Dive Brief:

• States expect to spend 5% more on higher education in the 2020 fiscal year than they did in 2019, the biggest annual increase in five years, according to the latest Grapevine report from the Center for the Study of Education Policy at Illinois State University and the State Higher Education Executive Officers Association.
• Funding rose year-over-year in all but three states, compared to nine states in 2015 and 18 states in 2018 that saw decreases. Still, just a handful of states accounted for nearly half the increase this year.
• The new data comes as public institutions face pressure to lower tuition and as more states tie funding to student outcomes using policies some fear could favor better-resourced schools.

​Dive Insight:

The data, which measures initially approved state investment in colleges and has not been adjusted for inflation, helps show what states expect to spend in the year ahead and how those estimates compare to the past few years.

State spending is up 18.8% in 2020 from 2015, according to the data. Jim Palmer, editor of the Grapevine survey, told Education Dive that the trend is "fairly predictable given the state of the economy." An economic contraction, which some economists have forecast, could stem that growth, he said.

While most states increased higher ed funding for 2020, nearly half saw gains between 0.7% and 4.8%, below the nationwide figure. Funding growth in five states — California, Texas, Illinois, New Jersey and Tennessee — made up nearly 50% of the nationwide increase for the year, according to the report. In those states, spending on higher ed rose 7.3% for the year compared to 4.4% for the other 42 states where funding grew combined.

What's more, it's unlikely institutions in states that added funding were affected equally.

"What's really interesting to me is something that's hidden in Grapevine data," Palmer said, noting that more selective public institutions "are better off than others simply because they have a greater capacity to raise alternative revenue streams through alumni giving, entrepreneurship, and so forth."

A report out last year from the National Bureau of Economic Research backs up that idea. It noted that the decrease in state funding in the last decade could have a bigger effect on colleges that focus mainly on granting degrees than on top-tier research institutions. The latter schools are better able to raise tuition, expand recruiting and fundraise, the report explained.

In light of these challenges, some regional public colleges are consolidating in order to reduce costs. The Connecticut State Colleges and Universities system, for instance, is planning to merge its 12 community colleges to help overcome a budget deficit and 10-year enrollment low.

Growing interest among states in outcomes-based funding models, which more than half of states used as of 2018, could put smaller public colleges at a greater disadvantage, Palmer said. "Institutions that have greater access to alternative revenue streams have greater capacity to invest in student services that will improve completion and graduation rates that are at the heart of these performance funding mechanisms," he said.

Other research has connected decreasing state funding to higher tuition rates that could reduce access to higher ed for students from disadvantaged backgrounds, contributing to greater racial and economic inequity. 

Public colleges and universities raised tuition an inflation-adjusted 43% per student from 2008 to 2018, according to a June 2019 analysis by the Pew Charitable Trusts. The same report noted that while state funding rose 4.3% during that time, per-student spending nationwide ended up 13% below 2008 levels.

In the latest Grapevine report, Alaska reported the biggest year-over-year decrease in funding, at -11.2%, largely due to major budget cuts with which the state's public four-year universities are still grappling. The other two states to decrease spending for 2020 were New York and Hawaii, though by smaller margins than Alaska at -0.3% and -2.2%, respectively.

Meanwhile, four states raised funding by more than 10% for the year: Utah (10.1%), South Carolina (10.8%), New Jersey (11.1%) and Colorado (11.4%).