Higher education budgets are set to rebound: what that means for students

Higher education stands to be a big winner in many state budgets this year. State coffers are enjoying record surpluses, and tax receipts in numerous states are exceeding budget estimates, thanks to a surging U.S. economy. State revenues have recovered from the pandemic faster than most experts predicted, and that recovery, coupled with the support provided through several pulses of Higher Education Emergency Relief Rescue Funds, is leading higher education officials to look for big increases in state support of public institutions and state financial aid programs.

University presidents are eager to take advantage of the windfalls. Eyeing a $7.7 billion state budget surplus, the University of Minnesota asked for almost $1 billion in new funding, including $473 million for infrastructure upgrades across 5 campuses, $185 million to enhance campus security and sustainability, and $65 million to expand scholarship funding.

Many governors have recommended budgets that contain large increases for higher education in their states.

In Alabama, the state’s Commission on Higher Education made a $2 billion request for the state’s public colleges and universities for the upcoming fiscal year, a 17.5% increase over the current fiscal year’s budget.

Many governors have recommended budgets that contain large increases for higher education in their states. While some of the proposed hikes were not as large as higher education leaders might have hoped, they still represent a welcome recovery in public funding for institutions that just a year ago were worried that the pandemic was going to imperil their financial health, and in some cases, their survival.

In January, California Gavin Newsom proposed a historic, multi-year budget increase for California higher education. The recommendations include 5 years of annual 5% increases in base support for the University of California and California State University, and it promises about $1.6 billion in new money for California’s community colleges.

Other governors have followed suit. Here are some other examples.

Kentucky

Kentucky Governor Andy Beshear’s fiscal year 2022-23 budget calls for a higher education funding increase of about 12%, the largest increase in decades for public institutions in that state. Beshear’s budget would add $67.5 million in fiscal year 2022-23 and $90 million in fiscal year 2024 to institutions’ base budgets.

It also adds $60 million in bond funds for Kentucky’s popular “Bucks for Brains” program, which funds research at the 4-year universities. That $60 million is to be matched dollar-for-dollar with private donations and then put into individual endowments that provide a perpetual source of funding for selected faculty, graduate students, and research programs. In addition, Beshear wants to spend $500 million to pay down the debt on deferred maintenance for the state’s 9 postsecondary institutions.

Iowa

In Iowa, Governor Kim Reynolds proposed a 2.5% increase for the state’s 3 public universities – the University of Iowa, Iowa’s State University, and the University of Northern Iowa. The universities had requested a $22 million increase, but recommendations in Reynolds’ budget provides only about $14.8 million more than last year.

Arkansas

Arkansas Governor Asa Hutchinson has proposed a general revenue increase of $12.9 million for that state’s colleges and universities, bringing their total appropriations to $775.6 million. The budget for the 4-year colleges would increase by about $12.2 million, and for 2-year colleges by $813,501 in fiscal year 2022-23. But the state’s technical colleges would see a $129,805 decline under Hutchinson’s proposal.

Illinois

In Illinois, Governor J.B. Pritzker’s budget recommendation includes a fiscal year 2023 higher education budget that’s an increase of $208 million compared to current spending levels. The increase features a $122 million boost to the state’s need-based financial aid program, a 5% increase in funding for public universities and community colleges, $25 million for a new program to expand the healthcare workforce through the state’s community college system, a $2.8 million increase to recruit and retain more nurse professionals, and a $2.8 million increase for scholarships to attract more minority teaching candidates and minority faculty.

Governors in dozens of other states have submitted their budget recommendations over the next few weeks. And in several of those states—such as Colorado, Louisiana, Maryland, Missouri, Vermont and Virginia— they have proposed increased state higher education appropriations for fiscal year 2023.

One exception is Florida, where Governor Ron DeSantis has proposed a $100 million cut in funding for state universities compared to the current level, despite the state sitting on $15 billion in reserves.

What the increases mean for students

Assuming these and other proposed budget increases are enacted by state legislatures, college students should see at least 3 major benefits.

Student success is a key area of focus in several budgets. No where is this more obvious than with Governor Newsom’s proposed funding boost, which comes with a major catch: the institutions will need to make progress on a number of outcomes they have agreed to address over the coming years. Those goals are aimed in part at attaining 70% of working-aged Californians holding a college degree or certificate. Below are some examples of the high-priority goals that directly impact students:

• closing gaps in achievement rates among underserved students
• increasing graduation rates
• lowering net costs of attendance and increasing the predictability of costs
• increasing college enrollment by California residents
• shortening time-to-degree completion
• upping the transfer of community college students to the state’s four-year schools

Another area of student benefit is the one-time funding many states will be dedicating to renovate and repair aging campus facilities. Whether it is upgrading poorly heated and ventilated buildings, modernizing dilapidated science labs, or abating moldy living spaces, universities are poised to spend hundreds of millions of dollars in campus improvements under several of the governors’ budgets.

Finally, and perhaps of greatest interest, some governors are tying their recommended budget increases to requirements or agreements that institutions freeze or cap tuition increases for the upcoming year.

South Carolina

Governor Henry McMaster proposed a number of new investments for higher education in that state, including:

• $183 million for higher education deferred maintenance
• $20 million in one-time lottery revenues to address a nursing shortage in the state
• $60 million in additional financial aid for South Carolina residents who qualify for federal Pell Grants and who attend any in-state public college, university, or technical college: Students at private, independent, and historically black colleges and universities would receive an additional $20 million for tuition grants and assistance
• $124 million in American Rescue Plan Act funds to expand the state’s Workforce Scholarships for the Future, a program that allows residents to earn an industry credential or associate degree in selected high-demand careers

The key element in McMaster’s recommendation, however, is that for the third consecutive year, he has proposed that “the General Assembly freeze college tuition for in-state students.” In exchange, he is recommending an increased appropriation of $20.1 million to the public institutions, equivalent to last year’s 2.7% increase in the Higher Education Price Index (HEPI).

Kansas

Governor Laura Kelly’s 2022-23 budget recommendation includes an additional $45.7 million for the state’s public universities. That increase, which would restore institutional funding to pre-pandemic levels, would be tied to a requirement that the institutions freeze tuition at their approved 2022 fiscal year rates.

With record reserves in the state’s coffers, Kelly also recommended millions in new funding for need-based financial aid, special scholarships, and community colleges. She also wants to add capital funding for maintenance, new facilities, and enhanced technology at the public institutions, describing those dollars as an investment intended to increase the state’s economic competitiveness.

What is next?

The action now turns to the state legislatures as they begin to hold budget hearings on their governors’ proposals before possibly amending the budgets and then taking final votes later this spring.

It would not be surprising if more governors and legislators proposed similar appropriation-tuition quid-pro-quos in the months to come. Neither would it be surprising for some protracted negotiations to take place between governors, lawmakers, and university leaders as they hammer out the details of what should be a good year overall for higher education budgets and the students served by them.