Colleges vary widely in reliance on state support, report says
- Although state aid to higher education increased for most states in fiscal year 2019, public universities vary widely in their dependence on state funding and thus their ability to respond to future cuts, a recent Moody's Investors Service analyst report suggested.
- Three states — Hawaii, Alaska and Illinois — rely on state support for more than 40% of their public higher ed funds. Meanwhile, Vermont, New Hampshire and Pennsylvania round out the bottom, with less than 10% of their funds coming from the state.
- The Moody's report suggests concerns around state funding will remain a "high-profile policy issue" for many states. While an improving economy might make state legislators more generous toward higher ed funding, an economic downturn could weaken support.
The Moody's analysis is based on data from a Grapevine report released earlier this year that showed state support for higher education increased by 3.7% from the 2017-18 to the 2018-19 fiscal years.
While an overall increase is positive for higher education, Moody's analysis underlines others' concerns that state colleges have not yet recovered from deep cuts during the Great Recession. Meanwhile, declining enrollment and public questioning of the value of a college degree is further squeezing some institutions' budgets.
Additionally, not all states have benefited from a recent increase in public support, with funding falling year-over-year for South Carolina, Kentucky, Minnesota, Ohio and Alaska.
Following years of rising tuition, some recent funding increases have been wed to requirements that states manage student costs. Public universities in Michigan, for instance, have been barred from state performance increases if they raise their tuition and fees by more than 3.8%. Education in the state received a 2% funding boost in fiscal year 2019, Moody's notes.
Meanwhile, lawmakers recently mandated Washington state public universities reduce in-state tuition by as much as one-fifth over two years in exchange for more funding, according to Moody's.
Other colleges have made cuts aimed at increasing enrollment, especially among lower- and middle-income families. Rice University recently announced full-tuition scholarships for students with annual family incomes of up to $130,000, and the University of Illinois at Urbana-Champaign announced last year that it would offer free tuition and fees to qualifying state residents whose family incomes were at or below the state median.
Though roughly 50 institutions have reset tuition over the last decade, it has not always led to the desired increase in enrollment, Forbes reported. Only about a quarter of the colleges that cut tuition were able to sustain an enrollment rise of 5%, according to EAB.
To improve budgets and accommodate the state cuts, colleges also are laying off faculty and staff members, fundraising more, recruiting out-of-state and international students, and developing private sector partnerships.
Correction: An earlier version of this article misstated the states relying on states for more than 40% of their public higher ed funds. They are Alaska, Hawaii and Illinois.