Ed Money Watch

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Event Reveals New Fiscal Realities for Public Higher Education

Published:  March 1, 2012

The Federal Education Budget Project, Ed Money Watch’s parent initiative, held an event today examining the future of funding for public postsecondary institutions, given that American Recovery and Reinvestment Act (ARRA) funds are no longer available. The event was inspired by a recently-completed series of FEBP research papers that explored how states utilized ARRA money to support state higher education institutions through the recession.

After FEBP senior policy analyst Jennifer Cohen framed the discussion with conclusions from her research, Nick Johnson of the Center on Budget and Policy Priorities, Dr. Paul Lingenfelter of State Higher Education Executive Officers (SHEEO), and Dr. Stephen Jordan, president of Metropolitan State College of Denver, gave their insights on the use of stimulus funds – and what states will do without those funds. (The full webcast of the event is below.)

Though they work in different (if overlapping) areas of economic and education policy, all three speakers agreed on one thing: Budgets for state institutions of higher education aren’t out of the woods yet.

According to Johnson, in fiscal year 2010, states were able to fill their budget gaps through a combination of factors, including state budget cuts (which filled 37 percent of shortfalls) and federal stimulus assistance (33 percent). But now that the stimulus funds are gone, states will have little recourse outside of cutting spending or increasing revenue. In fiscal year 2012, 42 states faced budget shortfalls; 29 are projecting shortfalls in 2013. At the same time, some states are considering significant tax cuts, including eliminating income taxes altogether. To balance their budgets, especially in a year with decreased federal aid due to the expiration of stimulus monies, states will likely be forced to make additional cuts to state programs.

Recent trends suggest that the fiscal constraints under which states operate may lead to even tighter budgets for state colleges and universities as state legislatures often look to higher education budgets for savings. Lingenfelter presented evidence showing that over the past 25 years the state share of costs for public higher education have dropped significantly, leaving students to shoulder the burden through increased tuition and fees. According to SHEEO’s fiscal year 2012 State Higher Education Finance report, state support for higher education will drop by an additional 7.6 percent from fiscal year 2011, compounded by the absence of ARRA funds to help plug the gap. Should student enrollment continue to grow, states will be forced to make difficult decisions about raising tuition further and cutting per-student state funding.

Though the situation seems dire, some institutions have turned the economic downturn into an opportunity for innovation and growth. Jordan, the final presenter, is acutely aware of the fiscal realities facing Colorado; in 2009 Metro State faced a $10 million cut in state support. Whereas state support in fiscal year 2001 made up 68 percent of student funding and students contributed 32 percent, by fiscal year 2012 those numbers had flipped so that students now bear 66 percent of the cost and the state only 34 percent. In response, he and other leaders at Metropolitan State College have focused on increasing productivity, finding new revenue sources, and serving their students in new and innovative ways.

This conversation has important implications for public higher education institutions across the country as they tackle what will likely be many more years of constrained budgets. Many public colleges and universities have relied on tuition increases and strategic cuts to make ends meet. But it appears that those methods will soon be insufficient to fill gaps or make attendance unattainable for lower-income students. Instead, these schools should look for new finance and structural models, much like Metro State has, to determine how they can provide the highest quality services to their students with the budgets they currently have.

You can view the presentation slides from the event here (Jennifer Cohen; Nick Johnson; Paul Lingenfelter; Stephen Jordan). To participate in the discussion around stimulus funds and higher education on Twitter, tweet using #HigherEdPostStim. The full webcast of the event is available here:

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