Higher Education Inquirer : college revenues

Wednesday, September 18, 2024

Have Revenues Peaked For US Public Higher Education?

Student higher education enrollment has been headed in a downward trajectory for about 14 years. So, at some point we should have expected revenues to drop. This revenue decline, according to the US Department of Education statistics, finally happened in 2022, the last year reported.

But until ED updates higher ed revenue numbers, we won't know if we are seeing a statistical blip or something bigger and more long-term. These are numbers that some in the higher ed business may deny, hide, or rationalize for years to come.

Alabama, Michigan, Missouri, Texas, Vermont, Virginia, Washington, West Virginia, and Wyoming had similar looking revenue drops in 2022. States with years of consistent declining enrollment, and there are many of them, are difficult to assess without more data. Some states, like Pennsylvania, have long flat line revenue trajectories that show obvious trends of stagnation. States with growing populations (aside from Texas) appear to have upward revenue trends.

Did federal money received during the Covid crisis artificially lift revenues, leading to an eventual short-term correction, or is there something more to look at? Saying it's a short-term correction would be a simple answer that higher ed industry proponents could use on the front stage, whether or not it's completely true. But it may be too simple.

In the future, we will drill down into these numbers and examine revenues in subsets of public higher education, to include community colleges, HBCUs and other minority serving institutions, state universities, and flagship universities in various regions of the US. Private schools (which we will discuss later) may be in a deeper revenue decline. There are few apparent patterns, other than that the rich have gotten richer and the poor poorer (this too we will discuss in another article).

If higher education revenues continue to decline, as they appear to be doing for 2024-2025, what will we see on the ground level? Will there be budget cuts and layoffs? The California State University System is already bracing for a $1 Billion shortfall, and they are not alone.

What happens with higher education revenues as the enrollment cliff approaches and states are considering higher education budget cuts? What happens to schools that rely mostly on tuition and fees with few other sources of revenues? Should institutions expect to receive more federal funds again in the next (inevitable) economic downturn?