Making Sense of Capital Funding in Higher Education: An Overlooked Lever Toward Equity and Student Success

Project Summary

In their aptly named 1989 report – The Decaying American Campus: A Ticking Time Bomb – Rush and Johnson offered a stark diagnosis; college and university facilities were quickly deteriorating, deferred maintenance needs were growing by the billions, and state and institutional leaders needed to act to stymie the negative downstream effects. The contemporary outlook isn't much brighter. Institutions continue to struggle to address not only safety-related capital needs, but to afford the type of infrastructure necessary to keep up with students' learning needs. The burden may be particularly high at already marginalized institutions.

Despite this looming threat, and the sizeable price tags legislatures face for capital needs across their educational systems, relatively little attention has been paid to understanding how states approach capital funding in higher education and the potential implications thereof. Since September 2025, our research team has reviewed thousands of state statutes, legislation, budgets, and other policy materials and interviewed over 40 various state stakeholders to better understand the various mechanisms through which states evaluate schools' capital needs and determine resource allocation. Our initial report synthesizes this information and relevant extant literature to shine a light on the nuances of capital funding and its potential as a lever toward educational equity in higher education. Additional resources, including information sheets for each state and a public-use dataset of capital funding mechanisms by state/system are forthcoming.

Key Findings:

1. Public investment in higher education facilities is a crucial aspect of higher education finance policy. Nationwide, the higher education sector is the second largest recipient of state capital investments.
2. There is substantial variability between states in all aspects of higher education capital investment. States differ in their approaches to planning for future capital needs, financing current capital investments, and allocating capital funds across institutions.
3. Many states privilege debt- or cash-financing approaches for higher education capital. States that favor debt-based approaches to capital finance rely primarily on general obligation bonds, while most cash-based approaches center around general state revenues. A minority of states rely on dedicated sources of revenue (e.g., severance taxes) to finance higher education capital investments.
4. While allocation decisions are ultimately made by legislatures and/or governors, nearly all states require institutions to formally request capital funds. The process of reviewing and evaluating these requests is variously an art and a science. Some states rely on meticulous data and scoring rubrics to develop funding recommendations, while others rely on professional judgment and conversations with institutional stakeholders.

Funding partners

These reports and data are based on research funded by the Gates Foundation. The findings and conclusions contained within are those of the authors and do not necessarily reflect positions or policies of the Gates Foundation.