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Post-Stimulus, How Are States Paying for Higher Ed?

With federal stimulus dollars no longer a solution to backstop state budget woes, what does that mean for state spending on higher education?

At a New America Foundation event yesterday, several analysts dove into the specifics of how states are dealing with diminishing funds available for higher education yet rising numbers of students enrolling in public colleges and universities.

During the recession, President Obama and Congress passed the State Fiscal Stabilization Fund through the 2009 Recovery Act. It granted states some $48 billion in education relief that they could use for their fiscal budgets from 2009 through 2011. The federal government held states to several stipulations for accepting these funds, however, such as keeping state education spending levels no lower than their 2006 budgets. The idea was to keep states from cutting more in education spending than the amount of federal stimulus dollars they’d receive.

The federal dollars were crucial and widely used but not enough to buffer the blow of the recession. While states ended up spending $8.3 billion of federal funds on their higher education budgets over those four years, cuts were still necessary, and student fees went up. Tuition increases since 2009 ranged between eight and 10 percent in some cases, said Jennifer Cohen, one of the presenters who works as an education policy analyst at NAF. Because the SFSF was predominantly used as a job-saving tool to avoid more layoffs, states were directed by the Department of Education to use much of the federal largesse on payroll and benefits. With enrollment growing, colleges had to keep up with demand for more instructors and courses.

It could have been worse, said Cohen: The state budget leaders she interviewed told her tuition could have gone up by 20 to 25 percent in many states.

But while the national economy is showing some recovery, many states are struggling this year because their budgets lag behind the federal government’s when it comes to responding to bad economic cycles. Add to that lag a dried-up source of federal funding and a  climate of austerity in many states with Republican-led state Capitols, and budget cuts and fee increases have become the new trend.

Nick Johnson of the Center on Budget and Policy Priorities, a center-left nonprofit organization, noted that 25 states closed FY 2012 with budget shortfalls of 10 to 20 percent of their general fund, or more. Twenty-nine states have dealt with, or project to deal with, budget shortfalls for FY 2013.

Higher education certainly took a hit during the economic downturn. In 1990, states spent on average 15 percent of their general funds on higher-ed. In 2009 that figure was closer to 12 percent, meaning more students pay out of pocket or takeout loans in a tough economy, according to Dr. Paul Lingenfelter, president of the State Higher Education Executive Officers. For 2012, state spending on higher education is down 7.6 percent, he said, with the stimulus dollars exhausted.

And it’s not as if the SFSF completely shielded states from making tough cuts and raising fees: In FY2010, Johnson explained, federal assistance amounted to 33 percent of how states weathered the financial storm, while cuts, taxes, and fees made up 54 percent. The budget tweaks were so intense that even marginal increases in spending on education won’t balance out the recession-era cuts. In Florida, for example, $1,389 of per-pupil spending was cut between the 2009 and 2012 fiscal years; for the upcoming fiscal year, the state is putting back $59 per pupil.

But there have been some noteworthy innovations, however. At the NAF event, Dr. Stephen Jordan, president of Metropolitan State College of Denver, told the audience the school digitized many of its records and worked on efficiency measures that would allow staffers to do more with less when the federal funds ran out. As he explained, his students are mostly from low-income backgrounds and the majority qualify for Pell Grants. Though Colorado has cut funding to the university by 20 percent since 2009, he can’t raises costs for students who can ill afford the additional expenses.  



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