The Effect of State Appropriations on College Graduation Rates of Diverse Students. Policy Report

This report is an updated version of a report published in 2021 (ED623525). It examines whether levels of state funding for higher education are associated with college graduation rates, particularly among underrepresented racial and ethnic groups. The assessment is based on an analysis of state appropriations and the six-year graduation rates of all students as well as the graduation rates of three subgroups, including Black, Latinx, and White students. Using a six-year panel dataset of entering freshman cohorts at most public four-year institutions in the nation, the analyses show that graduation rates can be expected to change as a function of varying levels of state appropriations revenue within institutions. The first analysis examined the average effect of appropriations on graduation rates within institutions over the six-year period. The results indicated that a 10% increase in appropriations would yield a modest percentage point increase in graduation rates. While state appropriation levels have a positive effect on graduation rates on average, the second analysis demonstrated that the effect on graduation rates varies by institution. For the third analysis, tests were conducted to determine whether the effect of appropriations depended on three indicators of institutional type: Carnegie Classification, minority-serving status, and subsidy reliance. The results indicated that the effect of state appropriations does not vary according to whether an institution is classified as a bachelor's institution, master's university, research university, or Hispanic Serving Institution (HSI). However, the effect of appropriations on graduation rates was much larger at HBCUs than at other institutions. A 10% increase in appropriations was associated with a 1.55 greater percentage point increase in graduation rates of Black students at Historically Black Colleges and Universities (HBCUs).