The State Fiscal Stabilization Fund and Higher Education Spending

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 a 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, a 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 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.

This Federal Education Budget Project (FEBP) issue brief, The State Fiscal Stabilization Fund and Higher Education Spending, Part 2, uses information collected from the states to examine how much of the State Fiscal Stabilization Fund (SFSF) each of the 50 states and the District of Columbia spent on K-12 versus higher education in each fiscal year.

Using this information, we can make general conclusions about how the American Recovery and Reinvestment Act may have affected state spending on higher education. This paper includes:

• A discussion of the State Fiscal Stabilization Fund, including how states determined the division of funds between K-12 and higher education;
• Data on Education Stabilization fund allocations in the 50 states and the District of Columbia and how much of those funds each state spent on K-12 and higher education in each fiscal year; and
• An analysis of what the division of Education Stabilization funds between K-12 and higher education tells us about how states did or did not protect higher education funding during the economic downturn.

The paper is the second in a four-part series analyzing higher education funding under the SFSF. Look for part three, which will include a study of how select states used SFSF funds, later this year. Click here to read the first issue brief from this series.