In the aftermath of the Great Recession, a dramatic drop in state tax revenue led to significant reductions in funding for public higher education institutions, and while there has been some reinvestment by states in the past several years, on the whole states are spending approximately $9 billion less today than in 2008 on higher ed, according to a new report from the Center on Budget and Policy Priorities. Michael Mitchell, a senior policy analyst with the center who helped pen the report, said state reinvestment was tepid but present.
“However, the revenue is not making up for the recession cuts,” he said. “We’re seeing a slight decline in the rate of reinvestment in this most recent year ... and we’re seeing signs of potential revenue shortfalls which could mean another round of cuts or tepid maintenance investment. And since we have more students enrolling, it’ll only put more stress on public institutions.”
The report found that in the aftermath of the 2008 crash, states by and large resolved growing budget deficits primarily through spending cuts, rather than a mix of cuts and increases in revenue. The higher ed budget cuts came as enrollment spiked in the midst of the recession, with young adults opting to further their education in lieu of a bleak job market.
These cuts diminished all public services, though Mitchell noted that state lawmakers may have reinvested more substantially in other public programs, from K-12 education to health care, because they knew that colleges and universities have tuition revenue to serve as an alternative funding source. Additionally, Mitchell noted states which were more heavily dependent on energy production for tax revenue had seen lower-than-expected returns, leading to a reticence in higher ed funding.
However, states’ divestment from higher education has had a substantive impact on tuition rates, as well. The average annual published tuition has risen by 35% since 2008, according to the report. Tuition hikes in that time exceeded 60% in eight states, and in Louisiana, the average tuition rate had doubled in the past ten years. Additionally, the report charted a consistent progression of the funding responsibilities moving from states to students in the form of tuition revenue. In 1988, student tuition accounted for about one-third of revenue for public higher ed institutions as compared to state and local government, but now it is evenly split. Mitchell noted that in 1988, New Hampshire and Vermont were the only two states where tuition revenue exceeded state education funding. Now, tuition revenue exceeds government funding in half of the states in the country.
“The rate of investment we’re seeing is not reversing that trend. If lawmakers were to make the decision to reinvest in education, and tell universities to keep tuition increases at a modest rate, just by the sheer math you would see state funding grow,” he said. “But at the rate we’re going, that is not the case.”
There are also reasons to be concerned on the federal level, according to Craig Lindwarm, the director of congressional and governmental affairs at the Association of Public and Land-Grant Universities, which advocates for public universities throughout the country. The Trump administration proposed significant higher ed cuts, and it remains to be seen exactly what kind of cuts will be born by institutions in the years to come. Lindwarm expressed concerns that the Mandatory Inflation Adjustment for Pell Grants could conceivably expire, which would mean Pell Grant offers for students from low-income backgrounds to attend college could possibly remain flat, not keeping pace with inflation.
“It’d be a double punch to have states being unable or unwilling to make the investments needed, while simultaneously the federal government is cutting back,” Lindwarm said.
Lindwarm suggested that college presidents continue to advocate for the need for consistent and appropriate funding for public colleges and universities, arguing the individual and societal benefits of investing in a state’s higher ed system would lead to revenue savings later. He also said public colleges and universities could serve as economic engines for beleaguered states.
“I think in these times, the economic arguments for higher education are at the forefront, especially when contributing to their state economies; the workforce development aspects, the ability to attract employers to the state,” he said. It’s not a coincidence that many large industries are attracted to places with larger research universities. They know they have access to talent that is unrivaled.”
In considering how college administrators could plan for the future in the face of the sobering trends in higher ed divestment, Mitchell cautioned that administrations should be aware of the cycle of funding cuts and gradual reinvestment that is expected in the aftermath of an economic downturn.
“Schools need to be cognizant that the cycle continues, and also, where they can, look to make sure that lawmakers in their states understand the importance of investing in higher education when times are good, making sure they’re rejecting calls for untimely tax cuts, and investing in their ‘rainy day’ funds,” he said. “It’s a combination of schools and states acting prudently.”