$350 Billion for State and Local Governments Comes at Crucial Time for Higher Education Budgets

By Owen Daugherty, NASFAA Staff Reporter

Those overseeing state budgets hit hard by the impact of the ongoing pandemic may be able to breathe a sigh of relief after President Joe Biden signed the American Rescue Plan (ARP) Act into law last week, which will direct $350 billion in stimulus funds to state, local, and tribal governments to offset losses and hopefully shore up budget shortfalls.

The package allocated the largest amount of funding for state and local governments amid the pandemic and could help states lessen or avoid cuts that were previously made to higher education budgets.

“Public colleges and universities are as crucial an underpinning of this nation’s economy and opportunity for people to pursue their dreams and support their families. That’s why it is imperative that state leaders use the coming infusion of federal dollars to maintain — and ideally improve — their funding for higher education,” a recent brief from the Center for American Progress (CAP) stated. 

Tom Harnisch, vice president for government relations at the State Higher Education Executive Officers Association (SHEEO), said the direct aid for state and local governments has been overshadowed by other portions of the package, namely the $40 billion for institutions and students through the Higher Education Emergency Relief Fund (HEERF), but the impact the $350 billion will have on higher education cannot be understated. 

“This will help prevent another chapter in state disinvestment for higher education. It will give states more flexibility with their budgets,” he said. “It's going to be helpful for all states, but it's going to be game changing for those states that are hardest hit.”

While the outlook for state budgets has been a mixed bag depending on different tax and revenue structures, such as a reliance on tourism or one of the many industries hit hard by the pandemic, states across the board could use extra support for the higher education sector, particularly with enrollment trending in the wrong direction.

For a variety of reasons, higher education funding is one of the first sectors lawmakers look to for budget cuts during times of economic downturn. CAP found that over the past year, 22 states have cut a combined $1.9 billion in funding for higher education for the fiscal year that ends in June, while 23 states were able to avoid making cuts to their higher education budgets in the 2020-21 fiscal year.

Public colleges and universities looking to make up for the budget shortfalls have already laid off more than 300,000 employees and several public institutions have been forced to declare financial state of emergency. 

To this point, the aid from previous coronavirus relief packages has helped but still has fallen short of offsetting the significant losses, providing colleges and universities enough to only cover a fraction of the costs they have incurred due to the pandemic.

The first two rounds of aid from federal stimulus packages directed a combined roughly $37 billion for higher education, while the Coronavirus Aid, Relief, and Economic Security (CARES) Act set aside $150 billion for state and local government aid.

However, a database maintained by the National Conference of State Legislatures (NCSL) found that among 24 states listed, only $2.2 billion of the $150 billion went toward funding higher education institutions and institutions’ reopening costs. 

There have been other forms of support for higher education though, such as Governor’s Emergency Education Relief (GEER) Fund, created in the first aid package and then refilled again in December. Through that fund, at least 34 governors put some amount toward higher education. 

Even so, Harnisch said the $350 billion in the ARP is a critical piece of the package and represents the best opportunity for states to restore cuts already made to higher education or provide additional support.

“Even if just 5% goes to states, that’s huge for higher education,” he said. “We needed this help months ago, but this aid will help prevent layoffs, furloughs, program closures, and tuition increases in the months and years ahead.”

CAP added that states should use their funding to maintain — if not increase — their investments in their public higher education budgets, particularly when it comes to community colleges.

And even though the aid is a welcome reprieve for higher education, CAP added that the impacts from the pandemic will likely be long-lasting, and Congress should look for ways to make higher education more affordable, with a particular focus on how to ensure the investment “mitigates the boom-and-bust cycle of state budgets.”


Publication Date: 3/17/2021

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