Report: Public Institutions Entered 2020 Recession With Historically Low Funding, Worrying Signs Ahead for Higher Ed

By Hugh T. Ferguson, NASFAA Staff Reporter 

The pandemic may be waning, but public colleges are finding themselves in what could be their most vulnerable state of financial affairs than at any other point in recent history, according to a new report on state higher education funding.

In its annual State Higher Education Funding report, released on Wednesday, the State Higher Education Executive Officers Association (SHEEO) found that while state higher education funding has increased for the eighth consecutive year, these increases have largely not been large enough to make up for declines during the last two recessions. Its early estimates also show that inflation-adjusted appropriations for higher education declined in most states, and by 1.8% on a national level.

“In the past, enrollments in higher education have been countercyclical, rising during economic downturns. The COVID-19 recession proved to be an exception to that rule,” said Robert Anderson, president of SHEEO, in a statement. “This will lead to strain in institutional budgets, particularly at public two-year institutions and at institutions most reliant on tuition revenue. Continued state investment and federal assistance is key to ensuring that institutions are able to serve our students.”

While the higher education state funding per full time student was found to have increased by 2.9% in the 2020 fiscal year — marking an eighth consecutive year of states increasing inflation-adjusted higher education appropriations — these increases have generally not brought funding back to pre-recession levels.

On a national level, the report found that state funding remained 6% and 14.6% below 2008 and 2001 levels, respectively. While the study found that appropriations have fully recovered to at least 2008 levels in 18 states, it also determined that 12 states are at least 20% below 2008 levels.

The report also added several new variables to its overall analysis, including two- and four-year breakdowns of state general operating appropriations, state public financial aid, local appropriations, net tuition revenue, total education revenue, and net FTE enrollment.

Despite economic recessions that impacted most education appropriations, state public financial aid steadily increased by 7.0%, which marked an all time national high of $830 per full time student, accounting for 9.6% of all education appropriations.

For the second straight year, net tuition revenue continued its decline, dropping 1.% from the previous year. And while total revenue increased by 1.2%, it was not at a record high in more than half of the states, and varied substantially by institution type. Four-year institutions were found to have 1.64 times the total revenue of two-year institutions, and revenue increases have also been substantially shifted to the backs of students via tuition.

At two-year institutions, the average student share of total revenue in 2020 was less than a quarter (24.2%), while at four-year institutions, the average student share of total revenue was over half (53.2%).

“Demographic and economic trends clearly indicate that we need a more educated populace, and therefore, we must do a better job of educating those populations that our higher education system has underserved,” Anderson said. “Historically, we have done a poor job in this regard; our current higher education finance trajectory is only making matters worse, and the impact of the pandemic on enrollments and institutional budgets has exacerbated these trends.”


Publication Date: 5/27/2021

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