States will determine how much funding higher education institutions receive for the upcoming year based on budget trends in the coming months. Three key areas to watch include:
Tax revenue growth. State budgets depend heavily on tax collections, which took a major hit during the pandemic. If revenue does not rebound strongly, funding for colleges and universities will face constraints. Some states have budget shortfalls of over 20%.
Federal stimulus money. States received billions in aid which helped support higher education. But these funds are temporary, and their impact will fade without new federal support. Cuts to state funding could result.
Post-pandemic priorities. States will have to decide how to allocate limited resources across many needs including education, healthcare, economic development and more. Funding for colleges may face proportionate reductions, be flat-lined or receive boosts depending on each state’s priorities and situation.
Other factors like enrollments, tuition, and healthcare costs could also shape state funding for higher education year over year. But the budget trends around tax revenue, federal funds and post-pandemic priorities stand to have the biggest impact in the short term at a time when finances are strained.
By closely monitoring what unfolds, higher education leaders can better understand potential funding changes, look for vulnerabilities in their state budgets, and may need to take action through cost savings, efficiencies or alternative funding requests. Flexibility and planning will be crucial with so much uncertainty around the economic recovery and political process.
No single trend points inevitably to significant cuts or increases, however. A lot depends on determining values and balancing limited resources as states move from crisis response to normal operations again. With advocacy and by highlighting key contributions, the higher education sector can help policymakers make informed decisions that support opportunities and advance progress. But thoughtful debate and compromise will be needed with many competing demands on state coffers.
The funding future remains unclear, but awareness of these budget trends provides a starting point for having constructive discussions, facing hard choices, and securing the essential support colleges and universities need to fulfill their missions today and for years to come despite the uncertainty. By monitoring issues closely as the year progresses, the possibilities for both optimism and peril become more evident.