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Higher Education State Funding: Up in 2020, Down in FY 2021

Higher Education State Funding: Up in 2020, Down in FY 2021

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The State Higher Education Executive Officers Association (SHEEO) has collected data on state support for higher education for more than 10 years. The final report for fiscal year (FY) 2020 was just issued.

The FY 2020 report highlights include these facts:

  • Net full-time equivalent (FTE) enrollment in state institutions declined 0.6% in FY 2020. This is the ninth straight year of enrollment declines.
  • Enrollment declined in 35 states and DC in FY 2020.
  • Two-year institutions reported a 1.9% decline in enrollment.
  • Four-year institutions reported a 0.2% increase in enrollment.
  • Inflation-adjusted appropriations per FTE increased 2.9% to $8,636.
  • Appropriations per FTE increased in 41 states and DC.
  • Higher ed appropriations per FTE range from $3,387 (Vermont) to $21,802 (Wyoming).
  • Increases in appropriations per FTE over the past eight years have not been enough to offset the declines from the two recessions (2008 and 2001).
  • Net tuition revenue per FTE declined in 26 states and DC in FY 2020.
  • Net tuition revenue per FTE ranges from $2,360 (Florida) to $18,242 (Delaware).
  • Institutions in seven states and DC have education revenue of more than $20,000 per FTE. In four of these states (Alaska, Illinois, DC, and Wyoming) funds are sourced from education appropriations, while funds come primarily from tuition revenue in the other four (Alabama, Connecticut, Delaware, and Michigan).
  • Total education revenue per FTE averaged $17,645 for four-year institutions, nearly 1.64 times the average for two-year institutions.
  • Net tuition revenue increased to 44% in FY 2020. Because this increases in a recession, SHEEO expects to see this increase substantially in the coming years following 2020.
  • In 2020, half of all states had a student share above 50%.
  • Student share averaged 24.2% at two-year institutions and was 53.2% at four-year institutions.
  • In seven states (Alabama, Arizona, Colorado, Delaware, Michigan, New Hampshire, and Vermont), the four-year student share is greater than 75%.
  • California’s community colleges have the lowest student share at 3.1% while Vermont four-year institutions have the highest at 88.1%.

While state and local appropriations per student increased for the eighth straight year in FY 2020, SHEEO analysts note that 2020 represents a high point in funding since the recession began in February 2020.

In addition to the recession, public institutions face an added constraint in the decline in net tuition revenue. Federal stimulus and relief funds are not a replacement for long-term state investments. Additionally, students of color and low-income students have been impacted the most by the pandemic.

SHEEO’s most recent report provides an analysis of funding for FY 2021 using data collected by Illinois State University’s College of Education Grapevine compilation. It’s important to note that this analysis is preliminary and not as thorough as the SHEEO annual report.

State appropriations for higher education declined $1.7 billion or 1.8% from FY 2020 to FY 2021. Federal stimulus funding due to the pandemic provided some relief from the decline with $337 million used by 10 states for higher education in FY 2020 to $1.9 billion used by 32 states in FY 2021.

The decline in tax appropriations for higher education in FY 2021 is similar to declines observed by SHEEO in previous recessions. Given the higher reliance on tuition in recent years, SHEEO analysts write that enrollment patterns will be an important data point for federal and state policymakers to track.

Much of the FY 2021 state appropriate decline occurred in the two-year sector. The two-year sector experienced a $457 million decline while four-year institution state support declined by only $63 million.

It’s hard to avoid the news about the Biden administration’s proposal to fund a free community college education for everyone. At the same time, as I understand the proposal, there will be certain conditions imposed on the states, primarily that funding for community colleges remain at the same level as it was prior to the federal funding.

Many people seem to forget that the U.S. government is the only entity that can print money and create deficit spending. Most state constitutions require a balanced budget. If the Biden proposal passes, there may be states that do not accept the benefit because of the strings attached.

It’s also important to note that most state budgets mandate spending for Medicaid funding and for K-12 education. Higher education is not a mandated benefit to be covered by taxpayers. While the State Higher Education Executive Officers can ask that states consider the implications of reducing funding to higher education, it’s obvious from both the final 2020 report and the preliminary 2021 report that tuition revenue per student has increased and will likely continue to increase.

We’ve seen what’s happened to private institutions that have increased their tuition at rates higher than family incomes over the years. With states relying more and more on tuition, a similar fate is likely. It’s also likely that other educational or training options that provide an affordable pathway to employment will become an option selected by more students in the future.

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Wally Boston Dr. Wallace E. Boston was appointed President and Chief Executive Officer of American Public University System (APUS) and its parent company, American Public Education, Inc. (APEI) in July 2004. He joined APUS as its Executive Vice President and Chief Financial Officer in 2002. In September 2019, Dr. Boston retired as CEO of APEI and retired as APUS President in August 2020. Dr. Boston guided APUS through its successful initial accreditation with the Higher Learning Commission of the North Central Association in 2006 and ten-year reaccreditation in 2011. In November 2007, he led APEI to an initial public offering on the NASDAQ Exchange. For four years from 2009 through 2012, APEI was ranked in Forbes' Top 10 list of America's Best Small Public Companies. During his tenure as president, APUS grew to over 85,000 students, 200 degree and certificate programs, and approximately 100,000 alumni. While serving as APEI CEO and APUS President, Dr. Boston was a board member of APEI, APUS, Hondros College of Nursing, and Fidelis, Inc. Dr. Boston continues to serve as a member of the Board of Advisors of the National Institute for Learning Outcomes Assessment (NILOA), a member of the Board of Overseers of the University of Pennsylvania’s Graduate School of Education, and as a member of the board of New Horizons Worldwide. He has authored and co-authored papers on the topic of online post-secondary student retention, and is a frequent speaker on the impact of technology on higher education. Dr. Boston is a past Treasurer of the Board of Trustees of the McDonogh School, a private K-12 school in Baltimore. In his career prior to APEI and APUS, Dr. Boston served as either CFO, COO, or CEO of Meridian Healthcare, Manor Healthcare, Neighborcare Pharmacies, and Sun Healthcare Group. Dr. Boston is a Certified Public Accountant, Certified Management Accountant, and Chartered Global Management Accountant. He earned an A.B. degree in History from Duke University, an MBA in Marketing and Accounting from Tulane University’s Freeman School of Business Administration, and a Doctorate in Higher Education Management from the University of Pennsylvania’s Graduate School of Education. In 2008, the Board of Trustees of APUS awarded him a Doctorate in Business Administration, honoris causa, and, in April 2017, also bestowed him with the title President Emeritus. In August 2020, the Board of Trustees of APUS appointed him Trustee Emeritus. In November 2020, the Board of Trustees announced that the APUS School of Business would be renamed the Dr. Wallace E Boston School of Business in recognition of Dr. Boston's service to the university. Dr. Boston lives with his family in Austin, Texas.

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