SHEF: State Higher Education Finance - SHEF


For only the second time, state funding to public colleges exceeds per-student funding levels seen prior to the Great Recession.

In 2023, education appropriations increased 3.7%, surpassing pre-recession per student funding levels in 2008 by 6.7%. Federal stimulus funding decreased by roughly one-quarter, but still cushioned state budgets and supported higher education. However, a continued decline in enrollment (0.5%) and the largest one-year decrease in tuition revenue (3.3%) create uncertainty for public higher education revenues as federal stimulus funds are used up. The SHEF report provides a comprehensive look at trends in higher education revenues in fiscal year 2023.

After a short recession in 2020 due to the COVID-19 pandemic, historical patterns following economic recessions reversed in 2021, 2022, and 2023. Instead of the typical decrease in state funding following a recession, education appropriations increased for the 11th straight year, rising $1,247 per FTE from 2020 to 2023.

Nationally, public institutions received an average of $11,040 in education appropriations per full-time equivalent (FTE) enrollment in 2023.

Impacts of previous recessions can still be felt in many states.

Past recessions have resulted in decreases in education appropriations. However, since reaching an historic low in 2012, education appropriations per FTE have now fully recovered and surpassed 2008 levels, both including and excluding federal stimulus funding in 2023. However, this trend does not apply to all states. Half of all states have not yet recovered from the 2008 Great Recession, and 32 have not yet recovered from the 2001 economic downturn.

In response to previous state funding declines, net tuition revenue increased for many years.

Net tuition and fee revenue per FTE increased 53.0% over the last 25 years but has declined in four of the last five years amidst increases in state funding. After a 3.3% decrease in 2023, public institutions received $7,353 per FTE in net tuition and fee revenue.

Enrollment declined for the 12th straight year from 2022 to 2023.

Following the two largest single year enrollment declines since the start of the SHEF dataset in 1980, U.S. public institutions lost an additional 50,464 FTE students in 2023. Cumulatively, net FTE enrollment at public institutions has declined by 6.1% since the start of the COVID-19 pandemic in 2020 and 0.5% in the last year.

The last three years have defied many post-recession trends.

In the past, enrollment increased rapidly during and following economic downturns, while state funding decreased, and tuition rose. Each of those trends reversed in 2021, 2022, and 2023, as enrollment dropped, state funding increased, and tuition revenue declined.

State and local funding comes from a variety of sources.

Across the board, support continues to be primarily made up of state tax appropriations. These funds are supplemented with local appropriations in 32 states. Many states also rely on non-tax sources (lottery, tobacco, and gaming revenues).

Higher education uses these state and local funds to support students in numerous ways.

While the majority of state funding is used for general operations at public institutions, 10.5% goes to student financial aid, and 10.3% is used for research, agriculture, and medical purposes.

Most state financial aid dollars go to students at public, in-state institutions.

Public financial aid accounts for 8.4% of state support to higher education and 80.2% of total state financial aid. This represents $10.8 billion of the $13.4 billion of total state financial aid.

Amidst fluctuations in state support and student enrollment, financial aid has steadily increased over the last two decades.

From 2022 to 2023, public financial aid increased 2.5%, reaching an all-time high of $1,050 per FTE.

Financial aid accounts for an ever-growing portion of education appropriations.

In 2001, a pre-recession high for per-student education appropriations, only 5.1% of education appropriations were used for public financial aid. This proportion increased dramatically during the last two decades and reached 9.5% in 2023.

Despite increases in financial aid, the student share has grown over time—yet it has recently begun to decline.

Over the last two decades, state funding declines and tuition revenue increases placed a growing burden on students to fund public higher education. In recent years, this trend has reversed, and the student share has declined. In 2023, 40.2% of total education revenue came from tuition.

However, the student share differs greatly across the U.S.

The share of total revenue coming from students is highest in the Midwest and lowest in the West. At two-year institutions, the average student share was less than a quarter (19.9%). At four-year institutions, the average student share was over half (50.4%).

In many states, tuition and fees have become the primary revenue source for public higher education.

Although every state has different levels of state support and tuition revenue over time, the student share has increased in all but two states since 1980. In four states, the four-year student share is greater than 75%.



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