Dive Brief: 

• State support for higher education is projected to increase 8.5% in fiscal 2022 over the previous year, according to the latest Grapevine survey, though this figure doesn't account for inflation or federal stimulus funds.  
• The increase marks the first time state support for higher education would surpass $100 billion, according to the survey, which is administered by the State Higher Education Executive Officers Association and Illinois State University's Center for the Study of Education Policy. Just five states reported year-over-year declines in higher ed funding. 
• The jump in funding is partly due to states reversing higher ed cuts implemented during the early days of the coronavirus pandemic. Some of the states that filled those budget gaps using federal relief funding were once again able to fund higher education with their own support. 

Dive Insight: 

The Grapevine report offers a brighter outlook for public higher ed funding than it has in recent years. However, the inflation rate from fiscal 2021 to fiscal 2022 — which ends in June for most states — isn't yet known, and it will likely eat up a substantial chunk of the increase. Inflation rates in recent months have hit levels not seen in decades.

Credit ratings agencies agree inflation poses a risk to colleges. Although the move back to in-person learning, high endowment returns and strong state budgets helped raise college revenues, inflation is undercutting some of that growth. 

The agencies also note that colleges will have to adjust to federal coronavirus relief drying up. Along with about $76 billion in direct relief to colleges, spending packages sent discretionary funds to states. 

Around $7.5 billion of that federal relief helped buoy state higher ed spending since 2020, according to the Grapevine report. 

When accounting for the relief, 18 states reported an expected year-over-year decline in funding in fiscal 2022. Those decreases were due to reduced federal relief funding rather than lower state support for all but five of those states. 

The five states in line for state funding declines when excluding federal stimulus funds were Alaska, Hawaii, New Hampshire, Vermont and Wyoming. The biggest drop came in Wyoming, at 10.3%, largely because of decreases in public operating appropriations at four-year institutions. 

In fiscal 2022, states will see just a 6.5% year-over-year increase in higher ed funding when including federal relief, compared to 8.5% without it. That's because states got more federal relief in fiscal 2021 than this year, said Sophia Laderman, senior policy analyst at SHEEO. 

Forty-five states dispersed $3.9 billion in federal coronavirus relief in 2021, while 33 doled out $2.3 billion in 2022, according to the report. "The federal stimulus and relief packages have been really, really important to kind of maintain state support," Laderman said. 

In fiscal 2021, for instance, state support for higher ed jumped 3.7% year over year with federal relief. That's compared to just 1.1% without the federal relief — an increase too low to make up for inflation that year. 

The Grapevine report found cause for optimism in longer-term trends. Excluding federal relief and without adjusting for inflation, state support has increased 9.7% over the past two years and 21.4% over the past five years. Just four states had lower state support in 2022 than 2017 — Alaska, Mississippi, North Dakota and Wyoming. 

The analysis also tracked how states divvied up their higher ed support. A little over half, 50.4% went to four-year public colleges, 22.8% went to two-year public schools,13.4% went to state financial aid and 10.3% helped finance research, agricultural extension, hospital and medical schools. The remainder was put to other uses, such as private institution operations. 

Looking forward, Laderman is worried about potential declines in state support as federal relief dries up. 

"We're really hoping that states continue to prioritize higher education and at least maintain funding after the federal stimulus funds end," Laderman said. "But I am quite concerned that won't be the case."