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 included 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 to the maximum Pell Grant. This would be the first time that the maximum Pell Grant differed based on whether the school a student attended was a for-profit institution. 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.

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 releasedits 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 Federal Work-Study program and the Federal Supplemental Educational Opportunity Grant 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 and Urban Development. Members of Congress utilized this account for earmarks in response to the LHHS earmark ban.

The outlook for public higher education budgets in the states continues to look promising as state economies remain strong and budget surpluses continue. The National Association of State Budget Officers (NASBO) reports that overall state spending is projected to increase by 6.5 percent to $1.26 trillion in FY 2024. General Fund budgets are projected to increase 11.8 percent.

Indeed, as the State Higher Education Executive Officers Association (SHEEO) noted in its annual state budget survey data in February, current year 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 that 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. Last year, SHEEO reported that state support for higher education in FY 2023 increased by 6.6 percent over 2022, and that the five-year increase was 27.5 percent.

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 and that current state appropriation trends continue their positive momentum.

For now, the worries over whether the economy will slip into a recession appear to have abated. The early outlook for fiscal year 2025 is cautiously optimistic, and the hope is that states will again use some of their budget surpluses to make historic investments in state operating support, student financial aid, and a host of other programs aimed at improving college access, completion, and affordability. However, amid the optimism are concerns that budget surpluses will lead some states to enact overly generous tax cuts and thus reduce higher education funding as a policy priority, while other states will opt to freeze tuition as they are flatlining, or even reducing, state support.

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.

• 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.