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

Preparing for funding challenges.

There was good news on the financial front when it came to federal and state support for college and university presidents and their governing boards as the new year began. Going forward, however, questions remain, given the potential political and financial uncertainties.

Updated November 22, 2023.

The Federal Budget

President Biden submitted his proposed budget for fiscal 2024 to Congress in March, which included increased investment in areas of concern to higher education. He requested $90 billion in discretionary spending for the Department of Education, a further increase of nearly $11 billion or 13.6 percent. In addition, after securing a $900 hike in the maximum Pell Grant over the past two years, he proposed raising it further by another $820 to $8,215 for the 2024–2025 academic year and reiterated his goal of doubling the maximum by 2029 “to ensure college is accessible and affordable,” his budget office said. On the unsettled question of forgiving student debt, the Department of Education stated that “the [a]dministration looks forward to working with Congress on reforms that improve outcomes for student loan borrowers and make the administration of student loans more effective and efficient.”

Biden also asked Congress to fund a new $500 million competitive grant program for community colleges to offer two years tuition-free, and he proposed creating a partnership with states, territories, and tribes to offer free community college tuition to first-time students and workers.

In July 2023, Congress began the formal education appropriations process. This summer, the House Subcommittee on Labor, Health and Human Services, Education, and Related Agencies released and approved its fiscal year 2024 funding bill. The bill matched the House GOP stance that funding should be dramatically cut below fiscal year 2023 levels, slashing $60 billion compared with the actual 2023 level of spending across the bill. While the House GOP bill maintained the maximum Pell Grant at the current level, it eliminated funding for the Federal Work-Study program and the Federal Supplemental Educational Opportunity Grant program. Lastly, the bill cut funding for the National Institutes of Health and included a number of partisan riders on education, health, and labor matters. Meanwhile, the Senate Appropriations Committee has proposed $79.6 billion for the Department of Education, including a $250 increase in the maximum Pell Grant and maintains investments in the Federal Work-Study program and the Federal Supplemental Educational Opportunity Grant program. Presently, the federal government is operating under a continuing resolution through the holidays, with funding for the Department of Education remaining through February 2, 2024. Neither chamber has yet to pass its version of the bill that funds the Department of Education.

The $1.7 trillion omnibus spending bill for fiscal 2023 that the Biden administration hammered out with Congress, still under full Democratic control at the end of the last session, fixed spending levels through the end of September 2023. The omnibus bill provided sizable increases for the National Science Foundation (NSF) and the National Institutes of Health (NIH), the principal funders of basic science research on campuses, which traditionally draw strong bipartisan support. It did not include the ban on funding research in labs in China and other “foreign adversary countries” that some House members sought. On top of the sizable increases hammered out in December, NIH and NSF are both proposed for more increases in the President’s FY 2024 budget.

Elements of the Inflation Reduction Act (IRA)—the major piece of legislation passed in August 2022 that addresses domestic energy production, climate change, prescription drug prices, and other priorities—is also coming under pressure in the Republican-led House. Funding for clean energy and Internal Revenue Service staffing and modernization, in particular, is being attacked and figuring in the mix of desired spending cuts Republicans seek in any compromise on the debt ceiling. The clean energy provisions of the IRA have several potential benefits for colleges and universities—rebates and tax credits for climate friendly renovations, adaptations, and new construction, as well as funding for R&D.

Congressional Earmarks

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, retiring 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 will be different, however. While the Senate is largely expected to stay with last Congress’ rules, the House has announced that the total dollar amount of earmarks will be 0.5 percent of total discretionary spending versus 1 percent last year and that no earmarks will be allowed in the Labor, Health and Human Services, Education, and Related Agencies Appropriations (LHHS) bill. That could be a significant blow to colleges hoping to use this appropriations cycle to secure targeted funds from the Department of Education. It remains to be seen how the Senate, which will allow earmarks in the LHHS bill, and the House will resolve this major difference in approach.

State Budgets

The near-term outlook for public higher education budgets in the states looks promising, thanks in no small measure to massive infusions of pandemic funds in the past three years. According to a survey by the National Association of State Budget Officers (NASBO), overall state spending jumped 18.3 percent in fiscal 2022, and the budgets enacted for fiscal 2023 provide for a further 6.7 percent increase to almost $1.2 trillion.

In a survey by the State Higher Education Executive Officers Association (SHEEO) public higher education leaders expressed “cautious optimism.” “State budget surpluses provide an opportunity for new investments in public higher education that will accelerate progress toward meeting state educational attainment goals, closing equity gaps, and advancing economic and workforce objectives,” SHEEO reported.

Asked to rank the most important public policy priorities, SHEEO leaders cited the following, in rank order: (1) economic and workforce Development, and K-12 teacher shortages (tied), (2) addressing equity gaps, (3) college affordability, (4) enrollment decline, (5) financial aid, (6) higher education’s value proposition, (7) public perception of higher education, (8) state support, and (9) college completion/student success.

SHEEO also found that state support for higher education in FY 2023 reached $112.3 billion, a 6.6 percent increase over 2022 and a 27.5 percent increase over five years, well above the overall rate of inflation. Excluding federal stimulus funding, state support has increased 16.4 percent nationally since 2021. The bulk of state and local support—85 percent—goes to public colleges and universities.

The shower of stimulus funds that helped colleges and universities survive the pandemic is over and will not return. One cloud of uncertainty over current state spending levels is whether the economy will slip into a recession. Since all but two states are required by their constitutions or laws to spend no more than they collect in revenues, a prolonged downturn could quickly crimp public college and university budgets along with funding for state student aid that benefits many private college students.

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. One hopes that higher education won’t see a replay of those difficult times and that current state appropriation trends continue their positive momentum. And on the whole, the FY 2024 budget cycle appears to be positive. States have used 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 this positive news remains concern over public higher education as a state policy and funding priority, as some states with robust budget surpluses opted to either flatline or even reduce state support for higher education.

Questions for Boards

  • 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?

The AGB Perspective

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.