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

In March 2024, the Biden Administration submitted its Fiscal Year (FY) 2025 budget request to Congress proposing $84 billion for the U.S. Department of Education. This budget included increased the maximum Pell Grant through a combination of both mandatory and discretionary funding. The budget boosted the maximum Pell Grant by $750 for students attending public or non-profit 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 non-profit 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 included $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 lowering tuition.

With respect to 2024 appropriations, in July 2023, Congress began the formal education appropriations process. This summer, the House Appropriations 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. The Senate Appropriations Committee 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. Ultimately neither bill was successfully signed into law. Congress has operated under a series of continuing resolutions, the latest of which is valid through March 22, 2024. As of this writing, six of the twelve FY 2024 appropriation bills have not been passed, including the one that funds the Department of Education. Congressional leaders are in the midst of budget negotiations, and while we expect those negotiations to come down to the wire, Congress will likely be successful in keeping the government open.

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.

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 24. 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.

• 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.