NASBO reports a 9.3% increase in state fund higher education spending between fiscal 2021 and 2022

In addition to last week’s Digest story on all state expenditures, the National Association of State Budget Officers’ (NASBO) 2022 State Expenditures Report detailed information on higher education expenditures, finding a 9.4% increase (from $225 to $247 billion) in total higher education expenditures over the past fiscal year, a sizable increase from the 1.7% increase experienced from FY 2020 to 2021. State funds for higher education increased 9.3% and federal funds saw an increase of 12.1%. This represents a large growth in state fund spending (from -0.3% in FY 2021), yet a decrease in momentum for federal fund spending (from 15% in FY 2022).

Federal funds do not typically make up a large portion of a given state’s overall expenditures for higher education (15.2% in FY 2022, compared to 10.1% in FY 2019); however, NASBO attributes FY 2022’s continued growth to higher education-specific COVID-19 relief funding, totaling $3.3 billion in FY 2020, $9.9 billion in FY 2021 and $10.4 billion in FY 2022. Much of this funding comes from programs like the Higher Education Emergency Relief Fund (HEERF), CARES Act, Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA or HEERF II), ARPA, etc.

For the purposes of state fund higher education spending, NASBO calculated the sum of higher education expenditures from general funds and ‘other state funds’ (not inclusive of federal funds or bonds). The general fund and ‘other state funds’ make up the largest portions of total state expenditures on higher education at 39.1% and 43.4% respectively (federal funds encompass 15.2%, while bonds are 2.3%) for FY 2022 (see above figure for this and select years prior).

This represents a shift for states since the onset of the pandemic; prior to COVID-19, higher education spending was heavily reliant on ‘other state funds’ to support its institutions, but in the last few years there has been a shift of over 5% away from ‘other state funds’ and onto the remaining sources.

State’s total state fund expenditures on higher education increased by an average of 7.9% between FY 2021 and 2022, with Colorado experiencing the largest increase at 90.4% (driven by a nearly twofold increase in both general fund and ‘other state fund’ higher education spending), followed by Idaho (33.4%), California (27%) and Kentucky (25.2%). Eight states decreased their expenditures on higher education, led by Oregon (-23.4%) and Hawaii (-35.3%).

Colorado’s increase of over 90% looks particularly large because the state cut a substantial amount of funding from FY 2021’s higher education budget as it was facing a $3 billion budget hole; compared to FY 2020 budget, the FY 2022 funding level represents a 13.9% increase over the 2-year period.

As with last week’s edition, the data used in this report accounts for “more than 99 percent” of total state spending, meaning that some data may slightly change once data has been fully collected. Fiscal year timelines vary from state to state, impacting when self-reported data is sent to NASBO.

Current and past editions of NASBO’s State Expenditure Report are available here.