State Funding Hit Lands on 2-Year Colleges

This article has been updated to reflect new information about Tennessee's funding for four-year institutions in fiscal year 2020, which increased by 2.2 percent instead of a larger increase that was previously stated. The new information means the one-year change in state support for four-year institutions across the U.S. declined.

States slashed financial support for two-year colleges by $457 million during the pandemic, while funding for four-year institutions declined by only $63 million, a new analysis of state higher education appropriations shows.

Federal stimulus funding softened the blow for many state higher education budgets, but state tax appropriations, which are often the predominant recurring revenue stream for public higher education, declined this fiscal year.

Six states cut funding for two-year institutions by more than 10 percent in the 2021 fiscal year, which began July 1, 2020, and will end June 30, 2021. Only three states cut funding for the four-year sector by a similar amount, according to the analysis, published by the State Higher Education Executive Officers Association. The analysis builds on findings presented in the most recent Grapevine report on state higher education funding for fiscal year 2021.

The new sector-level state funding analysis reveals yet another way two-year institutions have been disproportionately impacted by the pandemic and resulting economic recession. Enrollment across the sector has also plummeted in the past year. During the 2020-21 academic year, enrollment at public two-year institutions declined by 9.5 percent.

Low enrollment is often coupled with funding declines, said Richard Kahlenberg, a senior fellow at the Century Foundation, a progressive think tank.

“I imagine that state officials are looking at the number of pupils being served and the larger rates of attrition among community colleges than the four-year colleges,” Kahlenberg said. “Any cuts to community college funding are deeply troubling. Community colleges have long been malnourished -- cuts push them in the direction of starvation.”

Nevada and Arizona posted the largest state funding declines for two-year colleges this year, reporting a 19.9 percent drop and 17.2 percent drop, respectively. Funding for four-year institutions also declined by 18.9 percent in Nevada, and the state is eyeing further cuts for the upcoming fiscal year.

Community college enrollment -- and, by association, state funding levels -- typically increases during a recession, Kahlenberg said. This recession has so far been atypical in that regard, and community colleges, which often serve low-income, adult and underrepresented students, have experienced declines to tuition revenue and state funding.

“There’s research to suggest that greater funding for community colleges works,” Kahlenberg said. “It increases graduation rates and success for students. Right now, the completion rates at community colleges are quite low, and so more resources are better.”

With schools and daycares closed, childcare was hard to come by during the pandemic. Many students who are parents left community colleges because of this. Kahlenberg expects that many will return after the pandemic ends, and the increase in demand for community colleges on top of budget reductions could put further stress on two-year institutions.

"The pandemic has temporarily suppressed community college enrollment in part because many community college students who have school-aged children to care for had to pull back from their own education after their kids' elementary and secondary schools were closed," Kahlenberg said. "Community colleges are typically funded based on previous-year enrollments, so as we emerge from the pandemic, enrollment could increase yet funding will lag."

Vermont increased spending on four-year colleges by the most of any state, 51.3 percent, while cutting funding for two-year colleges by 1.9 percent.

A few states did funnel more money into two-year colleges this past year. Connecticut upped spending for two-year institutions by 23.4 percent, and Washington increased funding by 14.8 percent.

With Jill Biden, a professor of English at Northern Virginia Community College, as first lady, Kahlenberg hopes community colleges will be prioritized more so than they have been in past recessions.

“Going forward, there’s some hope that there will be renewed interest in supporting community colleges,” he said. “There’s an individual very close to the president who understands the value and needs of community colleges. So even though these are difficult times, there may be better times coming.”

The SHEEO analysis also examined the impact of more than $1 billion in stimulus funding routed to states through the CARES Act and the Governor’s Emergency Education Relief Fund. In 2020, 10 states used $337 million in federal money for higher education. In 2021, that count more than tripled to 32 states, which used a total of $1.9 billion in federal stimulus funding for higher education.

“It seems like states were recognizing that higher ed was an area that really needed these funds,” said Sophia Laderman, a senior policy analyst at SHEEO and co-author of the brief.

Many more states have spent federal money on higher education this fiscal year than did at a corresponding point during the Great Recession. In 2009, a total of 15 states spent a collective $1.4 billion in federal stimulus funding on higher education.

In some states, federal dollars almost entirely replenished state cuts to higher education. For example, Colorado cut its higher education budget by more than 45 percent. After stimulus money was taken into account, the budget only fell by 3.8 percent.

“They probably wouldn’t have made that cut without knowing that the federal stimulus funding was coming,” Laderman said.

Federal relief money kept Kansas, Louisiana, Missouri, New Jersey, Ohio and Texas from facing overall funding declines in fiscal 2021. The SHEEO brief does not include stimulus funding from the December stimulus package or the recent $1.9 trillion relief bill. It’s too early to know whether the states will retain the steep cuts offset by federal funding even after the stimulus money has run out.

Almost all of the numbers in this report are not adjusted for inflation, but authors used conservative inflation estimates for fiscal year 2021 to calculate one figure: 70 percent of states experienced declines in inflation-adjusted higher education tax appropriations between fiscal year 2020 and fiscal year 2021, according to the brief. After eight years of growth for unadjusted state tax appropriations for higher education, state appropriations declined by 1.8 percent from fiscal year 2020 to fiscal year 2021.