Higher Ed Budgets for the Post-COVID Era

By Bill & Melinda Gates Foundation and Lumina Foundation -

Higher Ed Budgets for the Post-COVID Era

Now’s Our Chance to Do This Right

Executive Summary

The COVID-19 pandemic has disrupted the global and U.S. economy more profoundly than any other event since World War II. Just as the subprime mortgage crisis ushered in an 18-month economic decline and an ensuing state budget crisis, the current economic slide threatens to leave us in an even larger fiscal hole. The Great Recession also taught the nation several lessons about higher education. Generally, the more education you have, the more likely you are to remain employed during economic hardship. States with higher educational attainment also see greater economic growth.1,2 Conversely, disproportionate cuts to higher education undermine statewide attainment goals. States will often pursue “across-the-board” cuts to institutions in what may appear to be a “fair” way to distribute losses, but this can cause significant harm.

Not only would another round of higher education cuts hamper our economic resiliency, it would also increase inequality. Since COVID-19 hit, millions of Americans have lost their jobs, with low-income, Black, Hispanic, and Native Americans hardest hit. The enormous toll the virus has taken on communities of color—coupled with the protests following the deaths of George Floyd, Ahmaud Arbery, and Breonna Taylor—have forced a new reckoning with our nation’s history of racial injustice. Higher education is beginning to grapple with its own legacy on race, part of which involves less funding for institutions serving Black students. “Across-the-board” cuts would continue that policy.

Despite this history, a movement in higher education to improve completion rates and eliminate disparities in student outcomes by race and income has made progress over the past decade.3 Lumina Foundation and the Bill & Melinda Gates Foundation have been fortunate during this time to work with a wide range of stakeholders—including policymakers committed to ambitious attainment goals, institutional leaders reorienting their schools around student needs, and faculty experimenting with advanced teaching methods. Together, we have built a body of evidence about efforts that increase completion and promote equitable student outcomes, including new approaches to developmental education, advising, and course planning for digital learning. Cuts to successful initiatives such as these will only make things worse.

Recognizing the urgency of the moment, we have solicited advice from leading experts in higher education policy and finance and developed a framework to help a wide range of state leaders face the crisis. Reductions in state support to postsecondary education may be unavoidable, and they will cause harm. However, by rejecting the customary “across-the-board” approach and prioritizing what works, states can implement longer-term solutions that create equitable, accessible, affordable paths to postsecondary credentials that provide upward economic mobility for the most vulnerable populations.

What follows is a detailed framework to help policymakers make strategic budget decisions. This framework includes an assessment of states’ economic and policy contexts and applies the following principles:

  • Principle 1: Prioritize funding for institutions that can best serve Black, Hispanic, Native American, and low-income students and those institutions that provide timely opportunities for unemployed or underemployed individuals to reskill.
  • Principle 2: Protect and expand need-based financial aid through increased or reallocated investment.
  • Principle 3: Support programs and strategies that advance students’ ability to complete credentials.
  • Principle 4: Expand resources and invest differently to drive economic growth.
  • Principle 5: Evaluate and improve system and institutional cost structures.

Each of the principles is described in more detail below and is accompanied by a recommended framework for how states can examine current practices against these principles and make strategic decisions over the long run. Wherever possible, we provide specific examples of what states have already done to make progress in a particular area. Recognizing the immediate challenges policymakers are navigating within their states, we highlight here a set of essential “first order” priorities that can guide funding decisions (outlined below).

First-order funding priorities:

  • Reject proportional, across-the-board cuts or investments by protecting and prioritizing those institutions that effectively serve larger numbers of individuals affected by COVID-19 and populations that are historically underserved, namely low-income students and students of color.
  • Commit to meeting the demand for need-based financial aid and reallocate funding from elsewhere, if needed, to meet the demand.
  • Allocate dollars to institutions in ways that provide adequate support for low-income students, students of color, and adult students (particularly unemployed adults who need to retrain), and require postsecondary providers to efficiently support students so they can complete credentials aligned to in-demand careers in a post-COVID-19 economy.
  • Consider this a “rainy day” and tap into resources that can help meet shortfalls. Direct these resources to programs and supports that help the most vulnerable populations affected by COVID-19. This may include protecting postsecondary funding from the typical disproportionate recession-driven cuts in the short term while laying the foundation for longer-term financing reform.
  • Facilitate collaboration among institutions, particularly to address new challenges created by COVID-19, so institutions can dedicate more of their resources to serving students.
  • Make new resources, such as new federal money, count by using these principles to allocate any additional investments into postsecondary education.

Read the full report here.

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