State higher education leaders have identified economic and workforce development as their top policy priority for 2026, with nearly all respondents calling the issue critically important amid federal policy changes and budget pressures, according to a new survey released Tuesday.
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The issue reclaimed the top spot after ranking second in 2025, reflecting states' continued focus on aligning postsecondary education with career readiness as the nation faces projected workforce shortages. Georgetown University research indicates the U.S. will need over five million additional workers with education beyond high school through 2032, including 4.5 million who will need at least a bachelor's degree.
College affordability surged to second place, jumping from sixth position last year, as states grapple with student concerns about costs despite steady increases in state funding. The dramatic rise in importance reflects widespread legislative action, with at least 20 states considering legislation in 2025 to create or expand statewide promise programs offering free college.
Other top priorities include higher education's return on investment, state operating support for public institutions, and college completion rates. The consistency of these issues in the top five demonstrates their enduring significance to state policymakers.
A new addition to the survey—state impacts from federal policy changes—ranked sixth, highlighting concerns about the One Big Beautiful Bill Act's reductions to Medicaid and SNAP funding, which could squeeze state budgets and affect higher education appropriations. The legislation is expected to reduce federal matching funds by nearly $1 trillion, potentially forcing difficult budget choices that could impact higher education funding.
"2026 holds a lot of unknowns as we look to see what state legislators will prioritize and how changes at the federal level will impact states," said Tom Harnisch, SHEEO's vice president for government relations. "Economic and workforce development continues to be top of mind—and with the implementation of Workforce Pell rolling out later this year, we're optimistic that states will continue to make advances in addressing workforce needs."
The report comes as states prepare to implement Workforce Pell grants, which will extend federal aid to short-term job training programs starting July 1. This expansion presents a significant opportunity for community and technical colleges to offer nondegree workforce development programs with federal funding support.
States are responding to workforce challenges through various initiatives. Colorado Governor Jared Polis recently proposed merging the state's postsecondary and workforce agencies to increase workforce development capacity. Other states are increasing collaboration between higher education and workforce agencies, exploring standardized microcredentials, and aligning academic planning with state workforce needs.
Forty-seven state higher education executives from 40 states and one territory responded to the November 2025 survey, which asked leaders to rank 25 policy issues. The survey added four new topics this year, including dual enrollment and K-12 connections, which ranked 10th, and proactive or guaranteed admissions programs, which ranked 19th.
State funding for financial aid programs ranked seventh, with states allocating $16.1 billion in fiscal year 2025—a 4.8% inflation-adjusted increase from the previous year. Several states expanded financial aid eligibility in 2025, including Illinois, which made state aid available to undocumented students, and New York, which expanded veteran tuition awards.
Despite positive funding trends, approximately half of Americans believe students cannot access high-quality, affordable postsecondary education, according to recent polling cited in the report. State leaders also expressed concern about enrollment declines, institutional financial stability, and brain drain as graduates leave their home states for employment opportunities.
The report notes that state budget conditions are softening after record surpluses earlier in the decade, with slower revenue growth and mounting budget pressures potentially affecting future higher education funding. Student transfer pathways and public perception of higher education also remained significant concerns for state leaders entering 2026.
