Report: State Funding Up Nearly 5% for Higher Ed, But Concern Remains for Future Levels of Investment

By Hugh T. Ferguson, NASFAA Managing Editor

For the first time since the 2008 Great Recession state funding for public higher education surpassed pre-recession funding levels per-student, with an increase of 4.9% in appropriations.

These findings come from an annual report out of the State Higher Education Executive Officers Association (SHEEO), which seeks to review education funding trends for the most recently completed fiscal year.

Authors noted that education funding managed to debunk historical patterns with education appropriations increasing for the 10th straight year immediately following the brief recession experienced by the pandemic in 2020. The increase was recorded as rising $932 per full-time equivalent (FTE) from 2020 to 2022.

“Fiscal year 2022 defied several long-term trends in higher education finance and showed growth in education appropriations,” the report’s authors wrote, warning that this recent improvement could be a short-term trend. “The continued decline in net tuition revenue puts greater pressure on states to not cut funding to public higher education in the coming years.”

In upcoming fiscal years the report’s authors expressed concern that “when federal stimulus funds run out, states will face difficult budgetary decisions, and higher education may face cuts in some states.”

The paper also reported that since data collection began in 2001, state financial aid has steadily increased in all but two years — despite economic recessions impacting the rest of the education sector. This national increase, however, varies by state. While per-student aid increased in 38 states since 2001, the report also found that in the last year per-student aid decreased in 21 states. 

Further, financial aid has increased over time as a percentage of education appropriations. By fiscal year 2022, 9.7% of education appropriations were directed toward student financial aid, which represented a 4.6% increase from 2001, the report found.

However, without federal funding or the decline in FTE enrollment, inflation-adjusted education appropriations would have increased by 3.6% from 2021 and 2.9% from 2020.

While the report contained some of these concerning indicators coupled with concerns over future federal funding levels it did find that for the first time since 2016, the student tuition and fees funding public higher education comprised less than 50% of total revenues in more than half of all states and Washington, D.C., even after excluding federal stimulus funding.

“Continued increases in education appropriations and declines in net tuition revenue have reduced the proportion of total revenue financed by students,” the authors write. “As states are faced with fewer federal stimulus dollars amidst increasing concerns about student affordability and student loan debt, states must make conscious efforts to continue decreasing the portion of public higher education funded by students and families.”

Additionally public FTE enrollment has now shown a decline for 11 straight years, with 10.31 million students enrolled in 2022 serving as a 2.5% decrease since 2021, and drop of 11.6% from an enrollment peak in 2011.

While the report demonstrates a number of overarching improvements for the higher education funding landscape as a whole, the paper’s authors also highlight that on a state-by state basis there can be significant variation in the trends. For instance the report found that 28 states continue funding higher education at a lower level than prior to the Great Recession. 

“The trends detailed in the SHEF report reflect national and state averages, but there are almost always outliers in every trend. Even within states, there can be wide variation in the enrollment and revenue patterns at each institution,” said Kelsey Kunkle, policy analyst at SHEEO and primary author of the report. “We know that state funding and institutional revenue impact student outcomes, and the negative impacts of low and unequal institutional revenues disproportionately affect students of color and low-income students.”


Publication Date: 5/30/2023

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