Key Takeaways
- A new legislative task force is undertaking a comprehensive review of Louisiana’s higher education funding in general and its postsecondary funding formula in particular.
- Louisiana’s funding for higher education is low compared to other states at a time when some colleges and universities are facing significant fiscal challenges.
- Community and technical colleges are under intense pressure to expand workforce training programs to support major economic development projects across the state.
- Changing the funding formula alone will not solve the problem if overall resources are inadequate.
Over the last couple of years, budget crises at UNO (now LSU-New Orleans) and the University of Louisiana at Lafayette have prompted lawmakers to take a closer look at higher education funding. With concerns about possible financial challenges facing other campuses, they passed two pieces of legislation this session designed to head off future budget problems.
SB 484 requires the Board of Regents to develop a fiscal early warning system to monitor the financial health of institutions and require the college management boards to implement corrective action plans when a school is identified as being in financial distress.
SR 172 created a task force to study and make recommendations on the funding of all of higher education.
To help leaders understand the debates around higher education funding, it helps to first understand a little about how its funding formula works. The Board of Regents which develops the formula already goes through a thorough review of the formula every five years. The version now in place was approved in 2025. Like the MFP, the formula that funds K-12 public education, the higher education funding formula is little understood. But fundamentally, it is less complicated and easier to grasp conceptually.
How It Works
- Since 2015, Louisiana has used an outcomes-based funding formula to distribute state support to both its two-year and four-year schools. This year they are set to receive $691 million in direct state support through the formula.
- This does not include about $380 million in student financial aid (such as TOPS and Go Grants) or about $200 million to institutions outside of the funding formula (such as the LSU and Southern Agricultural Centers, the LSU Health Science Centers, and the Pennington Biomedical Research Center.) They are funded through separate appropriations.
- Unlike K-12 education, which is funded on a per-pupil basis, state colleges and universities are funded based on whatever the Legislature appropriates each year. Funding is not constitutionally protected, as it is in K-12 education, and budget cuts are not uncommon during times when the state faces fiscal challenges.
- Under the current formula 70% of what the Legislature appropriates for institutional funding ($484 million) goes to base support, largely based on what institutions received during the prior year, and 30% ($207 million) is based on performance and outcomes.
- The outcomes portion uses different metrics for two-year and four-year institutions and places greater emphasis on student success, completion in high-demand fields, workforce alignment and other state priorities. Four-year institutions also have a research component, while two-year schools receive specific recognition for short-term credentials and validated skills.
- Colleges and universities generate about $1.8 billion from tuition and fees which is about two-and-a-half times more than what the state provides them.
That new state task force looking at funding for higher education recently held its first meeting. It began with presentations that provide insights into where Louisiana stands in terms of funding for postsecondary education.
From the Presentations:
- Louisiana has the fifth-lowest per student state funding for colleges and universities in the country, behind every state in the southern region. This encompasses the considerable amount Louisiana spends on financial aid, including TOPS.
- Per student funding for four-year schools is the eighth-lowest in the country, while state support for two-year community and technical colleges ranks last.
- In looking at student financial aid as a percent of overall state appropriations to higher education, Louisiana’s is the second-highest in the nation at almost 29%.
- While revenue received per student from tuition and fees is less in Louisiana than the southeastern regional average, students pay a higher share of the total costs of their education compared to the region as a whole.
- While total enrollment has grown over the last five years, K-12 enrollment has dropped significantly since 2020, a warning sign for Louisiana colleges since they depend heavily on student tuition to fund their operations.
On the positive side, state funding for higher education operations has generally risen over the last eight years despite some years where funding was flat. This year higher education received an additional $56 million, the most it has seen in some time. But institutions have continued to struggle to make ends meet, driven by high inflation, the growing cost of collegiate athletics, various debt obligations, and changes occurring at the federal level.
Responding to that, the Legislature recently granted higher education management boards permission to raise tuition and fees by up to 10% per year without legislative approval. That was a massive policy change, but with affordability already an issue, it is unclear how much relief that will actually provide.
And they are undertaking that deep dive into the higher education funding formula to better understand how it works and determine if changes to it might provide financial relief to campuses.
Observations
The data seems clear: by just about any measure, funding for higher education in Louisiana is low compared to other states. Tuition increases might mitigate some of that problem, but in the current environment where affordability is a major issue, that seems to be a limited option.
In some ways, community and technical colleges face an even more severe problem. Besides low funding, they are also dealing with the challenges of exponentially ramping up workforce training because of economic development wins. But in many cases, they lack the resources to stand up new programs, purchase expensive new equipment, hire qualified instructors, and build the needed partnerships with employers.
So here are two things to think about:
- The legislation to allow the Board of Regents and the college management boards to develop early warning systems to avoid financial distress is much needed. That doesn’t give schools more money, but it should better position them to head off real fiscal crises like we have already seen at some institutions.
- Changing the formula could rearrange how money is distributed, but if the Legislature doesn’t put more funding into the formula, it probably won’t make a huge difference.
It appears the Legislature is trying to balance a couple of major issues. One is that some schools are facing financial challenges fueled by higher costs and the new, more financially competitive world of college athletics. There is no easy answer on this one, but college presidents should be expected to manage through their fiscal issues, absent more money.
The second is that Louisiana is going through a major period of transition when it comes to meeting state workforce needs. Community and technical colleges are at the heart of that and perhaps the Legislature should consider ways to specifically fund workforce training while the state is undergoing a major boom in economic development projects.
In many states, community colleges are funded not just by state appropriations, but also by local tax revenues that are not in play in Louisiana. That might be something else to consider for the long term.
But at the end of the day, the exercise of having lawmakers conduct a thorough study of higher education funding and assess the state’s talent needs is a good thing. They need to know and understand the current state of higher education funding and how the funding formula actually works. But the formula itself cannot solve a shortage of resources.
The bigger issue seems to be determining how to make the immediate investments in community colleges that are needed to accelerate talent production in the current economic boom, while also supporting the funding formula which provides recurring operational resources and strategic outcomes-based funding for each institution.
It would be great if lawmakers could come up with ideas to deal with both.