Top Public Policy Issues Facing Governing Boards in 2023–2024:
Federal and State Funding

In March 2024, the Biden administration submitted its FY 2025 budget request to Congress, proposing $84 billion for the Department of Education. This budget includes an increase in the maximum Pell Grant through a combination of both mandatory and discretionary funding. The budget would boost the maximum Pell Grant by $750 for students attending public or nonprofit institutions of higher education, while students attending for-profit institutions of higher education would see a $100 increase in the maximum Pell Grant. Under the budget, the total maximum award for students at public and nonprofit institutions of higher education would be $8,145 per year, while the maximum award for students at for-profit institutions of higher education would be $7,495. Additionally, President Biden’s budget includes $12 billion in mandatory funding for a new program called Reducing the Costs of College Fund, which would provide funds to increase access to dual enrollment programs as well as additional awards to institutions to encourage innovation around affordability, college completion, and lower tuition.

Separately, the House GOP kicked off congressional action by passing an education appropriations bill that is more than $20 billion below the comparable FY 2024 level, which level funded the maximum Pell Grant. It also cut the Federal Work-Study (FWS) program and the Supplemental Educational Opportunity Grant (SEOG) program. The Senate Appropriations Committee also put forth education funding legislation for FY 2025 that boosted the maximum Pell Grant by $100 for the 2025–2026 award year and maintained funding for the FWS program and the SEOG program. The Senate appropriations bills as a whole have $35 billion in additional spending. We expect a continuing resolution will need to be passed in late September, then the outcome of the November elections will largely dictate how and when Congress resolves FY 2025 spending.

With respect to 2024 appropriations, Congress began the formal education appropriations process in July 2023 when the House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies released its FY 2024 funding bill. The bill matched the House GOP stance that funding should be dramatically cut below FY 2023 levels. The Senate Appropriations Committee proposed $79.6 billion for the Department of Education, including a $250 increase in the maximum Pell Grant and maintained investments in the FWS program and the SEOG program. Congress finalized all FY 2024 spending in late March, largely level funding most education programs (including keeping the maximum Pell Grant the same for the upcoming award year at $7,395).

After a decade-long moratorium on earmarks, Congress once again allowed lawmakers in 2022 to bring home dollars for favored projects without going through the regular appropriations process. Some 540 institutions—including university hospitals and medical centers, public and private four-year colleges, and community colleges—received more than $1.7 billion in earmarks for more than 800 projects, according to an Inside Higher Ed analysis. While the median earmark was $1.25 million, former Sen. Richard Shelby (R-AL) secured more than $200 million for Alabama colleges and universities, followed by the $186 million that former Sen. Roy Blount (R-MO) got for Missouri schools and the $75 million that went to campuses in Kansas, courtesy of Sen. Jerry Moran (R-KS).

The ground rules for earmarks in the current Congress are different, however. While the Senate has largely continued the last Congress’s rules, in the 2024 appropriations process, the House provided only 0.5 percent of total discretionary spending for earmarks versus 1 percent last Congress, and no earmarks were allowed in the Labor, Health and Human Services, Education, and Related Agencies Appropriations (LHHS) bill. For FY 2025, the House again is keeping the ban on LHHS earmarks but also prohibits nonprofits from getting earmarks under an economic development account through the U.S. Department of Urban Development. Members of Congress utilized this account for earmarks in response to the LHHS earmark ban.

The outlook for public higher education in the states continues to look promising even as states are projected to increase budgets only modestly for 2025, the fiscal year most states currently are in. And despite an aggregate decline projected in state spending for FY 2025, the National Association of State Budget Officers (NASBO) reports in its June fiscal survey that the governors of the majority of states are still calling for general fund spending increases. NASBO also reports that overall state spending growth in the 50 states is estimated at 5.2 percent for fiscal years 2023 to 2025.

The State Higher Education Executive Officers Association (SHEEO) noted in its annual state budget survey data in February that current year (FY 24) funding for higher education increased 10.2 percent to $126.5 billion. Federal stimulus dollars distributed to the states are declining, but states still allocated an additional $800 million of such funds to their own state-generated spending. When federal stimulus funds are excluded, SHEEO reports, only two states, Alaska and Wyoming, have lower state support in 2024 than in 2019. The SHEEO survey and its longitudinal data, known as Grapevine, also show an increase of 36.5 percent over the past five years. The bulk of state and local support—85 percent—goes to public colleges and universities.

Worries over whether the economy will slip into a recession persist, although the early outlook for fiscal year 2025 is cautiously optimistic. The hope is that those states with budget surpluses will use some of the surpluses to make investments in operating support, student financial aid, and a host of other programs aimed at improving college access, completion, and affordability. However, amid the cautious optimism are two major concerns. First, for many public and private colleges and universities, the most immediate concerns about declining institutional revenues are tied to enrollment declines. Drops in enrollment due to declines in the college-going population result in declining tuition revenue or state funding formula revenue and are leading to program closures and institutional mergers. Second, states with budget surpluses will enact overly generous tax cuts and thus reduce higher education funding as a policy priority—indeed, as NASBO reports in its spring fiscal survey, states enacted “widespread and sizable tax cuts” in FY 24 and FY 25—while other states will opt to freeze tuition as they are flatlining, or even reducing, state support. It took years for institutions to recover from the deep cuts inflicted during the Great Recession of 2008–2009, which forced them to resort to stiff tuition increases—24 percent at four-year public institutions between 2008 and 2012. The hope is that higher education won’t see a replay of those difficult times.

An interesting development came out of Illinois in March. After several months of discussion and study, a commission of legislative and higher education leaders released a preliminary plan to create an entirely new higher education funding model. The commission’s proposed model recognizes that several Illinois institutions, particularly the regional comprehensives and minority-serving institutions, educate large numbers of disadvantaged students and may require additional resources to ensure students’ success. Other states, and most certainly the regional and minority-serving colleges and universities in those states, will be watching how the proposed model progresses in the Illinois legislature.

Individual states with healthy budgets continue to promote college access by enacting programs of free tuition at public colleges. By last count, 33 states offer some type of financial support for free college. Colorado is the latest. In June, Governor Jared Polis signed into law the Colorado Promise, a program to cover 100 percent of tuition and fees for up to 65 credits for all students with household incomes of $90,000 or less. The promise program will use tax credits rather than direct subsidies. Students will pay their education bills and they will be reimbursed after they file their tax returns. These “last dollar” tax credits, when combined with other federal, state, and institutional aid, will cover 100 percent of tuition and fees for eligible students at any of the state’s two- and four-year institutions.

Two additional states created programs in 2023: Massachusetts and Maine. Massachusetts passed MassReconnect, which will pay tuition, fees, and an allowance for books and supplies for students 25 or older at one of the state’s community colleges. Maine passed legislation that will fund free tuition and fees at one of the state’s seven community colleges. Aid will be last dollar, applied after any received state, federal, or institutional aid. It is currently limited to high school graduates from 2022 to 2025.

• Trusteeship Podcast Episode 39: What Boards Need to Know about the Federal Budget (November 2023)
• AGB Policy Alert: President Biden Signs 2023 Omnibus Appropriations Package, with Changes for Multiple Higher Education Programs (December 2022)
• AGB Policy Alert: President Biden Signs Consolidated Appropriations Act, Providing Funding for Multiple Higher Education Programs and Initiatives (March 2022)
• Trusteeship Podcast Episode 19: Higher Ed Budgets for the Post-COVID Era (April 2021)

• Does the board know the categories, dollars, and percentages of state and federal funding our institution or system receives? How would reductions in government funding affect key operating aspects of the institution(s), such as tuition levels? Has the institution discussed or developed strategies to adapt to such reductions?
• If our institution conducts significant research, does the board have a firm understanding of how many federal research dollars flow to the institution and from which agencies?
• Are board members, particularly the board leadership, actively engaged in advocacy efforts with the institution’s chief executive and government relations staff about current funding issues?

AGB believes that higher education is a private and public good, one that benefits both graduates and society. Colleges and universities produce individuals with practical and soft skills, preparing them to contribute in innumerable ways to our democracy and society. AGB supports increases in public investments in higher education, as well as heightened communication and advocacy about its value and benefits.