Positive Picture for State Higher Ed Funding

An annual survey of state funding for higher education released today documents modest continued increases in funding across most states.

Initially approved state appropriations grew by 5 percent in fiscal 2020 compared to the year before, representing the eighth straight year of annual increases and the largest annual percentage increase since fiscal year 2015, according to the annual Grapevine survey, a joint project of the Center for the Study of Education Policy at Illinois State University and the State Higher Education Executive Officers Association (SHEEO).

Only three states reported a year-over-year decline in state funding for higher education. By far the largest decrease -- 11.2 percent -- was in Alaska, the result of a gubernatorial veto that slashed funding to the University of Alaska system. Governor Michael J. Dunleavy initially vetoed $135 million in funding for the University of Alaska -- 41 percent of the university’s budget -- but the governor and university officials subsequently agreed on a compromise plan to phase in $70 million in cuts over three years.

Hawaii and New York had much more modest annual declines in state funding, of 2.2 percent and 0.3 percent, respectively. Funding levels for both states had already recovered to levels seen before the Great Recession of 2008.

Of the other 47 states and the District of Columbia, 25 reported annual increases in state funding of less than 5 percent, 19 reported increases between 5 and 10 percent, and four (Colorado, New Jersey, South Carolina and Utah) reported increases of more than 10 percent.

The fiscal year 2020 appropriations are 9.5 percent higher than the appropriation levels two years ago, and 18.8 percent higher compared to five years ago. The Grapevine data are not adjusted for inflation.

"It's a fairly positive report this year, with a 5 percent increase from last fiscal year to this fiscal year," said Jim Palmer, the editor of the Grapevine survey and a professor of educational administration and foundations at Illinois State. "And only three states indicated declines and two of those states registered relatively small declines. When you contrast that just a couple years ago, in 2018, about 18 states had reported declines in funding, so we see that funding increases are more evenly spread across the states."

"I think this is probably predictable given the state of the economy right now," Palmer continued. "In order for states to increase funding for higher education, two things need to happen. First, the states have to have the fiscal capacity to increase funding. And then of course, second, there has to be a political will to increase funding. I think that after several years of tuition increases, there is growing political pressure for states to perhaps increase funding and to counter the trend toward increased tuition."

While state funding has been steadily increasing over each of the past six years, a report released last April by SHEEO found that state funding had only halfway recovered from the deep cuts it sustained following the 2008 financial crisis. In essence, "the increases haven’t been as big as the decreases during the recession," said Sophia Laderman, a senior policy analyst at SHEEO.

The Great Recession accelerated the move toward growing reliance on tuition revenue to fund higher education. In 2008 student tuition accounted for 35.8 percent of total educational revenue at public colleges. In 2018, it accounted for 46.6 percent, according to the SHEEO report.

Laderman echoed Palmer's point that the widely seen increases in state funding this past fiscal year may represent a shift in political priorities.

"I think it very much differs across states, but generally over the last few decades as state support has declined, tuition revenue has gone up and tuition rates have gone up," she said. "There have been increased calls for affordability and a lot of attention to student loan debt, and I do think policy makers are hearing that and paying attention to that and trying to prioritize higher education."

Below is a chart from the Grapevine survey showing changes in funding levels for each state over the past one, three and five years. Just two states -- Alaska and Kentucky -- reported declines in public funding over the previous two-year period. Five states -- Alaska, Kentucky, Mississippi, North Dakota and Oklahoma -- reported declines over the previous five-year period.