State Higher Ed Funding Looks Positive

For the first time in years, Sophia Laderman, senior policy analyst for the State Higher Education Executive Officers Association (SHEEO), is feeling hopeful about the state funding outlook for higher education in fiscal year 2022, thanks to the rebounding national economy.

"I tend to not be optimistic about state funding for higher education," she said. "But it sounds like a lot of states are actually expecting increases."

After the pandemic ripped through state budgets and smothered their revenue streams, some lawmakers opted to cut higher education funding during fiscal year 2021, when uncertainty about the pandemic's economic impact peaked. Last fiscal year, 13 states reduced higher education appropriations by a net total of $417.5 million, according to a report from the National Association of State Budget Officers (NASBO).

As the pandemic raged on, experts feared that the higher education sector would once again see declines in state support for fiscal year 2022, which began in July. Every state except for Vermont is required by law to balance their budgets, according to the National Conference of State Legislatures (NCSL). Higher education is often one of the first budget items to see cuts during periods of economic decline.

Late last year, it appeared that states were on track to do just that, said Andrew Smalley, a research analyst at the NCSL.

"It's been a real rollercoaster ride for where the revenues have been going, and what things looked like a year ago versus the situation now," Smalley said. "I think people were definitely preparing to make pretty serious cuts."

But state revenues have quickly recovered, and lawmakers have revised their budgets for the fiscal year accordingly.

"The fiscal situation for states just overall is looking much better than it did at the start of the year," Smalley said. "In large part because revenues have recovered as things have reopened and the pandemic has somewhat abated. Then, there's the support that was part of the American Rescue Plan."

So far, 47 states have passed budgets for fiscal year 2022, according to NASBO. Texas, Michigan and Alabama have yet to do so. Texas begins its fiscal year on Sept. 1, and has already passed the higher education portion of its budget, which includes a $4.7 billion increase for higher education. Michigan and Alabama begin their fiscal years on Oct. 1. (This paragraph has been updated to include additional information about the Texas budget.)

Laderman recently surveyed a couple dozen state finance officers about what higher education funding looked like in their states for the current fiscal year. The informal meeting included officers from just under half of states, she said.

"A lot of the states who were in the meeting were actually saying that things are looking better than expected -- even better than what was forecasted," Laderman said. "In some cases forecasts are being moved up for total state revenues, and in other cases they're just shooting way past forecasts."

About 60 percent of the officers reported plans to increase funding for public, two-year colleges in fiscal 2022. Kansas reported a 21 percent funding increase for two-year colleges, Tennessee reported a 10 percent increase, and Louisiana reported a 9 percent bump.

"I was very excited about Louisiana because they have pretty poor funding," Laderman said.

None of the officers at the SHEEO meeting said two-year colleges would see a funding decline this year.

Another 60 percent of finance officers said they expected to see an increase to public, four-year institutions in their state. Two officers said four-year colleges would see a funding decline. Many states also maintain statewide financial aid programs, and about 62 percent of officers said they expect to see increases to such programs in fiscal 2022.

Read on for more details about funding levels in a handful of states to watch.

Alaska

The University of Alaska system has entered its final year of planned budget reductions following a three-year deal between former system president Jim Johnsen and Governor Michael Dunleavy. In 2019, the two agreed to cut $70 million from the system's budget over a period of three years.

The system reduced expenses by $25 million in both fiscal 2020 and fiscal 2021. This year, the system will cut an additional $20 million from its budget.

Alaska's legislature appropriated $273 million for the system in fiscal 2022, but Dunleavy vetoed $31.6 million in capital funds for deferred maintenance projects.

"We appreciate that the governor recognizes the extraordinary financial impact that COVID-19 has had on the university in accepting the legislative operating appropriation, but we still face a $4.3 million reduction in state funding," Pat Pitney, interim president of the system, said in a statement. "This reduction is compounded by remaining COVID impacts of $15.9 million. Additionally, the capital budget veto delays work on critical deferred maintenance projects. We will continue to pursue funding for these important projects."

California

The California legislature passed a historic budget in late June which substantially increases general funding for the state's public university systems and restores mid-year cuts from the previous fiscal year.

The California State University system will receive a $185.9 million increase in general operating funds and $299 million to restore cuts from the previous fiscal year, EdSource reported. An additional $325 million in one-time funding will also be doled out to the system to pay for deferred maintenance and other infrastructure projects

The University of California system will get $173 million in general funds and $302.4 million to restore last year's cuts.

California's 116 two-year colleges will see a $371.2 million increase in state funding for general operations. The budget will also pay down the California Community Colleges' deferrals, pay out $115 million for a zero-cost textbook program, $100 million to hire full-time faculty members and $100 million to support students' basic needs.

Several initiatives did not receive funding as part of this year's budget, Cal Matters reported. A $515 million effort to create debt-free grants for low and middle-income students who attend the University of California and California State University did not receive appropriations this year. Neither did a $149 million plan to increase California resident enrollment at both systems by 15,000 students.

Kansas

Kansas lawmakers put together an increase of $53 million for higher education this fiscal year, most of which will go to community and technical colleges, The Wichita Eagle reported. Included in that total is a one-time, $15 million increase for college and university general operating budgets, $11.4 million to cover utilities costs from last year's freeze, and $8 million for need-based financial aid.

The legislature was motivated to sustain funding for higher education in order to meet the "maintenance of effort" clause included with recent federal relief dollars. The clause requires states to continue funding higher education at pre-pandemic levels in order to be eligible for the federal funding.

Missouri

The Missouri legislature approved $24.2 million for higher education institutions in fiscal year 2022, including a 3.7 percent increase in funding for four-year public institutions, an additional $7 million for community colleges and $2 million in added funding for the State Technical College of Missouri, St. Louis Public Radio reported.

New Jersey

New Jersey passed a budget for fiscal 2022 that includes $472.9 million in tuition-aid grants which support one third of the state's full-time undergraduate students, New Jersey Policy Perspective reported. The budget also includes $54.3 million for the Educational Opportunity Fund which offers students support for counseling, tutoring and other support services.