Sadly, the rise in tuition is NOT the result of reductions in funding. Most of it isn't even the result of relative drops in funding if we account for inflation and higher enrollment
In the 1970s, states paid 65% of the costs of college.
By 2013, states covered a mere 30% of college costs.
But let's put that in context.
In 1970, states spent $6.12 billion on higher education.
1970 State spending in 2012 dollars: $37.58 billion.
State funding for higher education today is $74.4 billion
1970 Tuition spending in 2012 dollars: $20.20 billion.
Tuition today is $173.6 billion.
State funding has increased by an inflation-adjusted $36.82 billion. Tuition has increased by an inflation-adjusted $153.4 billion
State spending has gone up by +97% Tuition itself has gone up by +759%.
Why do schools need 329% more funding after adjustments for inflation? Is the U.S population 329% higher? No, it's gone up by about 33% (from 200 million in 1970 to about 300 million in 2010).
Have professors gotten 329% better? Did the dorms need to be 329% nicer? Why do the schools need this much more money? Enrollment?
Here's the problem: tuition costs have far exceeded what it would take to keep funding constant with enrollment. Enrollment has only gone up by 165% since 1970 (from 8 million to 21 million)
http://nces.ed.gov/programs/digest/d12/tables/dt12_220.asp
Two thirds the increase in college tuition since 1970 cannot be accounted for by increased enrollment or inflation.
Where does the money go is largely: Increases in administration size and administrative costs. I think it's a symptom of colleges being run more like businesses, similar to how for-profit private health insurance companies have much high administrative costs than Medicare/Medicaid does.