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Three Priorities for Higher Education Government Spending on EdTech and Infrastructure

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Submitted by Robyn Francis on February 14, 2023

The higher education market is faced with several challenges including declining student enrollment, aging infrastructure, reduced state funding and an ever-increasing demand for technology. The COVID-19 pandemic, coupled with the influx of recent federal funding, has altered infrastructure funding and shifted the paradigm of higher education to more of a hybrid scenario. There are now fully in-person and fully remote classes but also options for some students within an in-person class to still learn remotely. 

Many universities are upgrading outdated infrastructure, including implementing efficient HVAC and air filtration systems to minimize the spread of COVID-19 and ensure student safety, as Deltek’s market research team covered in its recent Education Contracting Analysis report. As the country struggles with a mental health crisis, universities are prioritizing students’ wellbeing by investing in surveys, counselors, and mental health programs. 

Previously, we looked at the state of K-12 government spending. In this article we examined recent developments in spending, budgets and government procurement from higher education agencies, as well as the steps these entities are taking to invest in infrastructure and technology.  

Finances, Budgets and Fiscal Trends 

Higher Education affordability remains a broadly relevant issue. Higher education institutions are discounting tuition, assisting students with loan payments, and providing more grants to students. According to GovWin’s Vertical Profiles data, total expenditures by all public and private higher education institutions in FY 2022 was estimated at $664.5 billion. Based on the National Center for Education Statistics, 63.4% of these expenditures are made by public institutions. Among these institutions, “instruction” or faculty salaries comprises the single largest category. Funding for the basic operation of these schools comes mainly from student tuition while infrastructure and capital improvements tend to come from tax-funded allocations at the state level. 

Infrastructure 

The Census of Construction Put in Place shows demand for infrastructure-related contracting saw slight growth from 2013 to 2019 ($22B to $26B), but overall the trend has been downward. Over the past five years, from 2016 to 2021 there was an average annual rate of change of -4.1% in spending on these projects (from $25.0B to $20.3B in total). Administration, dormitory and parking facilities had the largest declines. The largest categories for 2021 include instructional facilities ($12.6B), dormitory ($2.5B) and sports/recreation ($2.2B). 

Higher education infrastructure and other physical improvements has faced funding limitations as well as historical deferred maintenance. State government allocations are not guaranteed as officials will bring up their needs and try to compete for limited state dollars. Declines in enrollment as well as greater budgeting uncertainty have made their case even more challenging. However, ARPA stimulus funds (March 2021) as well as 5-10 year infrastructure act funding can potentially improve and reverse this trend. 

Technology 

Since the onset of the pandemic, EdTech has rapidly grown to enhance the effectiveness of online learning. Online learning platforms and learning management systems have become essential to student learning as colleges have coped with the effects of the pandemic on students. Preferences for remote learning have remained even as campuses re-opened. The landscape of the vendor community has extended to encompass a multitude of start-up technology companies and Software as a Service (SaaS) companies, often providing education services in the form of subscriptions. 

Artificial Intelligence (AI) has been deployed by higher education institutions to support various functions of online learning, including algorithms to proctor online assessments, chat bots for student and faculty assistance, and tutoring services. Additionally, Virtual Reality (VR) and Augmented Reality (AR) are tools that many universities are embracing to encourage hands-on and immersive student learning. These can be seen as becoming mainstream and more common within EdTech as the federal government emphasizes STEM programs. 

 

Paul Irby is a Principal Research Analyst for GovWin from Deltek. Follow them on Twitter and LinkedIn and stay up to date with the latest government market insights.