States Higher Education Facing Bleak Financial Future
By Pamela M. Prah, Staff Writer
Further complicating the academic community's plight in the budget belt-tightening: an influx of new legislators who know little about the budget process and even less about higher education.
That was the grim news at a conference, "From Pain to Gain: Building Our Future in Tough Economic Times," held by four higher education groups in Georgia's capital last weekend. The sponsoring groups were: American Association of Community Colleges, American Association of State Colleges and Universities (AASCU), Council for Advancement and Support of Education, and the National Association of State Universities and Land-Grant Colleges.
Higher education is the third largest state expenditure, behind K-12 public schooling and Medicaid. But it is feeling the squeeze of soaring health care costs and new K-12 costs associated with new federal education legislation, the so-called No Child Left Behind law.
"Higher ed is top on the `nice to do' list, but not on the `need to do' list," Charles B. Hoslet, director of state relations at the University of Wisconsin-Madison, said. When times are good, states dole out more funds for higher ed, but colleges and universities are first on the hit list when times get tough, he said.
A major reason colleges and universities feel the pain when state revenues falter is because lawmakers know that colleges and universities have other sources of revenue, including tuition, fees, government contracts and private contributions. This past year, states went after their higher education systems for mid-year cuts equaling up to 10 percent of original appropriations, according to AASCU.
Some states saw deeper cuts than others. Iowa, for example, cut its higher ed budget by 20 percent while Mississippi cut 18 percent. "Higher ed ... is an easy target to hit during a downside," David Breneman, dean of the Curry School of Education, University of Virginia, said.
It's no surprise that the funding squeeze has meant higher tuition. Tuition and fees at four-year public colleges climbed an average of 9.6 percent for the '02-'03 academic year, the sharpest rise in a decade, according to the latest figures from the College Board. In addition to tuition hikes, AASCU said that campuses and systems in at least one-third of the states are cutting administration and personnel expenses, leaving positions unfilled, consolidating positions and freezing travel.
Colleges and universities are accustomed to riding out bad economic times, but this recession is different from one a decade ago, according to Donald Nichols, director of LaFollete School of Public Affairs at the University of Wisconsin-Madison.
State fiscal health is more tied to the condition of the service sectors and the stock market than ever before and as a result, higher ed feels the pain when these economic engines slow down, he said.
Information and service-driven services are mostly untaxed, unlike manufactured goods. That means less state revenue for states and fewer funds for higher ed. States also get less revenue because folks are buying online and not paying sales taxes on Internet sales.
Nichols said that even when the economy recovers, states won't see revenue return to the levels of the 90s. In the boom years, states got a substantial amount of tax revenues from capital gains and huge dot-com bonuses. That revenue has tanked with the stock market and high-tech crashes, he said.
States face a cumulative budget gap of $17.5 billion for fiscal '03, according to the latest figures from the National Conference of State Legislatures. Only seven states did not have budget problems this past year, according to Arturo Perez, of NCSL's Fiscal Affairs Program. States are not only trying to fix the shortfalls of '02, but are trying to resolve potential gaps in '03, he said.
The higher ed community faces a double whammy. On top of budget cuts, states face the prospect of an enrollment surge similar to that during the baby boom, the University of Virginia's Breneman said. The AASCU reports that public institutions can expect more than 1 million additional students over the next decade.
Most state legislators are unaware of the complications of higher ed funding. That's because one in three legislators in 2003 will be new to the legislative system and budget making and the higher education debate specifically, Julie Bell, education program director for the NCSL, said. Term limits and redistricting are the main reasons for the huge turnover in statehouses. It means a "tremendous void of experience and leadership in state legislatures on education and budget issues," Bell said.