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Issue Brief

The State Fiscal Stabilization Fund and Higher Education Spending

Part 3 of 3: State Case Studies
October 18, 2011 |
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By late 2008, the United States was in the midst of its most severe economic recession since the 1930s, brought on by a collapse in real estate prices and exacerbated by the failure of many large banks and financial institutions. Heeding calls from economists, Congress and the Obama administration passed an historic law in early 2009 to stimulate the economy with $862 billion in new spending and tax cuts.

This law, the American Recovery and Reinvestment Act of 2009 (ARRA), included nearly $100 billion in one-time funding for new and existing education programs, an historic sum given that annual appropriations for federal education programs at the time were approximately $60 billion. The largest single education program included in the law was the State Fiscal Stabilization Fund, a new $48.6 billion program that provided direct grant aid to state governments in fiscal years 2009, 2010, and 2011. The program was designed to help states maintain support for both public K-12 and higher education funding that they might have otherwise cut in response to budget shortfalls brought on by the economic downturn.

Now that fiscal year 2011 has ended, we can better understand how public institutions of higher education actually used the State Fiscal Stabilization Funds. This report examines how eight states and their public institutions of higher education used the funds to support higher education and what will happen to these institutions' budgets in fiscal year 2012 when the funds are no longer available. It uses information collected directly from state higher education offices and institutions of higher education to determine how states distributed the funds and how institutions actually used them.

The report draws general conclusions about how the American Recovery and Reinvestment Act may have affected state spending on higher education. This paper includes:

  • Background information on the design and implementation of the State Fiscal Stabilization Fund;
  • An analysis of trends in how states distributed, managed, and used their SFSF monies to support higher education; and
  • In-depth case studies on eight states (Colorado, Louisiana, Massachusetts, Montana, Nevada, North Carolina, Ohio, and Wyoming) exploring how they used SFSF monies to support higher education and what will happen to their budgets now that the funds are gone.

This paper is the third in a three-part series examining these trends.  Click here to read the first paper in the series, and here to read the second paper.