Higher Education’s Uncertain Fiscal Future – The Pew Charitable Trusts

Report on Fiscal Pressures in Higher Education and Their Impact on Sustainable Development Goals

Introduction: Fiscal Instability Threatens Progress on Global Goals

Current fiscal challenges at state and federal levels are creating significant funding instability for public higher education institutions. These financial pressures directly threaten the sector’s ability to contribute to key Sustainable Development Goals (SDGs), particularly SDG 4 (Quality Education), SDG 8 (Decent Work and Economic Growth), SDG 9 (Industry, Innovation, and Infrastructure), and SDG 10 (Reduced Inequalities). State budget cuts, shifting federal research funding policies, and demographic pressures on enrollment are converging to create a systemic risk to the accessibility, quality, and innovative capacity of higher education.

State-Level Austerity and its Conflict with SDG 4 (Quality Education)

State governments frequently reduce higher education appropriations during periods of financial strain, treating this sector as a flexible component of state budgets. This practice undermines the commitment to SDG 4 by compromising the quality and accessibility of tertiary education. During the 2025 legislative sessions, numerous states enacted or proposed funding cuts, effectively reducing institutional capacity even where funding remained flat due to inflation.

• Virginia: A pause on $600 million in funding for higher education infrastructure projects directly impacts SDG 9 by deferring necessary maintenance and development of educational facilities.
• Washington: A 1.5% budget cut was applied to all public four-year institutions as part of a strategy to address a $16 billion state budget shortfall.
• South Dakota: Lawmakers cut $9 million designated for campus maintenance and repair, a decision that risks higher future costs and degrades the physical infrastructure essential for quality education.

These actions force institutions to implement austerity measures, including tuition increases, which create barriers to access and directly contravene the goal of ensuring inclusive and equitable quality education for all (SDG 4) and reducing inequalities (SDG 10).

Federal Funding Shifts and Endangerment of SDG 9 (Innovation) and SDG 8 (Economic Growth)

Public universities are critical drivers of research and innovation, contributing directly to SDG 9. However, this role is under threat from proposed federal budget cuts and policy changes. Federal grants and contracts, which constituted up to 8.7% of total revenue for public universities in fiscal year 2022, are facing significant reductions.

1. Proposed Budget Reductions: The preliminary fiscal 2026 budget includes substantial cuts to key research funders, including an $18 billion reduction for the National Institutes of Health (NIH) and a $5.1 billion reduction for the National Science Foundation (NSF).
2. Indirect Cost Caps: A new 15% cap on the portion of grant funding that can be allocated to indirect costs, implemented by the NIH and followed by other federal agencies, forces universities to divert other funds to cover essential administrative and facility expenses, thereby reducing overall research capacity.

These funding changes have a direct negative impact on SDG 8. Universities are major regional employers and economic engines. Reductions in research funding lead to job losses and diminished economic activity. For example, Michigan State University eliminated 83 positions due to federal funding cuts and identified 160 research projects that were terminated or negatively affected, illustrating the ripple effect on local economies and the workforce.

Enrollment Challenges and the Exacerbation of SDG 10 (Reduced Inequalities)

Demographic trends, including declining fertility rates, project a decrease in the traditional college-age population beginning in 2026. This “demographic cliff,” compounded by disruptions in international student enrollment, threatens tuition revenue, which accounts for nearly 20% of public university income. The institutional response to these combined fiscal pressures often involves measures that exacerbate societal inequalities, undermining SDG 10.

University systems in numerous states are implementing significant cost-cutting measures to address budget shortfalls:

• States Implementing Cuts: Connecticut, Kansas, Maryland, Minnesota, Missouri, Nebraska, New Hampshire, and Wyoming are among the states where university systems are addressing deficits through budget reductions.
• Impact on Affordability: The University System of Maryland, facing a $155 million reduction in state funding, approved a budget that cuts spending by 7% while also increasing tuition and fees. Such actions shift the financial burden to students, making higher education less accessible for individuals from lower-income backgrounds and widening the inequality gap.

Conclusion: A Systemic Challenge to Sustainable Development

The convergence of reduced state appropriations, volatile federal research funding, and demographic pressures creates a formidable challenge for public higher education. The resulting institutional austerity measures—including tuition hikes, hiring freezes, layoffs, and deferred maintenance—collectively impede progress toward multiple Sustainable Development Goals. Ensuring stable and sufficient funding for higher education is not merely an educational issue; it is a prerequisite for fostering innovation (SDG 9), promoting inclusive economic growth (SDG 8), reducing inequalities (SDG 10), and ultimately, providing quality education for all (SDG 4).

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 4: Quality Education

  The article’s central theme is the financial crisis in higher education due to state and federal funding cuts. This directly impacts the quality, accessibility, and affordability of university education, which is the core of SDG 4.

• SDG 8: Decent Work and Economic Growth

  The article discusses the consequences of budget cuts, including “hiring freezes, and layoffs.” It also highlights that “major research universities serve as economic hubs for their regions,” and funding changes have “ripple effects on the surrounding communities and their economies,” connecting the financial health of universities to local employment and economic stability.

• SDG 9: Industry, Innovation, and Infrastructure

  A significant portion of the article is dedicated to cuts in research funding from federal agencies like the National Institutes of Health (NIH) and the National Science Foundation (NSF). This directly undermines scientific research and innovation, which are key components of SDG 9.

• SDG 10: Reduced Inequalities

  The article states that a common response to funding cuts is to implement “higher tuition” and “raise fees.” This makes higher education less affordable and accessible, potentially widening the inequality gap by creating barriers for students from lower-income backgrounds.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 4.3: Ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university.

   The article directly addresses this target by describing how funding cuts are leading to “higher tuition” and increased fees. For instance, the University System of Maryland’s budget “hikes tuition and raises fees.” This trend threatens the affordability and accessibility of university education for all.

2. Target 8.5: Achieve full and productive employment and decent work for all.

   The article provides concrete examples of how budget shortfalls lead to job losses, directly contradicting this target. It mentions that universities are implementing “hiring freezes, and layoffs” and specifically notes that Michigan State University “eliminated 83 positions because of federal funding cuts and 99 others because of budget challenges.”

3. Target 9.5: Enhance scientific research, upgrade the technological capabilities… encouraging innovation and substantially increasing… public and private research and development spending.

   This target is challenged by the article’s detailed account of reductions in research funding. It specifies a “nearly $18 billion reduction in funding to the National Institutes of Health (NIH)” and a “$5.1 billion reduction for the National Science Foundation (NSF).” These cuts directly reduce public R&D spending and hinder scientific research.

4. Target 10.2: Empower and promote the social, economic and political inclusion of all, irrespective of… economic or other status.

   By making higher education more expensive through tuition hikes, the actions described in the article risk excluding individuals based on their economic status. This creates a barrier to social and economic mobility, working against the goal of inclusion.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• For Target 4.3 (Affordable Tertiary Education):
  • Indicator (Implied): Change in tuition and fees. The article repeatedly mentions “higher tuition” and that universities “hikes tuition and raises fees,” serving as a direct measure of decreasing affordability.
  • Indicator (Implied): University enrollment rates. The article discusses fears of “declining university enrollment” and notes that “undergraduate enrollment grew but still remained below pre-pandemic levels,” which can be used to measure access to education.
• For Target 8.5 (Full and Productive Employment):
  • Indicator (Implied): Number of jobs eliminated in the higher education sector. The article provides a specific data point: “Michigan State University… eliminated 83 positions because of federal funding cuts and 99 others because of budget challenges.” This quantifies the negative impact on employment.
• For Target 9.5 (Enhance Scientific Research):
  • Indicator (Implied): Government expenditure on research and development. The article provides precise figures for proposed cuts, such as the “$18 billion reduction in funding to the National Institutes of Health” and “$5.1 billion reduction for the National Science Foundation.”
  • Indicator (Implied): Number of research projects affected by funding changes. The article states that Michigan State University “identified at least 160 projects that were either terminated or otherwise affected,” providing a metric for the disruption to scientific research.

4. SDGs, Targets, and Indicators Table

Source: pew.org