State Spending on Higher Education Edges Down, as Deficits Loom

January 24, 2011

Higher education largely dodged big cuts in state appropriations for this budget year, thanks in part to money from the federal stimulus package. On average, state appropriations for colleges fell by slightly less than 1 percent from the previous budget year, and by less than 2 percent over the past two years, according to the Grapevine Project, Illinois State University's annual survey of state financing of higher education.

But the stimulus package, which allocated nearly $40-billion to states to prop up spending for public schools and higher education, will run out at the end of this fiscal year, leaving state and college leaders wondering how they will fill the budget gaps looming in more than two-thirds of the states.

Nearly $9-billion of the federal stimulus money went directly to higher-education budgets from the 2009 to 2011 fiscal years, accounting for 4 percent of total state support for colleges during that period. Some states relied more heavily on the stimulus than others did, however, and colleges in those states now expect a steep drop in aid as the federal money dries up without a growth in state-tax revenues to replace it.

"We're still trending downwards," said James C. Palmer, the researcher who conducts the annual survey at Illinois State's Center for the Study of Education Policy. "I don't see any strong evidence that we've begun to climb out of the trough created by the last recession."

Colorado was the most reliant on stimulus funds, which made up 26 percent of total state appropriations to higher education there from 2009 to 2011, according to a Chronicle analysis of the Illinois State data. Stimulus dollars made up 10 percent of total state appropriations for higher education in Louisiana, Montana, and Nevada, which were the next-most-reliant on federal dollars.

The 0.7-percent decline in state appropriations for 2011 is only a bit smaller than the 1.1-percent drop between the 2009 and 2010 fiscal years. Over the past five years, higher-education appropriations have increased by an average of 12.5 percent nationally, thanks to steady increases from 2006 to 2008, before the nation's economy soured.

But the aggregate figures mask a much wider range of cuts and, in some cases, increases in higher-education spending among individual states in the past year. From 2010 to 2011, six states slashed college appropriations by more than 10 percent, with Missouri making the deepest cuts, 13.5 percent. Higher-education appropriations were flat or increased in 18 states between the 2010 and 2011 budgets.

Over the past two years, 13 states cut higher-education appropriations by more than 10 percent. Arizona cut the most, nearly 22 percent. At the same time, 18 states managed to increase money for higher education over the past two years, with the largest gains in energy-rich states such as North Dakota and Wyoming.

In most cases, however, state appropriations were not able to keep pace with the increases in enrollment in many states. Stagnant appropriations and growing numbers of students forced 11 states to cap enrollments at their flagship universities in the current academic year, and seven states capped enrollment at public regional universities, according to a report from the Education Policy Center at the University of Alabama.

Uncertain Outlook

Prospects for state appropriations for higher education remain at least as uncertain as they have been since the beginning of the economic downturn.

While the nation's economy is slowly recovering, at least 35 states anticipate revenue shortfalls for the 2012 fiscal year (which begins for all but four states in July), according to a November report by the National Conference of State Legislatures. In those states, tax revenues are expected to fall a total of $82-billion short of spending. In at least a dozen states, governors have pledged not to raise taxes to fill those budget gaps.

In Nevada, for example, the state's $1.2-billion revenue shortfall is equal to nearly a third of the entire budget, and more than twice the $559-million the state spent on higher education this year. Although Gov. Brian E. Sandoval, a newly elected Republican, has said he won't raise taxes, public-college leaders have said the governor would not object to significant increases in tuition to offset probable budget cuts.

In California, Gov. Jerry Brown, the newly elected Democrat, has proposed a $1.4-billion cut for higher education in the next budget. His plan would reduce spending on the University of California and California State University systems by 17 percent and 18 percent, respectively. The state's community-college system would lose 6.5 percent of its appropriations.

In a few states, however, governors want to give more money to higher education in the next budget. Gov. Robert M. McDonnell, Republican of Virginia, has proposed giving public colleges in his state at least an additional $50-million in state appropriations, a down payment on his plan to help colleges keep tuition in check and raise the proportion of Virginians with college credentials from 42 percent to 55 percent over the next 15 years.

As part of his plan to expand the Kansas economy, Gov. Sam Brownback, a newly elected Republican, has proposed a three-year, $105-million plan to support university programs that would create high-paying jobs in such fields as aviation, cancer research, and engineering.

Governors in Michigan and New Jersey, too, have recently said they hope to increase state appropriations for higher education when the economies in their states improve.

James B. Milliken, president of the University of Nebraska, said in a statement that he was grateful for even a flat level of support in the next budget proposed by Gov. Dave Heineman, a Republican. "Under normal circumstances, the flat funding proposed for the university would be disappointing, but these are not normal times," Mr. Milliken said. "This recommendation puts us in a stronger position than many of our peers."