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Decline in FY10 State Support for Higher Education Mitigated by Stimulus Funds

February 1, 2010

State support for colleges declined last year, although less than it would have without the nearly $40-billion provided by the federal government through the State Fiscal Stabilization Fund (SFSF), part of last year's $787-billion stimulus package. A recent report - Grapevine: State Fiscal Support for Higher Education in Fiscal Year 2009‐10 - by the Center for the Study of Education Policy at Illinois State University and the State Higher Education Executive Officers (SHEEO) describes the decline in state funding and the mitigating impact of SFSF funds on state higher education systems.

The report details a 1.1 percent decline in state support in fiscal year 2009-2010 (FY10) to $79.4 billion. This is down from $80.3 billion in FY09, and from $80.7 billion (a 1.7 percent decline) in FY08. However, without the funding from the SFSF, the one- and two- year declines would have been 3.5 percent and 6.8 percent respectively - a significant difference.

Initial one-year data on FY10 shows that the majority of states provided lower levels of support to higher education systems than one and two years ago. Factoring in stimulus funds, 28 states reported declines of 0.2 percent to 16.4 percent. This number increases to 37 states, with declines of 0.1 percent to 21.1 percent, once stimulus moneys are removed from the equation. Two-year data (FY08-FY10) shows declines in 29 states, ranging from 0.3 percent to 20.1 percent. Again removing stimulus funds, 35 states reported declines, ranging from 0.2 percent to 37 percent.

In some cases, increases, rather than smaller declines, were reported. While nine states experienced declines in state support between 2005 and 2010 (without SFSF funds), four of those nine states were actually able to increase state support of higher education over that five‐year period. However, some states made large cuts in even with the stimulus money; Alabama and Massachusetts have reduced higher education spending by nearly 20 percent since FY08, and last year, Illinois saw the smallest annual spending growth - 1 percent - in five years.

Looking forward, the fiscal situation for higher education is likely to worsen rather than improve before the next budget year. Thirty-nine states are projecting midyear reductions, totaling nearly $34 billion, while nearly 40 states report expected revenue shortfalls for the 2011 fiscal year, which begins in July in all but four states. In addition, by the end of the current fiscal year, nearly half of the states will have spent all of their stimulus money for education.

The likelihood of increased state funding in the near future is low. This means institutions will be contending with an unprecedented amount of demand, coupled with budget shortfalls and the end of federal stimulus money. And it puts the onus on state lawmakers to make difficult choices.

For more information and to see data tables, visit the Center for the Study of Education Policy website.


Anne Gross
Vice President, Regulatory Affairs