State Higher Ed Funding Growth Slowing: Report Reveals Deceleration After Years of Increases

📉 Latest SHEEO Grapevine Report Signals Shift in State Higher Education Funding

State support for public higher education across the United States reached $133.1 billion in fiscal year 2026, marking a modest 1.0 percent increase from the previous year, according to the most recent Grapevine data released by the State Higher Education Executive Officers Association (SHEEO). This figure represents the smallest year-over-year gain since fiscal year 2021, when growth stood at just 0.6 percent. For context, between fiscal years 2022 and 2025, annual increases averaged a robust 7.8 percent, fueled by post-pandemic economic recovery and federal stimulus allocations that bolstered state revenues.

The Grapevine survey, conducted annually since 1961, offers an early snapshot of initially approved state appropriations before final audits and inflation adjustments. While the raw dollar increase appears positive, experts caution that it does not account for inflation, estimated at around 2.7 percent for the period, potentially leaving many institutions with flat or reduced real funding. This deceleration comes after more than a decade of volatility, including deep cuts during the Great Recession and a strong rebound in recent years.

Nationally, funding allocations broke down as follows: 47.6 percent went to operations at public four-year institutions, 20.9 percent to public two-year colleges, 12.9 percent to state financial aid programs, 10.8 percent to research, agriculture, and medical initiatives, and the remainder to other uses like agency operations. State support per $1,000 of personal income edged up to $5.12, a 5.3 percent rise since fiscal year 2021, though it fell short of keeping pace with income growth in recent comparisons.

Historical Context: From Post-Pandemic Boom to Cautious Plateau

To fully grasp the significance of this slowdown, it's essential to review the trajectory of state higher education funding over the past decade. Public higher education appropriations per full-time equivalent (FTE) student—excluding research, hospitals, and medical education—have climbed for 12 consecutive years following the declines of the Great Recession era. In fiscal year 2024, as detailed in SHEEO's State Higher Education Finance (SHEF) report, education appropriations per FTE reached $11,683, up 0.8 percent beyond inflation from the prior year. This surpassed pre-COVID-19 levels from 2019 by 17.9 percent ($1,774 more per FTE) and pre-2008 recession benchmarks by 9.0 percent ($969 per FTE).

However, the post-pandemic surge was exceptional. From fiscal years 2020 to 2024, cumulative increases totaled 12.8 percent, amplified by federal stimulus funds totaling over $170 billion allocated through states to higher education. By FY2024, stimulus had dwindled to $624.1 million (0.4 percent of total support), down 63.3 percent from FY2023. Enrollment trends also played a role: after 12 years of declines, national FTE enrollment rebounded 2.9 percent to 10.4 million in FY2024, easing per-student funding pressures but straining overall budgets.

Prior to this recovery, states grappled with a 'lost decade' post-2008, where per-student funding dropped 16 percent nationwide after inflation. Recovery was uneven; as of FY2024, 22 states still lagged behind 2008 levels, with Arizona 40.3 percent below and Iowa 29.9 percent short. These cycles highlight higher education's role as a 'balancing wheel' in state budgets—often first to be cut during downturns and slower to rebound.

State-by-State Variations: Winners, Losers, and Everything In Between

While the national picture shows modest growth, individual states tell a more nuanced story. Of the 50 states and Washington, D.C., 33 reported increases in higher education appropriations for FY2026, but 17 states plus the District saw declines. Seven states implemented cuts of 5 percent or more, compared to just five with equivalent gains.

• Montana led with a 12.1 percent increase, prioritizing public operations and aid amid strong local revenues.
• Florida eked out a slim 0.1 percent gain, reflecting conservative budgeting.
• On the downside, Arizona slashed 13.6 percent, influenced by shifting local appropriations (which make up 42.4 percent of its support).
• North Carolina dropped 1.6 percent, while West Virginia cut 7.1 percent after one-time boosts in prior years for health premiums and FAFSA completion initiatives.

Per capita support reached $390 nationally in FY2026, up 32 percent from FY2021 but only 0.5 percent from FY2025. States like Illinois maintain high per-FTE appropriations ($25,529 in FY2024), while New Hampshire trails at $4,629. Local contributions vary wildly: essential in California (16.9 percent) and Texas (21.6 percent), absent in 18 states.

These disparities underscore how political priorities, tax revenues, and enrollment patterns influence outcomes. For faculty and administrators tracking professor salaries and institutional stability, state-specific trends are critical.

Factors Driving the Funding Deceleration

Several interconnected factors explain this pivot from boom to slowdown. Primarily, state tax revenues, which surged post-COVID due to stimulus-fueled consumer spending and low unemployment, have moderated. Grapevine analysts note 'less robust revenue growth' as states normalize after record surpluses.

Competing priorities loom large: Medicaid expansions, K-12 education, and infrastructure demand larger shares. Higher education's slice of general funds has shrunk from 14.6 percent in 1990 to around 9.4 percent recently. Proposed federal changes, like the One Big Beautiful Bill's $840 billion Medicaid cuts over 10 years, could force states to reallocate from education.

Enrollment dynamics add pressure. While FY2024 saw a welcome uptick, total FTE remains 10.8 percent below 2011 peaks and 5.1 percent under 2019. Net tuition revenue per FTE plummeted 3.7 percent to $7,510 in FY2024—the steepest drop since 1980—despite flat rate hikes, thanks to record state aid ($1,155 per FTE, up 4.8 percent).

Rachel Burns, SHEEO senior policy analyst, contextualizes: 'Pre-pandemic, slower growth might have alarmed us more, but after strong years, we're less panicked—though watchful.' Political shifts in state legislatures also play a role, with some redirecting to workforce development or economic initiatives.

Explore more on higher ed career advice amid these fiscal shifts.

Impacts on Institutions, Faculty, and Students

The funding plateau ripples through campuses. Public four-year institutions, receiving nearly half of allocations, face operational squeezes, potentially curbing hiring or maintenance. Community colleges (20.9 percent share) grapple with enrollment booms but thinner per-FTE margins ($10,899 vs. $10,820 for four-year in FY2024).

Tuition reliance, at 39.3 percent of total revenue (down from 45.4 percent in 2019), eases student burdens but strains institutions as aid absorbs more. Faculty may see stagnant higher ed jobs postings, while students benefit from aid but risk program cuts.

Administrative roles in administration jobs could pivot to fundraising or efficiency drives. Long-term, slower growth risks widening inequities, with underfunded states lagging in research or access.

Strategies and Solutions for Navigating the New Normal

Institutions aren't passive. Diversifying revenues—boosting non-traditional enrollment, partnerships, or endowments—proves vital. Policymakers advocate performance-based funding, tying appropriations to outcomes like graduation rates.

• Leverage state financial aid expansions, now 9.9 percent of appropriations.
• Pursue grants for research/agriculture/medical (10.8 percent share).
• Enhance efficiency via shared services or online programs.
• Advocate for stable formulas prioritizing equity.

For job seekers, platforms like university jobs listings help track opportunities. Share experiences on Rate My Professor to inform peers.

Read the full SHEEO Grapevine report or SHEF FY2024 analysis for deeper data. Inside Higher Ed coverage offers expert insights.

Outlook: Preparing for Potential Challenges Ahead

Looking to FY2027, softer budgets loom with economic signals like cooling inflation and geopolitical tensions. Yet, optimism persists: enrollment recovery and aid commitments provide buffers. Burns notes, 'Tougher times ahead, but solid foundations from recent gains.'

Higher ed leaders must innovate, from AI-driven efficiencies to public-private ties. For professionals eyeing higher ed jobs or remote higher ed jobs, adaptability counts.

Photo by Quinn Smith on Unsplash

Wrapping Up: Staying Informed in Shifting Fiscal Tides

The end of rapid growth doesn't spell crisis but demands vigilance. Track trends via resources like AcademicJobs.com's higher ed jobs board, Rate My Professor for campus insights, and higher ed career advice. Professor salaries data reveals compensation shifts. Voice your views in comments, post a job on our site, or explore university jobs today.