New data from the State Higher Education Executive Officers Association (SHEEO) indicates that growth in state funding for public colleges and universities slowed considerably in fiscal year 2026, raising concerns about the durability of these recent gains.
According to SHEEO’s latest Grapevine report, state support reached $133.1 billion in FY 2026, representing a 1.0% increase over FY 2025. The gain marks the smallest year-over-year increase since 2021. By comparison, between fiscal years 2022 and 2025, annual funding increases averaged 7.8%.
The data reflects what SHEEO describes as a shift from the unusually strong revenue growth that followed the COVID-19 pandemic. During that period, state budgets benefited from robust tax collections and federal stimulus dollars. The current increase aligns with more modest tax revenue growth in many states.
Although the FY 2026 increase represents the fourteenth consecutive year of nominal growth in state funding, the figures are not adjusted for inflation. Early inflation data covering the first half of most states’ fiscal years show increases between 2.7% and 3.0%, suggesting that the real purchasing power of appropriations may be declining.
The report provides an initial snapshot of state tax support for higher education in the current fiscal year, including general fund appropriations for public universities, community colleges, and state higher education agencies. The figures reflect allocations and estimates reported between October 2025 and early January 2026 and remain subject to revision as states update their budgets.
State-level variation was substantial. Thirty-three states reported increases in higher education support, ranging from 12.1% in Montana to 0.1% in Florida. At the same time, 17 others and Washington, DC, reported decreases, with cuts ranging from 13.6% in Arizona to 1.6% in North Carolina. Seven states reduced support by 5.0% or more, while only five posted increases at or above that level. The uneven results underscore the widening disparities in how each state is prioritizing higher education.
Measures of these efforts offer a more complex picture. State support per $1,000 of personal income increased 5.3% over five years. However, that level is 3.9% below 2025 and 3.2% below 2024, indicating that funding has not kept pace with recent income growth.
The distribution of state funds also highlights where dollars are flowing. For total FY 2026, 47.6% was allocated to operational funding at public four-year institutions, while 20.9% went toward operations at public two-year institutions. Financial aid accounted for 12.9% of total support. Research, agriculture, and medical appropriations represented 10.8%, and 7.8% was directed toward other uses, such as non-credit and continuing education or operational support for independent institutions and state agencies.
Additional context from SHEEO’s broader State Higher Education Finance (SHEF) report illustrates how recent fiscal trends have reshaped institutional revenue. In FY 2024, public higher education appropriations per full-time equivalent (FTE) student increased 0.8% beyond inflation, surpassing pre-pandemic 2019 levels by 17.9%. Public FTE enrollment grew 2.9%, reaching 10.4 million students after 12 consecutive years of decline, though enrollment remained 10.8% below its 2011 peak.
At the same time, tuition revenue per FTE has fallen sharply. Inflation-adjusted net tuition revenue declined 3.7% in 2024 and 8.1% over five years, with public institutions receiving $7,510 per FTE in 2024. Institutions in 40 states and Washington, DC, collected less tuition revenue than they did five years earlier.
As appropriations increased and tuition revenue declined, the average student share of total revenue fell below 40% for the first time since 2010.
Taken together, the FY 2026 Grapevine data and recent SHEF findings suggest that while nominal state funding continues to rise, the pace of growth has slowed considerably. With inflation, enrollment shifts, and the expiration of federal stimulus funds reshaping state budgets, the stability of public higher education funding will likely remain a central issue in the years ahead.
