Checking In On California’s Higher Education Financial Health

Earlier this year the State Higher Education Executive Officers Association (SHEEO) released their annual State Higher Education Finance Report (SHEF), examining enrollment trends, state and local government funding, tuition costs, financial aid, and more across the country. The past few years have been difficult ones for higher education across the United States, and approaches to how best to respond varied substantially across the 50 states. This year’s report—which focuses on the fiscal year ranging from July 2022 to July 2023—offers an opportunity to examine how well California’s higher education system held up under the adverse conditions of the COVID-19 pandemic compared to the rest of the nation, as well as potentially highlights a few key areas of interest that may require more focus from state leaders in the coming years.

Enrollment

We’ve previously discussed at length the enrollment declines that have impacted the state’s public higher education systems in recent years—this report only provides more evidence to that effect. Due to the sheer size of California’s higher education system, 2022 to 2023 had by far the largest raw decline in FTE enrollment in California, with a  decline of 34,427 students. Furthermore, California alone accounted for over 68 percent of the decline of 50,464 students across public institutions in the United States as a whole. 

On a rate basis, California tied for the 8th largest percentage decline in Full-Time Enrollment (FTE) at -2.3%, a ways behind the -0.3% national average. When pulling back to the pre-pandemic era however, the national picture looks quite a bit different. Between 2019 and 2023, California suffered a -4.5% decline in students enrolled full-time, nearly double its single year total, but substantially less disastrous than the -11.7% national drop, accounting for over half a million students.

Public Appropriations

In 2023, California delegated $11,801 per full-time student, falling slightly above the national average, and increasing 3% from the previous year. However, that increase is far from being distributed evenly across the sectors. Education appropriations at two-year institutions in California decreased from the prior year by 2.9% in 2023, while increasing at four-year institutions by 7.1%. This discrepancy is, to an extent, in line with national trends, as funding for four-year institutions increased by more than double the rate of two-year colleges, despite both sectors seeing an increase in funding at the national level. Considering that just 28% of California’s postsecondary students are enrolled at four-year institutions—ranking dead last among the 50 states—reducing funding for two-year institutions (from levels that were already below the national average) impacts a much larger slice of an already much larger pie than it would anywhere else in the United States. 

Tuition Revenue

In 2023, California collected $2,717 in net tuition revenue per full-time student, far behind the national total of $7,353 and ranking 49th among all states, ahead of only Florida. Broken down by sector, California had the second lowest net tuition revenue in the nation for two-year institutions, behind only Tennessee at just $459 per student and sixth lowest among four-year institutions at $5,626. California’s extreme placement is a result of the state’s successful efforts to keep tuition affordable in an increasingly expensive living environment but is also reflective of the dominance of the state’s community colleges in attracting enrollment and their lower tuition compared to four-year institutions. As California draws a significantly smaller percentage of its overall revenue from tuition compared to other states, decreases to state and local appropriation levels detailed above could be crippling, as they constitute the majority of the sector’s funding. Since these numbers are calculated on a per-student basis, they do not take into account the overall decline in tuition revenue as a result of declining enrollment, only further proving the potential impact of declines in state funding for California Community Colleges. 

State Financial Aid

California ranks nearly identically to the national average both in terms of state financial aid per full-time student and the percentage that state financial aid accounts for total out of state higher education appropriations. Overall, state financial aid in California increased by 2% per full-time student from the previous year and by 17.5% since 2018, keeping the state in lockstep  with the national increases of 2.5% and 17.9% over the same time periods. Once again, however, when looking under the hood, we see a strikingly different story depending on the sector. At California’s four-year institutions, state financial aid increased by a whopping 62.9% over just a five year period between 2018-2023, an increase of nearly 5 times the national average of 13.7%. By contrast, the totals at two-year institutions declined by 27% over the same period despite increasing by 4.4% nationwide.