State funding is an important revenue stream for public institutions of higher education. However, the distribution between two-year and four-year colleges varies considerably by state.
According to data recently released by the State Higher Education Executive Officers Association, less than one quarter (22.8%) of state higher education fiscal support is used to support public two-year college operating funds, while roughly half (50.4%) of state higher education support is used for public four-year college operating funds.
The remaining state higher education funds are used for: state scholarships (13.4%); research, agriculture, medical uses (10.3%); and 3.1% for other uses such as support for independent colleges, noncredit education, etc. It is important to note that these data do not include any of the Covid-related federal stimulus dollars that were passed through states to colleges and universities.
The percent of funding used to support public two-year colleges by state is shown in the figure below. Four states reported one-third or more of their state higher education funds were used for public community colleges (New Hampshire, 38.1%; Washington, 37.4%; California, 36.2%; and Delaware, 33.3%). Conversely, four states and the District of Columbia reported less than 10% of their state higher education fiscal outlays were used for public community colleges.
While state support is an important funding stream for public community colleges, many colleges derive a significant portion of their operating revenues from local sources. To illustrate this point, consider the following: Based on the SHEEO data, only 12.1% of Arizona state higher education funds are used to support community colleges. However, when one looks at revenue sources in data reported to the U.S. Education Department (based on American Association of Community Colleges analysis of IPEDS data), the ratio of local appropriations to state appropriations is about 90% from local appropriations and 10% from state appropriations.