At the same time pundits are calling for more college graduates, states are cutting funding for their public universities. Despite this many states are still opening new colleges. How can this happen? Well, it has a lot to do with where states open new institutions. They’re often four-year colleges, but very much related to the communities in which they’re located.

According to a piece by Kevin Kiley at Inside Higher Ed:

The two newest public university campuses in Arizona — Northern Arizona University’s campus in Prescott Valley, which is in its second year of operation, and Arizona State University’s Lake Havasu campus, slated to open in fall 2012 — will be testing grounds for some fairly innovative concepts.

The most innovative feature might be one that students never see: how the universities are funded. Unlike other public campuses, neither is receiving direct funding from the state, and both received significant indirect investment from municipal governments and local residents. Whereas the main campuses fund about a quarter of their operations through state appropriations, a percentage that has decreased significantly since 2008, the branch campuses will try to be self-sufficient, operating mostly on tuition revenue, with only some administrative expenses being shared with the main campuses.

The new college will be significantly cheaper than the state’s main public colleges (the University of Arizona and Arizona State) but they also won’t have much to do with the state’s existing higher education system. Kiley reports that in many places across the United States “cities and groups of private citizens” are working to create the infrastructure and supports to build their own colleges.

Because these schools don’t have much to do with the state, these low-cost schools can operate pretty much as they wish. This also means that they’ll be very closely connected to the economies of the towns where they’re located.

It’s too early to tell how successful these institutions are, but check out Kevin Carey’s 2010 article in this magazine, about the University of Minnesota, Rochester, to see how this sort of thing can work.

Schools like these, Carey wrote, are “based on the idea that most of what we know about how a public university should operate is wrong, that it can be done better, for modest amounts of money, right away.”

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Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer