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Despite State Support, Public Colleges Faced 2020 with Historically Low Funding

Most states have not recovered from recessionary cuts in state funding and now face declines in other revenue sources. Public colleges and institutions may be in a more precarious financial situation than at any other time in recent history. Amid this uncertainty, the State Higher Education Executive Officers Association’s State Higher Education Finance (SHEF) report offered a comprehensive look at where states stood as they weathered the COVID-19 economic recession. SHEF includes new data which bring to light clear disparities in funding and total revenue across sectors.

Key findings about public colleges:

In fiscal year 2020, a 2.9 percent increase in per-student education appropriations marked the likely end of an eight-year recovery in higher education funding.
  • State and local governments provided $8,636 per full-time equivalent (FTE) student to public institutions. Due to the pandemic, higher education likely faces several years of cuts to state funding. Additionally, early estimates of 2021 funding show a decline in most states.
  • Recent state investments in higher education are encouraging. However, per-student funding has never been so low at the start of an economic recession. Nationally, inflation-adjusted education appropriations per FTE remain 6.0 percent and 14.6 percent below 2008 and 2001 levels.
Two-year public institutions receive less funding from state governments.
  • Two-year public colleges received $4,969 per FTE in state general operating appropriations, compared to $7,352 at four-year institutions. Four-year institutions also received $1,697 per FTE in research and medical appropriations.
  • Local appropriations, primarily supporting two-year institutions, partially made up for the gap in state funding. In 2020, two-year institutions received $2,727 per FTE in local support. 
Enrollment declined for the ninth straight year.
  • Following a 0.6 percent decline over 2019, there were 10.9 million FTE enrolled students in 2020. The enrollment decline was concentrated at two-year public institutions, with a 1.9 percent decline, while four-year public institutions reported a 0.2 percent increase.
Financial aid continues to rise at a faster rate than institutional funding. 
  • Financial aid increased steadily despite economic recessions that negatively impacted the rest of education appropriations. State public financial aid per FTE increased 7.0 percent in 2020 and reached an all-time high of $830 per FTE. These funds made up 9.6 percent of all education appropriations, the largest proportion ever.
  • FTE students attending four-year institutions received 2.14 times more financial aid than students at two-year institutions.
Thanks to minimal tuition rate increases and growth in state financial aid, net tuition revenue decreased for the second straight year.
  • Public institutions averaged $6,726 in net tuition revenue from in-state and out-of-state students in 2020, down 1.0 percent from 2019. Net tuition revenue at two-year institutions was $2,606 per FTE, compared to $9,385 at four-year institutions.
Students finance the majority of public institution revenues at four-year institutions.
  • There has been a substantial shift of responsibility for financing public higher education toward net tuition revenue, particularly in the four-year sector. At two-year institutions, the average student share in 2020 was less than a quarter (24.2 percent). At four-year institutions, the average student share was over half (53.2 percent).
Total revenue continues to rise, but not for all states and institutions.
  • Total education revenue increased 1.2 percent in 2020, reaching a high of $15,276 per FTE. However, total revenue was not at a record high in more than half of states and varied substantially by institution type. Many institutions could not increase tuition revenue to offset declines in state funding, and four-year institutions had far more total revenue than two-year institutions.

These findings paint a concerning picture as the impacts of the 2020 recession continue to affect higher education. With declining revenue from both states and students and after a year of increased costs due to the pandemic, state support is crucial for the continued success of our public institutions.

Explore the SHEF website to read the full report. The website includes individual state profiles and reports on state effort and capacity to fund higher education, early estimates of 2021 state support, the use of federal stimulus funding for higher education and changes in state funding for private institutions over time.

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