The result has been a narrowing of educational choices for some students and concerns over deteriorating quality of public institutions.

Some organizations have proposed that the federal government take several important steps to improve the funding of public higher education and to increase student access to these institutions:

• Expand federal matching programs that encourage increased state appropriations for higher education.

• Reform the Medicaid program to slow the growth of state commitments that crowd out spending on higher education.

• Focus national resources on improving the purchasing power of Pell awards.

• Offer matching funds to states based on their funding of means-tested grant aid.

Higher education has been central to the strength of the US economy over the last half-century. Broadened access for students has created social and economic opportunities for millions of Americans. The integration of education and research has become a key pillar of our research and innovation system. And the new knowledge generated has provided a strong engine for innovation and economic growth.

Public institutions are a particularly important component of America’s higher education system. They enroll and educate one-quarter of all 4-year undergraduates (see Figure PHE-1). When community colleges are included, public schools account for more than 70% of all undergraduate enrollment (see Figures PHE-2A and B). Many of the nation’s top research institutions, particularly in the Midwest and West, are public universities.

A strong system of higher education is more critical now than ever. Global competition in the knowledge economy is growing. Developed and developing countries are working to create high-quality educational institutions, often using American colleges and universities as a model. They are developing their own pool of knowledge workers and knowledge-sector firms.

For the United States to compete in this environment, American higher education needs to remain preeminent. It must continue to play a central role in the production of knowledge and innovation. It needs to create dynamic environments that will entice knowledge-based companies to locate in this country. The United States should facilitate world leadership of its higher education system by continuing to invest where it counts most.