- Economic recovery has boosted the flow of revenue to states but their support for higher education remains 13% below 2008 levels per student, reflecting lingering effects of the Great Recession, according to a new report from Pew Charitable Trusts.
- The report examines 10 ways these effects are apparent. That includes diminished purchasing power as a result of $283 billion in foregone tax revenue during and immediately after the recession, the report notes.
- While state spending from the general fund is up 4.3% overall, 23 states spent less in 2018 than they did in 2008 when adjusted for inflation. Budget increases approved for 2019 would have 17 states spending less than they did pre-recession.
States are struggling to shore up their finances ahead of a future economic downturn, Pew notes. At the close of 2018, 19 states had less in reserves relative to the operating costs in their general fund than they did in 2007.
"For many states, though, even pre-recession levels were inadequate to plug huge budget gaps caused by the last recession," the report notes, adding that seven states didn't have enough funds to run operations for a week last year and three had none.
The report touches on specific elements of states' budgets, including infrastructure, Medicaid, government employment and higher education spending.
The latter is states' third-biggest budgetary line item, the report notes, and has "partially recovered" from its trough in 2012. It has increased each year since, though the overall $88.2 billion spent on higher ed in 2018 is 7% below 2008 levels, adjusting for inflation. Pew based its analysis on data from the State Higher Education Executive Officers Association.
Public universities have responded to the drop-off and slow recovery by raising tuition. According to the report, that amount increased by 43% per-student from 2008 to 2018.
Not all institutions depend on state funding equally. A report earlier this year from Moody's Investors Service showed that while Alaska, Hawaii and Illinois rely on state support for more than 40% of their public higher education funds, Vermont, New Hampshire and Pennsylvania, got less than 10%.
Some states that reported significant decreases in overall general fund spending from 2008 to 2018 still increased per-student dollars to higher education, including Wyoming and Alaska, according to Pew's report. The reverse was also true, though was less common. Texas' general fund spending increased 21% during the period while its support for higher education fell 23%.
The funding cuts come in amid broader changes in the landscape that colleges and universities must navigate. Those include more demand for and competition in online education, public debate about the value of a college education, demographic shifts resulting in lower enrollment and hardening domestic immigration policy.