools often gets cut

during a downturn in the economy. This means that public institutions lose that stream of

income. However, private institutions are also hit during an economic downturn due to the

decrease of donations given during a recession, as described in Charlie Tyson’s article “Still a

Charity Case.”

How the tightening of a budget impacts a Student Affairs department largely depends on

the institution. For institutions that are largely residential, or that receive a higher percentage of

income from what takes place on campus, such as residence halls, dining centers, and student

activities, the department of Student Affairs might be seen as being higher in value, and thus

might not feel the cuts as much as other departments. On the other hand, for institutions that have

become largely commuter, or take place mostly online, the Student Affairs department might not

be seen as particularly important, and thus might be on the receiving end of budget cuts.

While the classification of a higher education institution as either public or private is only

one way to differentiate between colleges and universities, it is a particularly salient one in

regard to the economy and funding. While private and public schools largely share the same

sources of funding, the percentage of their revenue from these sources differs. These revenue
sources greatly impact how these institutions can respond to economic changes, as certain areas

of income are affected in different ways.

 References

Douglas, M. (2006, March 6). Public and Private: What's the Difference? Inside Higher Ed.

https://www.insidehighered.com/views/2006/03/06/public-and-private-whats-difference.

Postsecondary Institution Revenues. National Center for Education Statistics. (2021, May).

https://nces.ed.gov/programs/coe/indicator/cud.

Tyson, C. (2014, June 17). Charitable giving to higher education restored to pre-recession levels,

report indicates.

https://www.insidehighered.com/news/2014/06/17/charitable-giving-higher-education-res

tored-pre-recession-levels-report-indicates.

Whistle, W. (2020, April 6). What A Likely Recession Means For Higher Education. Forbes.

https://www.forbes.com/sites/wesleywhistle/2020/04/06/what-a-likely-recession-means-f

or-higher-education/?sh=208bacd96f83.