solicited Does Public Funding for Higher Education Matter ?

Zhang is an assistant professor of higher education at the University of Minnesota and a faculty associate at the Cornell Higher Education Research Institute (CHERI). He thanks Ronald Ehrenberg for his insightful comments on an early draft of the paper. Of course, full responsibility rests with the author. 1 Abstract This study uses panel data to examine the direct link between state funding and graduation rates at four-year public institutions. When other factors are held constant, a $1,000 increase in state appropriations per FTE student at four-year public institutions is associated with about a one percentage point increase in graduation rates. This positive link appears to hold for all research/doctoral, masters, and baccalaureate institutions. In addition, there is evidence that modest increases (or a decrease) in state funding are associated with rapid increases in tuition rates charged at four-year public institutions, which likely result in an additional negative impact on graduation rates. Simply put, there is no such a thing as free lunch when it comes to graduation rates at public higher education institutions.