The Changing Finances of Public Higher Education Organizations: Diversity, Change, and Discontinuity

The environment surrounding U.S. higher education has changed substantially over the past 40 years. However, we have a limited understanding of what these changes mean for the higher education organizations (HEOs) that occupy this organizational field. In this paper, I use descriptive statistics and multilevel latent class analysis (MLCA) to analyze the financial behaviors of public four-year HEOs from 1986 to 2010 to evaluate how HEOs adapt financially to their changing environments. I advance the current conceptual and empirical understanding of public HEO behaviors by evaluating how public HEOs utilize combinations of revenue and spending streams to accomplish their mission and the extent to which the revenues and spending patterns of these institutions are related. Descriptive results confirm the shift away from state funding toward tuition revenues and the relative stability in spending patterns. MLCA results, which allow for the investigation of how combinations of revenue and spending streams work together, indicate that public HEOs are changing the combinations of revenues they rely on in different ways, revealing multiple specific pathways for how public HEOs adapt to their changing environments. The spending profiles, in contrast, remain stable with only a few HEOs changing their profile over time. I argue that the loose coupling between revenues and spending and discontinuity in their patterns of change over time suggests that public HEOs are able to establish a buffer between their environment and spending or activities that allows them to continue engaging in the same broad set of activities despite environmental changes.