‘A Marginally Better Year’ for State Funding

Public higher education leaders may have reason to be cautiously optimistic this spring: an early indicator of states’ fiscal health shows modest, if uneven, improvements.

States spent 3.7 percent more supporting higher education in fiscal year 2018-19 than in the previous year. The small rise continued a five-year trend of upward support that this year totals about $91.5 billion.

In the previous fiscal year, support for higher education grew just 1.6 percent, according to the Grapevine survey, an annual early survey of state indicators.

And while five states reported funding decreases between FY18 and FY19, that represents a small fraction of the 18 states that reported declines the previous year.

“We’ve had, over all, a marginally better year,” said James Palmer, a professor of higher education at Illinois State University and editor of Grapevine, a project of Illinois State’s Center for the Study of Education Policy and the State Higher Education Executive Officers Association.

Palmer said the 3.7 percent rise “continues a trend in what can only be called modest annual increases to state higher education funding over the past five years.”

The recent higher education expenditures were uneven across states, with only Colorado and the District of Columbia increasing appropriations by double digits. Funding in Colorado grew by 12 percent, while D.C. grew by 11.7 percent.

In the five states that provided less funding -- Ohio, Alaska, Minnesota, Kentucky and South Carolina -- the drop ranged from 0.1 percent in Ohio and Alaska to 1.4 percent in Minnesota. In Kentucky, it dropped by 2.4 percent. South Carolina reported the largest one-year drop of all states at 3.7 percent.

The data show that more than two-thirds of the growth nationwide -- nearly 70 percent -- can be attributed to gains in just nine large states: California, Colorado, Florida, Georgia, Illinois, New York, North Carolina, Virginia and Washington. Together, these states increased funding for their higher ed systems by 5.4 percent, while the remaining 41 states saw a much smaller 2.1 growth.

While California’s state support grew by just 6.6 percent, the state is so large that it accounts for 29.3 percent of the total increase nationwide, the survey found. California is among the states where a growing population creates more demand for public higher education.

“There are 50 different stories here,” said Palmer.

Looking out over the past five years, five states -- California, Colorado, Hawaii, Oregon and Wisconsin -- have increased support for higher ed by more than 40 percent, while eight have seen it flat or declining. They range from essentially flat funding in New Mexico to 21 percent less in Oklahoma.

Over five years, state funding rose 18.2 percent.

While Grapevine has reported data from Puerto Rico since 2017, subsequent years' data aren't available but will be posted online when they are.

Palmer said each year’s small annual increase “kind of reflects the ongoing struggle of the states to sustain the revenue needed to increase funding for colleges and universities.” Economic downturns, legislative tax cuts and, in a few cases, the large burdens of obligations like state pension fund payouts are all weighing on various states. “In other words, the fiscal capacity of many states to increase funding for higher education just isn’t there,” he said.

The Grapevine findings typically appear a few months before a more comprehensive State Higher Education Finance report issued by the State Higher Education Executive Officers Association. That report found in 2017 that for the first time more than half of states relied primarily on tuition to fund higher education.

Grapevine data cover tax and nontax state support for college and university operations each fiscal year, roughly coinciding in most states with academic years. The data include funding for four-year institutions, community colleges and vocational-technical colleges, as well as appropriations to coordinating and governing boards, appropriations to state student financial aid, funding bound for higher ed but appropriated to other state agencies, and appropriations for private institutions.

The data don’t include appropriations for capital costs, debt service, money drawn from most federal sources, or funds drawn from tuition, student fees and auxiliary enterprises.

While it’s called a survey, the data is provided directly to Grapevine by state agencies, which upload it to a server that SHEEO maintains.

Because the survey doesn’t track enrollments, analyses of funding per student aren't included. So, for instance, in a state where funding is declining, the effects may not be as severe if enrollment is declining as well. By contrast, if funding is declining and enrollment growing, per-student funding may be heavily affected.

Enrollments nationwide have fallen slightly for the past several years -- in 2018, overall postsecondary enrollments decreased 1.7 percent, led by sharp drops at four-year for-profit institutions, which saw 15.1 percent fewer students, and at two-year public institutions, where enrollment dropped 3.2 percent.

Meanwhile, enrollments at private, nonprofit four-year institutions grew 2.4 percent. Enrollments at public four-year institutions were basically flat.

While Palmer noted that the past five years have seen uninterrupted annual funding upticks, he said state support of higher education rises and falls with business cycles, with gains easily erased due to conditions.

“We'll need to keep an eye on the economy,” he said. If a recession hits any time soon, “then all bets are off.”

State Support for Higher Education: Grapevine Data