SHEF: State Higher Education Finance - SHEF

STATE HIGHER EDUCATION FINANCE

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

In 2022, education appropriations increased 4.9%, surpassing pre-recession per student funding levels in 2008 by 3.1%. Federal stimulus funding decreased by roughly one-third, but still cushioned state budgets and supported higher education. However, a sharp decline in enrollment for the second year (2.5%) and a decrease in tuition revenue (1.0%) creates 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 2022.

After a short recession in 2020 due to the COVID-19 pandemic, historical patterns following economic recessions reversed in 2021 and 2022. Instead of the typical decrease in state funding following a recession, education appropriations increased for the 10th straight year, rising $932 per FTE from 2020 to 2022.

Nationally, public institutions received an average of $10,237 in education appropriations per full-time equivalent (FTE) enrollment in 2022. 1 1Federal 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

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 i 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 now fully recovered and surpassed 2008 levels, both including and excluding federal stimulus funding in 2022. However, this trend does not apply to all states, and most states have not yet recovered from the 2008 and 2001 economic downturns.

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

Net tuition and fee revenue per FTE i 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 increased 57.8% over the last 25 years but has declined in three of the last four years amidst increases in state funding. After a 1.0% decrease in 2022, public institutions received $7,244 per FTE in net tuition and fee revenue. 2 2Declines in net tuition revenue are largely due to increases in state financial aid and minimal tuition rate growth. VIEW ALL FOOTNOTES

Enrollment declined for the 11th straight year from 2021 to 2022.

The loss of 266,338 FTE students in 2022 marks the second largest decline since the start of the SHEF dataset in 1980. Cumulatively, net FTE enrollment i 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 at public institutions has declined by 5.6% since the start of the COVID-19 pandemic in 2020 and 2.5% in the last year.

The last two 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 and 2022, 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, 10.8% 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 financial aid i i State public financial aid State public financial aid is any state appropriated student financial aid for public institutions, excluding loans and aid for students attending medical schools. VIEW ALL DATA DEFINITIONS accounts for 80% of total state financial aid. This represents $10.2 billion of the $12.8 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 2021 to 2022, public financial aid increased 2.0%, reaching an all-time high of $990 per FTE. 

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

Only 5.0% 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 9.7% in 2022.

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 2022, 41.7% of total education revenue came from tuition. i 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 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 (20.3%). 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 since 1980. In five states, the four-year student share is greater than 75%.

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