The NCSL Blog

02

By Allison Hiltz

States collectively spent $77.7 billion in higher education in academic year 2014. This is slightly more than the federal government’s $75 billion in higher education spending, which includes $30.4 billion provided by the Pell Grant program.

person holding pencil and studyingTo put this in perspective, the combined spending is nearly triple what states collected in property and motor fuel taxes that same year.

Even so, this spending accounts for only a fraction of the total expenditures made in efforts to assist students and families facing mounting tuition costs.

For starters, this number excludes the $101 billion in student loans distributed by the federal government. It also excludes the forgone revenues from tax expenditures on higher education at both the state and federal levels.

"How Governments Support Higher Education Through the Tax Code," a new report from The Pew Charitable Trusts, analyzes the amount and methods by which governments spend on higher education, independent of direct spending.

These can include credits and deductions for tuition payments, tax exemptions for college savings plans, and exclusions of student loans from taxable income. Because most states use one of the federal definitions of income, they offer the same exclusions and deductions.

In addition, every state that levies a personal income tax has its own higher education tax expenditures, though few estimate their costs.

Pew’s report estimates the costs for roughly two-thirds of higher education expenditures in nine states plus the District of Columbia. Combined expenditures in California, for example, resulted in $443 million in foregone revenues, 43 percent of which was for the personal exemption for dependent students ages 19-23.

New York, on the other hand, offers either a tuition credit or deduction, the foregone revenue of which totals $240.3 million, or 53 percent of their total higher education tax expenditures.

Allison Hiltz is a research analyst in the State Services Division.

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About the NCSL Blog

This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.