The annual State Higher Education Finance (SHEF) report

For sixteen years, the State Higher Education Executive Officers Association (SHEEO) has produced the annual State Higher Education Finance (SHEF) report to broaden understanding and enable analysis of state-level and national funding and enrollment trends over time. The SHEF report provides the earliest possible review of state funding for higher education for the most recently completed fiscal year. SHEF also includes a robust data set for fiscal years 1980-2019 with detailed data on state and local funding, tuition revenue, and enrollment, with interactive data visualization materials. An early look at the state support for 2019 is available in the Grapevine data compilation.

In late 2018, SHEEO began a two-year grant-funded project to improve the SHEF report. This project is funded by the Bill & Melinda Gates Foundation.

The 2018 SHEF report examines the trends, context, and consequences of state higher education funding decisions.

Explore the Report

Sources and Uses of Revenue

This section provides data and analysis of the sources and uses of state and local government support for higher education, focusing on the most recent five-year trend (2013-2018), during which most states largely recovered from the Great Recession. These funding amounts are not adjusted for inflation or enrollment. Sources

• In unadjusted terms, state and local government support grew 20.3 percent from 2013, reaching an all-time high of $99 billion in 2018. State funding grew 2 percent in the last year, from $86.5 to $88.2 billion in 2018.
• State tax appropriations remained the largest source of funds, totaling $83.9 billion (84.7 percent of all state support).
• Local support in 29 states, which typically funds community colleges, increased 2.7 percent to $10.8 billion in the last year, totaling 10.9 percent of funds.
• Non-tax appropriations, mostly from state lotteries, continued to grow and exceeded $3.5 billion (3.6 percent of all funds) in 2018.

Uses

• General operating expenses at public institutions increased 23 percent in the last five years, reaching $77.7 billion, or 78.4 percent of the total state and local government funding.
• $10.3 billion (10.4 percent) went to special purpose appropriations for research, agricultural extension programs, and medical education.
• $10.6 billion (10.7 percent) was allocated to state-funded student financial aid programs. Over three-quarters of this aid went to students attending public institutions within a state.
• Funding for operations at independent institutions has increased 22.5 percent in the last five years, while funding for non-credit and continuing education programs decreased 12.2 percent. These funds account for less than 1 percent of state and local support.

Figures and Tables

Table 1. Distribution and Uses of State Support

National Trends in Enrollment and Revenue

This section highlights the composite trends in higher education funding across all 50 states. Data are adjusted for inflation and presented on a per full-time equivalent enrollment (FTE) basis.
General operations at public institutions of higher education are funded from both state and local support and tuition revenue. In the last 25 years, student FTE increased from 8.2 million to 10.9 million, while educational appropriations per FTE declined 4.2 percent, and net tuition revenue per FTE increased 85.6 percent in constant dollars.

• Full-Time Equivalent Enrollment (FTE). In 2018, there were 10.9 million FTE enrolled students. Recent enrollment declines have slowed, and FTE decreased less than 1 percent over the last two years.
• Educational Appropriations. Despite five years of small increases and steady appropriations in the last year, appropriations remain below historic levels after four straight years of declines during the Great Recession. Ten years after the start of the Great Recession, state funding for higher education has only halfway recovered and states fund about $1,000 less per FTE than in 2008.
• State Public Financial Aid. In the last year, state public aid increased 8.7 percent to $752 per FTE. During the worst years of the Great Recession, states protected their investments in financial aid, and aid increased while the rest of appropriations dropped.
• Net Tuition Revenue. Net tuition revenue was essentially flat in the last year, but has increased 38.7 percent since before the Great Recession. Tuition revenue is affected by changes in student population, enrollment mix, and rate increases.
• Student Share. Student share grew rapidly during the Great Recession and has since declined slightly. In 2018, student share was over 10 percentage points above 2008 levels. In over half of all states, tuition revenue comprises more than 50 percent of total revenue.
• Total Educational Revenue. After dropping significantly during the Great Recession, total educational revenue recovered in 2015. Nationally, increases in net tuition revenue have more than offset reductions in state and local funding per student. However, there is wide variation across the country, and reductions have not been offset at all institutions or in all states.

Figures and Tables

Table 2. Impacts of Inflation and Enrollment

Figure 1. Wave Chart (Enrollment, Tuition, and Educational Appropriations per FTE)

Figure 2. Public Student Aid per FTE

Figure 3. Student Share (Net Tuition as a Percent of Total Revenue)

Interstate Comparisons

This section expands upon the national metrics to closely examine interstate differences across the SHEF metrics of higher education financing. Data are adjusted for inflation, enrollment mix, and cost of living, and are presented on a per full-time equivalent enrollment (FTE) basis. See the technical documentation to learn more about these adjustments.
This section illustrates the variability across states and over time concerning higher education enrollment growth, total state and local appropriations, the amount and proportion of tuition-derived revenue, and total revenue available for public education.

• Full-Time Equivalent Enrollment (FTE). While enrollment was flat at the national level in the last year, it actually declined in 35 states. In the last five years, the sharp enrollment increases seen during the Great Recession have steadily declined as most state economies recovered. However, enrollment in 38 states remains above pre-recession levels.
• Educational Appropriations. Like enrollment, flat national educational appropriations mask differences among states. Educational appropriations per FTE are more than $1,000 above the U.S. average in nine states, and are more than $1,000 below it in 23 states. While 22 states saw declines in educational appropriations per FTE in the last year, the year-over-year change was less than 1 percent in 14 states. Only a handful of states that faced appropriations declines during the Great Recession have returned to their pre-recession funding levels.
• Net Tuition Revenue. Tuition revenue per FTE increased in just over half of all states and Washington, D.C. Net tuition has increased beyond inflation in every state since before the Great Recession, and has increased by more than 50 percent in 14 states. States vary widely in their student share, but every state has seen increases. In 2018, public higher education is more dependent on tuition revenue than educational appropriations in over half of all states.
• Total Educational Revenue. States vary widely in their total educational revenue; only 16 states are within $1,000 of the U.S. average in total revenue per FTE. Twenty-nine states saw increases in total educational revenue per FTE in the last year. However, changes to total revenue were less than 1 percent in 21 states. Sixteen states are still below their pre-recession levels of total educational revenue.

Figures and Tables

Table 3. FTE Enrollment by State

Table 4. Educational Appropriations by State

Table 5. Net Tuition Revenue by State

Table 6. Total Educational Revenue by State

Figure 4. Five-Year Change in FTE Enrollment by State

Figure 5. Five-Year Change in Educational Appropriations by State

Figure 6. Net Tuition as a Percent of Total Revenue by State

Figure 7. Five-Year Change in Total Educational Revenue by State

Figure 8. Educational Appropriations—Difference from U.S. Average

Figure 9. Total Educational Revenue—Difference from U.S. Average

State Revenue, Taxes and Funding effort

This section is intended to provide additional context behind the varied levels of state funding for higher education across the states. To do this, SHEEO compares three indicators of a state’s effort and capacity to fund higher education: state support per capita, state support per thousand dollars of personal income, and state support of higher education as a percentage of total state revenues. 
At the aggregate level, state tax capacity has rebounded from the Great Recession, but state effort to fund higher education has not recovered on any of the measures below. These data are pulled from publicly available sources, and are less recent than the SHEF data. All comparisons are between 2008 and 2016.

• State Support per Capita. States with larger populations should, theoretically, have greater fiscal capacity to direct resources toward higher education. On average, states provided $298 in higher education support per capita. States range between $93 in New Hampshire to $714 in Wyoming. Higher education support per capita was higher in eight states in 2016 than in 2008.
• State Support per $1,000 of Personal Income. This measure provides context about the scale of support for higher education in relation to a state’s available tax base. The U.S. average was $5.80 of support per $1,000 of personal income, and states again ranged from New Hampshire ($1.60) to Wyoming ($12.40). State support per $1,000 of personal income increased in only two states between 2008 and 2016.
• Percent of State Revenues Allocated to Higher Education. States provide different proportions of their available tax and non-tax revenues to higher education. Comparing total available state revenues contextualizes a state’s ability to fund higher education. On average, states allocate 5.8 percent of available revenues to higher education. Twenty states are within 1 percent of the U.S. average. Only seven states allocated a greater portion of revenue to higher education in 2016 than before the Great Recession.

Figures and Tables

Table 7. State Revenues and Funding Effort

Table 8. Change in State Revenue and Funding Effort by State

Figure 10. Support per Capita by State

Figure 11. Support per $1,000 in Personal Income by State

Figure 12. Percent of Revenues Allocated to Higher Education

Case Studies

• Recovery from Great Recession: This case study provides an analysis of how well states have recovered from the Great Recession. We consider the depth of cuts in state funding, recovery of total educational revenues and the sources of that recovery, and changes in state financial aid.
• Fiscal Challenges in Illinois: Higher education finance data for Illinois continues to be an outlier in the 2018 SHEF Report. This case study provides context behind the significant increases in Illinois’ state support and explains how the SHEF data handle Illinois’ lack of a budget in 2016 and 2017.
• State Budget Drivers: Higher education spending has struggled to recover to pre-recession levels. This case study explores some of the revenue and expenditure drivers that have led to this slow recovery.

Key findings for fiscal year 2018 include:

HIGHER EDUCATION FUNDING IS STABILIZING: Nationally, state and local per student support for higher education increased at the rate of inflation from 2017 to 2018. This minimal growth follows a five-year period of annual funding increases greater than 2 percent, indicating that state appropriations have stabilized, albeit at a much lower level.


STUDENT SHARE IS THE NEW NORM: For the first time since the Great Recession, net tuition revenue remained flat in 2018, indicating that the growing reliance on net tuition as a revenue source—the student share—might be leveling. While tuition revenue measures more than just rate increases, flat tuition revenue may be a sign of the impacts of increasing attention on college affordability


GOOD NEWS FOR STATE FINANCIAL AID: In 2018, state financial aid saw the largest increase since the Great Recession. Financial aid now represents nearly 10 percent of all appropriations, and encouragingly, evidence shows that states largely protect this source of support during economic downturns.


ENROLLMENT DECLINES ARE SLOWING DOWN: