Midwest’s public colleges and universities face state funding cutbacks

Colleges of all stripes are facing a much-discussed “demographic cliff,” with enrollment numbers already declining at many institutions. Multiple private colleges have seen downward outlook revisions from credit rating agencies due to declining enrollment and its attendant drop in tuition revenue combined with high debt levels.

Yet public universities and community colleges in the Midwest face their own unique set of challenges: cuts in state appropriations for higher ed, tuition increases outpacing inflation and growing pension costs. Some states are merely pulling back funding, while others are linking financial support to ideological programming changes.

If progressives and conservatives in the region can agree on one thing, it’s that public colleges and universities rely too heavily on tuition hikes. Some Midwest states have reduced higher ed funding dramatically from a decade or two ago, and while the past few years brought help in the form of federal pandemic relief funds, those funds are now tapering off. 

In Illinois, state funding for higher education has dropped by nearly 50% since 2000, while tuition has more than doubled, according to a March 2023 report from the Center for Tax and Budget Accountability, a Chicago-based nonprofit that advances progressive taxation and spending policies.

In his recent State of the State address, Gov. JB Pritzker announced a more than $30 million increase in direct operating support for higher education. But CTBA Executive Director Ralph Martire said that should be seen in the context of 2002, when general fund appropriations covered 72% of the costs for students attending public colleges; appropriations now cover roughly 36% of the costs.

“It’s not enough, what’s in the governor’s budget,” said Martire, who is also the Arthur Rubloff Endowed Professor of Public Policy at Roosevelt University. “The Pritzker administration has done a better job of funding higher ed than any of its predecessors… But we’re still way below where we were.”

Martire noted that tuition and fees have spiked at a much steeper rate than the national average during the last two decades. While median income in the state only grew about 12% in that time, tuition jumped by 121%, compared to a nationwide increase of 71%, he said. Meanwhile, state Monetary Award Program grants have lost 60% of their value.

“Tuition and fees are growing at a rate that very much outpaces the growth in MAP grants over time,” Martire said. Today, the average in-state tuition at an Illinois public university would take up 98% of annual earnings for people in the lowest income quintile, he added. 

That higher tuition has coincided with lower enrollment.

From the fall of 2002 to the fall of 2022, enrollment at the 12 state universities in Illinois dropped by more than 20,000, a 17% fall from 148,271 to 126,589, according to Illinois Board of Higher Education data.

Excluding the flagship University of Illinois Urbana-Champaign, where undergraduate enrollment is up more than 21%, undergrad enrollment at the other 11 campuses was down more than 30% over two decades.

The Illinois Policy Institute, a nonprofit think tank with libertarian leanings, noted in a February report that public universities in the state now get nearly $530 million less in real terms to fund operations than they did 15 years ago. 

Meanwhile, pension payments to the State Universities Retirement Systems fund have jumped eight-fold as the state grapples with underfunded public employee pensions. Pension spending has gone from 7 cents to 43 cents of every education dollar spent by the state. According to Illinois Policy, 11 of the state’s 12 four-year colleges have hiked tuition and fees to make up the  lost operating funds and higher pension costs.

“It is making college less accessible and affordable for many Illinoisans,” said Bryce Hill, the group’s director of fiscal and economic research. “This issue highlights the need for constitutional pension reform. We recommend a ‘hold harmless’ plan to rein in the growth of future pension spending.”

Hill pointed out that higher education pension costs will be growing by $80 million in 2025. With “no end in sight” for rising pension costs and declines in operational funding, he said, colleges and universities will likely keep turning to tuition and student fees to make up the difference. 

And while some students will continue to take on more debt in the hopes of further student loan forgiveness from the federal government, others may balk at going to college.

Community colleges in the Midwest and particularly in Illinois have seen modest increases in enrollment recently on a semester-to-semester basis, said Jim Reed, executive director of the Illinois Community College Trustees Association. But over the longer term, they face some troubling developments, too.

A major concern for Reed’s organization today is the ratio of student fees to state contributions to property taxes making up community colleges’ funding mix. The formula had always been one-third, one-third and one-third, he said. But the state is now contributing about 18% of community colleges’ funding, while property taxes make up about 32%. That leaves students responsible for 50% of the colleges’ revenue.

“That’s certainly a trend that we need to get away from,” Reed said.

Operating margins are deteriorating as well, he said.

Nonetheless, Reed said community college remains affordable compared to the region’s public universities. And he pointed to a range of solutions responding to the challenges facing community colleges.

There’s been an emphasis on dual credits and enabling students to get more of those credits while they are in high school, he said. The hope is that starting earlier with students will increase bachelor attainment rates. 

There have also been renewed efforts to strengthen transfer rates. In Illinois, for example, the General Assembly is currently considering proposals to create common course numbering systems to allow for easier transfers. Some community colleges are looking at applied sciences and applied arts degrees to address local workforce needs, as well as workforce equity initiatives that help get people into college and the workforce if they have unmet basic needs, such as childcare.

There is also a push to allow the community college baccalaureate in Illinois, an option currently available in 23 states including Indiana, Ohio, Michigan, Missouri and North Dakota.

Outside of Illinois — where a Commission on Equitable Public University Funding is discussing a funding formula that would aim to eliminate racial disparities in attainment rates — many states have seen dual trends of funding cuts and programming strings.

When the University of Wisconsin System Board of Regents in December approved a plan to freeze diversity, equity and inclusion program hiring, it gained $800 million from the Wisconsin General Assembly for building projects and pay raises.

But elsewhere in the Midwest, cost-cutting is being paired with pushback against policies targeted by GOP-run state legislatures. 

In Ohio, a cap on tuition increases and flat levels of state aid led to cuts at some state schools — among them Kent State University, which will cut $17 million from its budget over the next fiscal year, and more in the following two years.

Meanwhile, Ohio’s GOP-dominated legislature enacted a 2024-25 budget that established centers devoted to expanding “philosophical diversity” and free speech at Ohio State University, Miami University and Cleveland State University, with each center requiring new faculty and director positions to fund.

In Iowa, the House Committee on Education recently approved HF 2558. The bill caps tuition and fee increases for publicly funded colleges at 3% of the previous year’s totals, without a significant corresponding hike in state support for higher ed. It also eliminates all DEI functions except those necessary to comply with federal or state laws; bars the consideration of race or “other protected class characteristics” in the admissions process; requires state colleges and universities to recruit a “diverse range” of ideological perspectives; and requires the establishment of free speech institutes.

In Nebraska, Legislative Bill 1330 bars community colleges, state colleges and public universities in the state from spending funds on DEI programs, except as required by federal law. Meanwhile, the University of Nebraska-Lincoln trimmed $12 million from its budget by cutting positions and axing others that are vacant and axing others that are vacant, including an $800,000 cut to a shrunken diversity and inclusion office.

Not every Midwest state is cutting back on support to higher ed. Missouri Gov. Mike Parson’s proposed $52.7 billion 2025 budget includes a 3% increase for higher ed and $314.7 million for new construction at community colleges and four-year universities.

And North Dakota’s 2023-25 budget raised total higher ed spending to $3.29 billion from $2.69 billion, a $595 million increase. Gov. Doug Burgum had called for a $219 million increase over the 2021-23 budget’s education spending levels, but lawmakers appropriated more.

The governor’s communications director, Mike Nowatzki, said Burgum has pushed campuses to “continually evaluate their financial models” to reduce student costs.

He noted that North Dakota froze tuition for residents during the 2023-24 and 2024-24 academic years.

The cuts in many Midwest states depart from the national trend.

“Overall, state investment in higher education in 2024 looks positive at this time despite waning federal stimulus,” said Kelsey Kunkle, policy analyst at the State Higher Education Executive Officers Association. “Many states ended fiscal 2023 with a budget surplus, but states with chronic budget problems will no longer be able mask them with federal stimulus aid. This is leading to mixed early projections for 2025.”

Kunkle added that generally, state higher education leaders are committed to college affordability: “Some states have recently been allocating more funds to maintain or implement initiatives that address college affordability,” she said. “This includes agreements to keep tuition flat and some individual institutions and systems have even voluntarily committed to tuition freezes.” 

Ultimately, Kunkle said she’s “hopeful” that states will step up with funding to offset the tuition freezes. But the extent to which they’re able to do that may vary widely.