STATE HIGHER EDUCATION FINANCE
State funding to public colleges surpasses expectations amid historic declines in student enrollment and tuition revenue.
Generous federal stimulus funding protected state revenues and directly supported higher education, enabling states to increase funding 4.5% in 2021 despite a pandemic and short economic recession. However, sharp declines in student enrollment (3.0%) and tuition revenue (3.2%) signal continued upheaval for public higher education revenues. In the midst of this uncertainty, the SHEF report provides a comprehensive look at trends in higher education revenues in fiscal year 2021.
The U.S. entered a short recession in fiscal year 2020 due to the COVID-19 pandemic. In the year after each previous recession since 1980, education appropriations per full-time equivalent (FTE) enrollment declined. For the first time, in 2021 this trend did not continue: Inflation-adjusted education appropriations increased $400 per FTE in the last year.
Nationally, public institutions in 2021 received an average of $9,327 in education appropriations per full-time equivalent (FTE) enrollment. 1 Federal stimulus funding allocated to states due to the COVID-19 pandemic is included in education appropriations and total education revenue throughout the SHEF report.VIEW ALL FOOTNOTES
State funding typically fluctuates with the economic cycle.
The impacts of previous recessions on higher education funding can still be felt in most states. Education appropriations per FTE i Education appropriations Education appropriations measure state and local support available for public higher education operating expenses and exclude research, hospitals, and medical education. State-level and sector-level education appropriations include federal stimulus funding. Sector-level education appropriations do not include agency funding. VIEW ALL DATA DEFINITIONS have increased for nine years, but it has not been enough to reach pre-recession funding levels of 2001 and 2008.
In response to previous state funding declines, net tuition revenue increased for many years.
Net tuition and fee revenue per FTE i Net tuition revenue Net tuition revenue is the total amount of tuition and fees, minus state and institutional financial aid and medical tuition and fees. Net tuition is affected by changes in tuition rates as well as proportional differences in out-of-state, international, and graduate student enrollment. VIEW ALL DATA DEFINITIONS has grown 56.6% over the last 25 years but has declined for the last three years following recent increases in state funding. After a 3.2% decline in the last year, in 2021 public institutions received $6,723 per FTE in net tuition and fee revenue. 2 Declines in net tuition revenue are largely due to increases in state financial aid and minimal tuition rate growth.VIEW ALL FOOTNOTES
The COVID-19 pandemic led to a 3.0% drop in student FTE enrollment from 2020 to 2021.
This loss of 323,952 students marks the tenth straight year of enrollment declines and is the largest decline in net FTE enrollment i Net full-time equivalent (FTE) enrollment Full-time equivalent (FTE) enrollment converts student credit hours to full-time academic year students. FTE excludes medical students. VIEW ALL DATA DEFINITIONS since the start of the SHEF dataset in 1980.
Fiscal year 2021 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, 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, 11.2% goes to student financial aid, and 10.1% is used for research, agriculture, and medical purposes.
Most state financial aid dollars go to students at public, in-state institutions.
Public aid accounts for almost $9.8 billion of the $12.2 billion in total state financial aid. In 2020, 66.3% of state financial aid was allocated based on financial need. 3 https://www.nassgapsurvey.com/survey_reports/2019-2020-51st.pdf National Association of State Student Grant Aid Programs. (2021). Annual survey report on state-sponsored student financial aid. VIEW ALL FOOTNOTES
Unlike the rest of state support, financial aid has steadily increased over the last two decades.
In 2021, states provided $921 per FTE in public financial aid, i State public financial aid State public financial aid is any state appropriated student financial aid for public institutions, excluding loans. These funds are included in education appropriations. VIEW ALL DATA DEFINITIONS an all-time high and an 8.8% increase over last year.
Financial aid accounts for an ever-growing portion of education appropriations.
Only 5.1% of education appropriations were used for public financial aid at the height of per-student appropriations in 2001. This proportion increased dramatically during the last two decades and reached 9.9% in 2021.
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 2021, 42.1% of total education revenue came from tuition. i Total education revenue The sum of education appropriations and net tuition revenue, excluding any tuition revenue used for capital and debt service. Total education revenue includes federal stimulus funding at the state level but not the sector level. It measures the amount of revenue available to public institutions to support instruction (excluding medical students). VIEW ALL DATA DEFINITIONS
However, the student share differs greatly across the U.S.
The share of total revenue coming from students is highest in the Midwest and Northeast and lowest in the West. i Student share The student share is a measure of the proportion of total education revenues at public institutions coming from net tuition revenue. VIEW ALL DATA DEFINITIONS At two-year institutions, the average student share was less than a quarter (21.8%). At four-year institutions, the average student share was over half (51.6%).
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 every state except one. 4 Wyoming is the only state without an increase in the student share since 1980. In Wyoming, the student share has decreased from 14.0% in 1980 to 11.1% in 2021.VIEW ALL FOOTNOTES In four states, the four-year student share is greater than 75%.