|
« AAUP Homepage
|
Growing Expenses, Shrinking Resources: The States and Higher Education
Bust without boom? Deepening structural problems should warn us not to depend on the usual rhythms of state financing for higher education.
By Mark F. Smith
In Democracy in America, nineteenth-century political philosopher Alexis de Tocqueville argued that understanding how individual U.S. states approached an issue offered "the key to all the rest." If Tocqueville was correct, and he was right about many things, higher education advocates are in for a rocky time. Over the past two or three years, states have drastically reduced funding for higher education, and the situation probably won't be getting much better any time soon.
The signs are everywhere. Over the past two fiscal years, California shrank its higher education funding by 9.6 percent—with more cuts to come. Over the same period, Colorado's funding dropped by 21.8 percent, and Massachusetts's by 23 percent. Programs are being cut, and institutions are demanding more of current professors and increasing the use of contingent faculty. Scholarly activities are often expected to pay for themselves. Some institutions push research faculty not only to fund their own salaries but also broader departmental functions. In addition, tuition has consistently risen several percentage points above the rate of inflation for many years now.1
The cuts are not directed only at the classroom. The Chronicle of Higher Education reported on March 12, 2004, that state support of the University of Georgia Press has been halved for the coming year, while the University of Idaho Press was shut down on July 1, 2004. In a 2003 report titled State Shortfalls Projected Throughout the Decade, the National Center for Public Policy and Higher Education criticized the "boom-and-bust cycle [that] has become a traditional state pattern of treating colleges and universities disproportionately well during prosperous times—and disproportionately poorly in tight budgetary circumstances." Comparing the 1990s with the past two years emphasizes the point. The Center for the Study of Education Policy at Illinois State University runs a national database of tax support for higher education. According to the database, from fiscal 1992 to fiscal 2002, state tax appropriations for higher education increased by an average of 59 percent. In contrast, appropriations declined by 4 percent over the last two years.
Although private institutions rely less on public funding than do state colleges and universities, both sectors depend critically on financial support from federal and state governments. David Breneman, dean of the Curry School of Education at the University of Virginia, describes in the spring 2003 issue of Crosstalk, a publication of the National Center for Public Policy and Higher Education, how the pieces of higher education funding traditionally fit together. "State governments and private philanthropy," he writes, "have combined historically to provide the supply-side of higher education, while the federal role has focused on underwriting student demand through grants, guaranteed loans, and work study." This division of labor between the state and federal levels of government in the United States worked well as long as both entities kept up their end of the bargain. However, when neither is doing so, the quality of education is going to suffer.
Structural Problems
One very real problem state governments face today are revenue shortfalls. The December 2003 edition of Fiscal Survey of the States, issued semiannually by the National Governors Association (NGA) and the National Association of State Budget Officers, reports that states confront not only "short-term cyclical" but also "long-term structural" problems. The survey argues that even though the economy has "begun to show some signs of improvement," state budgets have not yet started to recover. In fact, "forty states reduced fiscal 2003 enacted budgets by $11.8 billion after they were passed." The previous year, thirty-eight states cut the budgets they had enacted.
NGA executive director Raymond C. Scheppach blames the revenue difficulties on what he calls "obsolete state tax systems, which were developed for the manufacturing economy of the 1950s, not the service-oriented, high-technology, global economy that has developed during the last two decades." Scheppach clearly identifies a problem but stops short of calling for a specific revenue solution other than implying that a tax system more in line with the new economy should be developed.
During the 1990s, a decade that saw major increases in state support for higher education, serious issues were hidden. On the revenue side, structural flaws, such as obsolete tax systems, were overlooked, as were Medicaid problems on the spending side. Following the collapse of the dot.com economy and the ensuing recession, state spending on all programs became essentially flat for three years. Recent economic growth has not brought about major state revenue recovery. Shortfalls continue, and further cuts threaten higher education.
Awareness of the crisis is widespread. The National Center for Public Policy and Higher Education argues in State Shortfalls that "even if states experience normal economic growth over the next eight years, all but a handful of states will find it impossible, given their existing tax policies, to continue funding their current level of public services." David Breneman warns that demographic changes threaten to exacerbate the problem. In a June 14, 2002, article in the Chronicle of Higher Education, Breneman cites a 1999 joint study by the College Board and the Western Interstate Commission for Higher Education that reported "the number of high school graduates began to increase in the 1990s and will continue to increase through 2008, when the nation will graduate the largest public high-school class in its history—3.2 million students—exceeding the class of 1979, the peak year of the baby boom."
Politics in Virginia
These studies point to structural difficulties and propose interesting solutions, but they do not raise the political arguments that will be needed to influence policy makers. The NGA executive director may identify "obsolete tax systems," but few of the state governors for whom he works have plans to revamp their tax systems.
One governor who has addressed large-scale tax reform is Mark Warner of Virginia. His experience illustrates some of the problems state governments face. Virginia does not allow its governor to serve two consecutive terms, so Warner did not have to worry about reelection when he included tax increases in his fiscal 2005 budget proposal. Unlike the governor, the state's legislators do face reelection pressures. But Virginia's tax system was so out of sync with revenue demands that the Republican chair of the Senate Finance Committee and, after initial opposition, the Republican Speaker joined the governor in supporting selected tax increases. Even former senator Harry F. Byrd, Jr., the son of the most renowned antitax politician in twentieth-century American politics, endorsed a tax increase.
Despite such backing, however, the legislature and the governor spent the spring and early summer in a deadlock over which taxes to raise and delayed the enactment of any state budget at all. When they finally reached agreement, they raised taxes more than Warner had originally proposed and offered modest raises to state employees, including those in higher education. Newspapers praised the responsible approach the governor and the bipartisan majority of the legislature finally achieved. But the ultimate test will come with the 2005 legislative elections. One can imagine the antitax ads now being devised by political consultants.
Over the past two years, higher education appropriations in Virginia have been cut by 17.8 percent, and the state ranks thirty-seventh in per-capita spending on operating expenses for higher education for fiscal 2004. Three of the state's most prominent public universities promoted legislation early in 2004 that would have changed their status to "commonwealth chartered," which would have removed their official relationship with the state. The institutions said the amount of state aid they received had become so small that its loss would be easily offset by release from the regulations that accompany public university status in Virginia.
According to an article in the January 12, 2004, issue of the Washington Post, administrators from the College of William and Mary claimed that the institution had been underfunded by $21 million a year, based on the "state's guidelines for academic program size, faculty salaries, and student aid." The same article showed that the share of the University of Virginia's budget coming from the state had declined from 27.9 percent in 1985 to 8.1 percent in 2003.
In the same article, a Washington, D.C.-based analyst of higher education predicted further moves by public institutions to dissolve their public connections, commenting that institutions undoubtedly feel that "we'd rather have less money we can count on than more money we can't count on." The three Virginia institutions dropped their effort to change their status as the state's fiscal 2005 budget process developed. But because the state is unlikely to increase its contributions to higher education, the effort may reemerge in some form.
Politics in Colorado
Colorado's appropriations for higher education place it forty-seventh among U.S. states, and things are looking worse for the immediate future. State senator Ron Teck introduced a resolution early last spring to ask voters if they wanted to cut higher education totally from the state budget and use the money to erase the state's projected $450 million deficit. He told the Denver Post on February 15, 2004, that he did not want to see higher education eliminated but saw few alternatives. The budget was so overextended, according to Teck, that "the only place that we can cut that's left to cut is in higher ed."
The state senate's education committee killed Teck's bill, but Colorado's system of higher education will face serious difficulties for several years to come. Voter initiatives have saddled the state with the Taxpayers' Bill of Rights (TABOR), which severely limits the legislature's ability to make tax and spending decisions, and a constitutional amendment that mandates annual increases in state funding of primary and secondary education. Once K-12 institutions are funded, the limitations on state revenue block any significant financial support for higher education. One lawmaker recently complained that the situation has "become almost a crisis."
Some administrators have endorsed a solution that would totally transform the state's system of funding institutions. Rather than providing direct support to colleges and universities, as all states now do, the new College Opportunity Fund would give vouchers directly to students to spend at colleges and universities. The bill would result in state money going directly to private institutions for the first time in Colorado. The president of the University of Colorado, Elizabeth Hoffman, endorsed the bill, warning that without adequate funding, her university would have to consider going private in order to attract students. The new voucher system would allow funding to go to institutions by way of their students, without running into the restrictions of TABOR. The governor had not even signed the bill before some legislators began talking about cutting the size of the proposed voucher from $2,400 to $1,600, raising questions about the viability of the entire program.
This "solution" raises several concerns for higher education and for the funding of public services in Colorado. Even if the voucher program works as anticipated (something that one should never rely on in public policy), it will break the traditional balance David Breneman identifies between state and federal funding for higher education—in which the state takes care of the supply side (salaries and capital expenditures) and the federal government covers the demand side (student aid in the form of grants, loans, and work-study programs). With both state and federal funding focused on the demand side, the supply side will inevitably be shortchanged.
From a public policy perspective, it is disturbing that evasion of established budget procedures seems to be the only way available to adequately fund state services. As in California and elsewhere, voter initiatives and referenda in Colorado have increasingly hemmed in the legislature's ability to address revenue and spending issues through traditional means.
No Solution in Sight
Reliance on revenue generated through tuition and fees is fast becoming the norm. The financial crisis of the past several years slashed state appropriations for public institutions and led directly to steep tuition increases. But it only exacerbated a trend that had been building for decades: the burden of funding higher education has shifted increasingly from state governments to students (and their parents) as the share of university budgets funded by state appropriations has declined steadily in most states.
The College Board report Trends in College Pricing 2003 points out that for the 2003-04 academic year, students at public four-year colleges and universities paid an average of $4,694 in tuition and fees, an increase of 14.1 percent over the previous academic year. The increase in the two-year sector was 13.8 percent. Some states have seen tuition increases as large as 40 percent, and others, such as California, have had multiple tuition increases during an academic year.
Those looking to the federal government for help have been told in no uncertain terms to look elsewhere. President Bush proposed holding the Pell Grant award steady for the third year in a row (effectively a program cut), and Congress has discussed only symbolic and ineffective approaches to the issue. Happily, Representative Howard McKeon of California dropped an ill-considered proposal to deny federal aid to institutions that increased tuition more than twice the inflation rate for several years in a row. The proposal would affect almost a quarter of all institutions if it were in effect today. Although it is no longer on the table, the federal government is clearly not going to spend money any time soon to cover state program cuts. Instead, congressional leaders criticize colleges and universities for raising tuition and fees and ignore the need to increase funding for student-aid programs.
If these budget difficulties were simply part of the recurring boom-and-bust cycle of financing, the solution would be to hunker down and wait out the bust. But as the voices cited above suggest, the current situation has larger implications. The growing demand for a college education among the children of the baby-boom generation, who are now graduating from high schools, comes on top of the increase in nontraditional students seeking higher education to compete in an economy that depends heavily on technological and intellectual skills.
Short-term solutions that rely on an exploited class of contingent and undersupported faculty who teach prepackaged educational materials will not provide the kind of higher education that our political leaders are demanding. The purpose of higher education is to develop an ability to think critically and to evaluate ideas as citizens. In a speech in New York City last April, Donald Langenberg, former chancellor of the University of Maryland system, contrasted the commitment of most states to higher education in the late nineteenth and early twentieth centuries to the lack of political will to fund it today. Back then, the public looked on the state university as a treasure, even though only a privileged few actually attended college. Today, as higher education comes within the reach of almost everyone, states are devaluing their systems and relying much more on individual funding such as tuition and fees.
In an 1821 letter, Thomas Jefferson wrote of the costs and benefits of establishing a state university that "the exertions and the mortifications are temporary; the benefit eternal." Would that we had a Jefferson on the horizon today.
Note
1. See the article by Ronald Ehrenberg and Michael Rizzo in this issue of Academe for an analysis of the implications of tuition increases over the past quarter century. Back to text.
Mark Smith is AAUP director of government relations.
|