Public Higher Ed Ain’t Seen Nothing Yet

During the first month of the Trump administration, higher education has been reeling from a number of executive actions targeting the sector, including federal funding freezes impacting scientific research. While federal courts have stepped in to assess the legality of these executive branch decisions, the Trump administration has turned its sights on decimating the Department of Education, which could impact many programs that higher education is heavily reliant on, including direct federal student aid programs like the Pell Grant and work-study programs. Additionally, other programs could be impacted, including adult education, special education and K-12 Title I school funding programs.

However, there is an apparent issue on the horizon that could be even more devastating to higher education, especially public higher education: the House Republicans’ new tax reduction proposal, which includes a reduction of federal support to the states in the form of Medicaid “matching” funding reductions. If federal Medicaid cuts are signed into law, a domino effect will begin, forcing states to choose whether to cut Medicaid or offset the federal reductions to keep Medicaid whole.

This is a choice that public higher education should be extremely concerned about. Recent history is not on higher education’s side when it comes to state prioritization of Medicaid over public university budgets.

Our research points to the extent of the threat. According to our recent study published in the Journal of Education Finance, state higher education spending exceeded Medicaid spending by 33.7 percent in 1991. Thirty years later, by 2021, state Medicaid spending exceeded public higher education spending by 83 percent.

The consistency of this state priority shift is evidenced by the fact that only two states, North Carolina and Tennessee, spent a higher percentage of their state budgets on public higher education operating expenditures in 2021 when compared to 1991. By contrast, 48 states spent a higher proportion of their budgets on Medicaid in 2021 than they did in 1991.

When reviewing overall state budgetary spending from 1991 to 2021, K-12 education spending remained constant, accounting for 34 percent of all state spending in 1991 and 34 percent in 2021. In fact, K-12 schools in 22 states experienced increases in their share of state budget spending. State spending on prisons remained constant as well, accounting for 6 percent in 1991 and 6 percent in 2021. Other various state expenditures outside of these major categories experienced declines of 4 percent during those three decades.

The most notable major shift in state spending was that Medicaid increased from accounting for 11 percent of state spending in 1991 to 18 percent in 2021. Meanwhile, public higher education declined from 14 percent of all state spending in 1991 to 9 percent in 2021.

In a recent survey of state higher education executive officers, they agreed that their top priority for 2025 is “State Operating Support for Public Colleges and Universities.” If the last three decades are any indicator of state funding prioritization, their concerns are certainly merited.

Despite the fact that Trump has stated that Medicaid won’t be “touched,” congressional Republicans appear to be moving in just that direction. Ultimately, if the Trump administration and the Republicans in Congress are insistent on restructuring the federal funding match program provided to the states for Medicaid, most states could face significant budget shortfalls.

The federal research funding reductions and freezes will have a detrimental and direct impact on some but not all higher education institutions. The impact of the decimation of the Department of Education will remain an important issue for higher education, even as the magnitude of potential damage remains unclear. However, if federal Medicaid funding is reduced in a new federal tax law, no public college or university will be immune from future state budget reductions and the austerity that will result. Public higher education must be prepared.