How Are Public Colleges and Universities Funded?

Find out the inner workings of how public colleges and universities, such as big state schools, get funding for all their educational and research enterprises.

How Are Public Colleges and Universities Funded?
Alex Mertz

In a previous BrokeScholar article, we examined how private not-for-profit college get their funding. This time around, we’re taking a close look at how public four-year colleges, for example, the University of Florida (UF), are funded. Public colleges, whether they’re big state schools or small ones, get their funding through a variety of sources, including state appropriations, tuition and fees, research grants, and private donations. 

Read on for a detailed breakdown of each of these funding sources and the implications of these funding models for public colleges and their students.

State Appropriations

State appropriations are the primary source of funding for public colleges and universities. State appropriations are funds provided by state governments to support public institutions of higher education. These funds are typically allocated through the state budget process and are based on a variety of factors, including enrollment, performance, and economic conditions.

At the University of Florida, for example, state appropriations account for approximately 25% of the university's total revenue. This funding is used to support a variety of programs and services, including academic programs, research, student services, and facilities maintenance.

One of the benefits of state appropriations is that they help to ensure that public colleges and universities are accessible to all students, regardless of their ability to pay. State appropriations help to keep tuition costs lower for students and can also provide funding for need-based financial aid programs.

State appropriations, however, are subject to the political process and can be affected by changes in state budgets and economic conditions. Furthermore, state appropriations may not keep pace with the rising costs of higher education, leading to funding gaps that must be filled through other sources.

Tuition and Fees

Tuition and fees are another important source of funding for public colleges and universities. Tuition and fees are charges that students pay to attend college and cover the cost of instruction, facilities, and other services.

Returning to the University of Florida as an example, tuition and fees account for approximately 57% of the university's total revenue. Tuition rates are set by the state legislature and are subject to annual increases. In addition to tuition, students may also be required to pay fees for services such as health care, athletics, and technology.

One of the benefits of tuition and fees is that they provide a stable source of revenue for public colleges and universities. Tuition and fees can also provide funding for student services and other programs that enhance the college experience.

However, tuition and fees can also create financial barriers for students, particularly those from low-income families. High tuition rates and fees can make it more difficult for these students to afford college, leading to reduced access and enrollment rates. Hence the reason why it’s important for students of all sorts to apply for college scholarships.

Research Grants

Research grants are another source of funding for public colleges and universities. Research grants are funds provided by government agencies, private foundations, and other organizations to support research projects and academic programs. At the University of Florida, research grants account for approximately 12% of the university's total revenue. These funds are used to support research in a variety of fields, including medicine, engineering, and agriculture.

One of the benefits of research grants is that they provide funding for innovative research projects and help to advance knowledge in a variety of fields. Research grants can also provide opportunities for students to gain valuable experience working on research projects and preparing for careers in research and academia. This is why, for example, a big public state school like Michigan State University ranks among the best colleges for biology, because of its ability to tap research grants.

There are some drawbacks with research grants. For instance, research grants can also be highly competitive and subject to fluctuations in funding levels. In addition, research grants may not be available for all areas of study, leading to disparities in funding across different academic departments.

Private Donations

Private donations are another important source of funding for public colleges and universities. Private donations are funds provided by individuals, foundations, and corporations to support academic programs, research, scholarships, and other initiatives. Again, using the University of Florida as an example, private donations account for approximately 6% of the university's total revenue. These funds are used to support a variety of programs and initiatives, including scholarships, research, and capital projects.

One of the benefits of private donations is that they provide funding for programs and initiatives that may not be covered by state appropriations or other sources. Private donations can also provide opportunities for alumni and other supporters to give back to their alma mater and support the next generation of students.

On the other hand, private donations can also be subject to donor preferences and may not align with the priorities of the college or university. In addition, private donations may not be available for all areas of study or for students from all backgrounds, leading to disparities in funding across different programs and populations.

Implications for Public Colleges and their Students

The funding models used by public colleges and universities have important implications for both the institutions themselves and their students.

For colleges and universities, funding models can impact their ability to provide quality academic programs and services, attract and retain top faculty and staff, and maintain and upgrade facilities. Changes in funding levels or funding sources can also impact the financial stability of the institution and its ability to plan for the future. Thus, when funding channels get disrupted, like they did during the pandemic, several colleges closed down.

For students, funding models can impact the cost of attendance, the availability of financial aid, and the quality of academic programs and services. High tuition rates and fees can create financial barriers for students and limit their ability to afford college, while funding gaps or reductions can lead to cuts in programs and services that enhance the college experience.

In addition, disparities in funding across different programs and populations can lead to unequal access to education and limited opportunities for students from underrepresented groups. This may help to explain patterns of college enrollment, especially the fact that college enrollment may have peaked in past years.

Policy Implications

The funding models used by public colleges and universities are also influenced by government policies and regulations. State and federal policies can impact the level of state appropriations, the availability of financial aid, and the regulation of tuition rates and fees.

Policies that prioritize funding for public higher education, support need-based financial aid programs, and regulate tuition rates and fees can help to increase access and affordability for students. In addition, policies that support research and innovation can help to advance knowledge and spur economic growth.

Nevertheless, policies that limit funding for public higher education or restrict the availability of financial aid can have the opposite effect, limiting access and opportunity for students. What’s more, policies that deregulate tuition rates and fees can lead to increased costs for students and reduced access to education.

The Bottom Line on Funding Public Colleges and Universities

Public four-year colleges, like the University of Florida, are funded through a combination of state appropriations, tuition and fees, research grants, and private donations. These funding models have important implications for the institutions themselves and their students, impacting access, affordability, and the quality of academic programs and services.

Government policies and regulations also play a critical role in the administration of public colleges and universities, influencing the level of state appropriations, the availability of financial aid, and the regulation of tuition rates and fees.

This is why understanding the funding models and policy implications of public higher education is so important. By learning about and understanding how public college funding works, policymakers, college administrators, and students can work together to create a more accessible, affordable, and equitable system of higher education for all.

Andrew DePietro

Author: Andrew DePietro

Senior Researcher, and Content Strategist

Andrew DePietro is a finance writer covering topics such as entrepreneurship, investing, real estate and college for BrokeScholar, Forbes, CreditKarma, and more.