A recent analysis by Andrew Gillen of the Cato Institute challenges the widely held belief that disinvestment in public universities is the primary driver of rising college costs in the United States. According to the study, government funding for higher education has generally increased over the long term, rather than declined.

While state budget cuts following the 2008 financial crisis temporarily slowed support for public colleges, funding levels rebounded by 2019 and have continued to rise. On average, state subsidies amounted to $12,081 per student last year, up from $7,677 in 1980 when adjusted for inflation. Though the trend varies by state—26 states have increased funding steadily, 19 have maintained relatively stable levels, and only five have reduced spending overall—the overall trajectory shows a growth in government investment in higher education.

The perception of widespread disinvestment has been linked to selective comparisons by critics, who often choose specific time frames to highlight declines. For instance, some analyses start from unusually high funding levels in 2001 and end in 2012, a period marked by post-recession cuts. Additionally, critics frequently rely on the Higher Education Cost Adjustment (HECA), an inflation measure that tracks the rising costs of inputs such as faculty salaries, instead of broader inflation metrics. While HECA captures college-specific price pressures, it does not account for general economic inflation, potentially skewing conclusions about funding trends.

Gillen’s analysis also notes that colleges have been able to raise tuition partly because of the availability of federally backed student loans, allowing them to offset increasing costs without prompting substantial cost-saving adjustments. However, contrary to claims that universities cannot respond to cost pressures, many have sought efficiencies—such as employing more adjunct faculty instead of full-time professors—to control expenses.

Interestingly, tuition prices began to decline around the time of the COVID-19 pandemic and are expected to continue falling, amid demographic trends including a peak in high school graduates in 2025 and a stagnation of the wage premium associated with holding a college degree. These factors are likely to intensify competition among colleges for prospective students.

Despite rising overall spending, higher education affordability remains a challenge, and increased funding has not consistently translated into improved student outcomes. As colleges advocate for additional state funding to sustain their budgets, this study suggests that the narrative blaming state disinvestment for tuition hikes is inaccurate. Instead, the issue appears more complex, involving financial aid policies, institutional choices, and shifting market dynamics.