State Higher Ed Funding Tops $100B in Fiscal 2022

State support for higher education eclipsed $100 billion for the first time this fiscal year, the latest Grapevine report on state higher education funding shows.

The Grapevine report—put together by the State Higher Education Executive Officers Association and Illinois State University—is based on survey data from all 50 states and Washington, D.C., and offers a preliminary look at state higher education funding in fiscal year 2022, which began July 1, 2021.

Without factoring in federal stimulus money, total state support for higher education increased by 8.5 percent year over year in fiscal 2022.

Thirty-three states allocated $2.25 billion in federal stimulus funding to higher education in fiscal year 2022, according to the Grapevine report, in addition to federal funding sent directly to institutions. The stimulus funding leveled out higher education appropriations year to year, so when the federal dollars from the past three years were figured in, total state support grew by 6.5 percent this fiscal year—the largest year-over-year increase since the Great Recession in 2008.

Sophia Laderman, a senior policy analyst at SHEEO, chalks up the increase to quickly recovering state revenues and the fact that many states reversed funding cuts from earlier in the pandemic.

“I think it does show that states are prioritizing higher education and understand that it’s an important area to get funding to and that it has been long underfunded,” Laderman said.

Of the $105.5 billion in total state support this fiscal year, half funded operations at public four-year institutions and 22.8 percent funded operations at public two-year colleges. Another 10.3 percent paid for research, agricultural extension, hospitals and medical schools. About 13 percent funded state financial aid, and the remaining 3.1 percent went to agency funding, private institution operations, noncredit appropriations and other expenses.

“We saw increases in each of those areas, which is really great, but we also see that about half of total state support goes to four-year institutions, and another 10 percent goes to them for research, whereas two-year institutions received less than a quarter of the total state support,” Laderman said. “I think that's interesting to look at when thinking about how institutions are funded differently and the inequalities across institution types.”

The gap in support between two-year and four-year institutions could be partially due to different enrollment levels. Four-year colleges typically enroll more full-time students than two-year institutions, and funding levels are often based on full-time-equivalent enrollments, Laderman said. At the same time, some states like California enroll more full-time students in the two-year sector and still allocate fewer dollars to those institutions than to public four-year colleges.

While it serves as a first look at state funding levels for the current fiscal year—published more than a year before the more comprehensive and definitive State Higher Education Finance report—the Grapevine report carries several caveats. First, the current fiscal year does not end until June 30. It’s possible that state funding levels could change over the next five months. Second, its numbers are not adjusted for inflation, which could have a big impact on how the record funding increase is interpreted.

“We don’t know exact numbers for inflation yet for 2022, but I wouldn’t be surprised if more than half of the increase, or even two-thirds of that increase was just really maintaining [funding levels] after we account for inflation,” Laderman said.

The report offers two preliminary inflation estimates: the Consumer Price Index, which increased by 7 percent between January 2020 and January 2021, and the Organisation for Economic Co-operation and Development’s inflation forecast, which pegs inflation at 4.8 percent in 2022. The 6.5 percent state funding increase falls between these two estimates. If inflation does turn out to be closer to 7 percent, state support for higher education may actually have declined in fiscal year 2022.

In fiscal year 2022, 32 states reported funding increases to higher education, with California, Colorado, Louisiana, Nevada, Oregon, and Texas upping state support by 10 percent or more, the report shows. 

Eighteen states reported funding declines in fiscal year 2022, according to the report. For 13 of those states, the decline was due to a decrease in federal relief funding rather than state support. Alaska, Hawaii, New Hampshire, Vermont and Wyoming reported year-over-year state funding decreases. Wyoming reported the largest state funding decline—10.3 percent—which was largely concentrated in the four-year public sector, the report states.

Seven states reported a decline in state support over the past two years: Alaska, Georgia, Hawaii, Nevada, New Hampshire, New York and Wyoming.

“That’s actually a very good number compared to past years,” Laderman said. “While you don’t want any state to have a decline, only four of those were greater than 1 percent.”

Each state has its own reason for the decline in state support, Laderman said. For example, Nevada is experiencing a decline in tourism and gaming revenues. Alaska is in the midst of several years of planned budget cuts.

Four states—Alaska, Mississippi, North Dakota and Wyoming—reported state funding declines over five years.

It’s possible the higher education sector could see relative declines in state support in future years as federal stimulus money runs out.

“That’s something we’re concerned about,” Laderman said. “There will still be federal stimulus funding in 2023, but unless a new federal relief package is passed, it will be smaller. And then after that, the concern is that states won’t be able to maintain their current levels of funding.”