Public funding of US higher education shifts downward

Covid helps end eight years of average increases, with wide state variations

May 26, 2021
Lake Shasta, USA - August 17, 2014 California's lingering drought exposes the 180-200 foot drop in water levels. The state's largest reservoir is receding at an average of 4.9 inches per day. The 3-year-long drought is affecting tourism and boating recrea
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Public funding of US higher education is declining for the first time in eight years, and likely to get worse, though with wide variations among states, a new analysis has concluded.

Total state appropriations for colleges and universities for the 2021 fiscal year declined $1.7 billion (£1.2 billion), or 1.8 per cent, from the previous year, according to the State Higher Education Executive Officers Association (SHEEO).

An estimated 35 states showed a reduction in higher education funding for the 2021 fiscal year, which is the current academic year now nearing its end, SHEEO reported.

That reality, along with the nation’s ongoing contraction in college enrolment – now in its ninth straight year – is alarming, SHEEO’s president, Robert Anderson, wrote in an analysis accompanying the data.

“Nationally, our approach to public higher education finance has been on a relatively consistent path toward de facto privatisation for at least the last 40 years,” Dr Anderson said.

State-by-state variations are leaving some jurisdictions and their institutions in especially bad shape, according to SHEEO, which represents the chief executives of statewide governing boards in US higher education.

Much of the inequity, said Sophia Laderman, a senior policy analyst at SHEEO, can be traced to states that are reliant on industries such as tourism that were especially hard hit during the Covid-driven economic decline.

Yet the unusual nature of Covid – including its suddenness, its disparate effects and the aggressive federal response to it – also make it difficult to make firm predictions, Ms Laderman said. While states typically cut higher education for three or four years after an economic downturn, it’s not clear that will happen this time, she said.

A separate report earlier in the month by Fitch Ratings demonstrates the importance of ongoing federal support. Fitch found a 2.7 per cent decline this year in state funding for higher education. But when adding federal aid – the US Congress so far has approved more than $75 billion for colleges in Covid relief, plus trillions more in other kinds of state and local aid – total support for colleges increased by 0.3 per cent, Fitch said.

Yet another report this month on state funding of higher education, issued by the Federal Reserve Bank of Philadelphia, also anticipates generally bad news with wide variations in effects.

Overall, the Fed report projects state and local appropriations for higher education to fall by $17 billion to $30 billion from 2020 to 2025. And total revenue losses facing US colleges and universities are likely to reach $70 billion to $115 billion over those five years, it said.

Most public colleges, private non-profit colleges and rural colleges will experience moderate losses, the Fed said. Hardest hit, it said, will be institutions with fewer than 1,000 students, historically black institutions and some types of for-profit colleges.

Colleges and universities face the toughest long-term prospects in the roughly 20 states that already cut higher education funding this year, said one of the Fed report’s authors, Robert Kelchen, an associate professor of higher education at Seton Hall University. That’s because those states will likely prioritise spending on healthcare and education below the post-secondary level, he said.

And, as SHEEO noted, the economic circumstances of the states vary widely, Dr Kelchen acknowledged. “The effects on state budgets have been very uneven,” he said of Covid, “with some states running massive surpluses and others running massive deficits.”

The analyses come as President Joe Biden is asking Congress to approve a federal-state partnership that would make community colleges tuition free by offering $3 for every $1 invested by the states.

But even if the idea is approved by Congress, Ms Laderman said, some states may not be able to take full advantage of it. That’s because some states have “really restrictive tax laws” that simply would not allow them to raise the necessary revenue, she said.

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