Stimulus Money Staved Off Deep Cuts in State Appropriations

January 18, 2010

State-budget cuts for colleges could have been worse this year.

That's the conclusion of an annual report on state appropriations for higher education, which found that state support for colleges declined by 1.1 percent, to $79.4-billion, in the 2010 fiscal year from the previous year.

At the same time, however, states closed revenue shortfalls totaling $193-billion, about 28 percent of their total budgets, for the current fiscal year. What spared higher education from much deeper cuts, according to the report, was the nearly $40-billion provided by the federal government through the State Fiscal Stabilization Fund, a portion of last year's $787-billion stimulus package.

The report was prepared by the Center for the Study of Education Policy at Illinois State University, joined this year by the State Higher Education Executive Officers.

Without the stimulus dollars, the decline in state support for higher education in 2010 would have been 3.5 percent since last year and 6.8 percent over the past two years, the report said. The figures do not factor in inflation. But for the first time they do include all state money for higher education, including funds that colleges receive from state lotteries and from interest income, such as that from state-financed endowments.

Some states made large cuts in higher education this year even with the stimulus money. Alabama and Massachusetts have reduced spending on colleges by nearly 20 percent since the 2008 fiscal year, when most states had not yet felt the full impact of the recession. A year ago, the Illinois State report said, state spending on higher education had increased by 1 percent in the 2009 fiscal year, the smallest annual growth in five years.

This year's report said spending on higher education had declined in 28 states compared with two years ago, and in 27 states compared with one year ago.

More Cuts Ahead

The fiscal situation for higher education may only get worse before the next budget year begins. Thirty-nine states are projecting midyear reductions, which total nearly $34-billion. In Nevada, for example, Gov. Jim Gibbons, a Republican, has asked all state agencies, including public colleges, to submit plans to reduce spending by 6 percent to 10 percent to offset a projected $72-million shortfall.

In Maryland, Gov. Martin O'Malley, a Democrat, has already made cuts to deal with a $936-million budget gap, including reductions in the University System of Maryland. A four-year tuition freeze at public universities will probably come to an end as the state projects a $2-billion budget gap for the coming fiscal year, the governor has said.

Nearly 40 states expect revenue shortfalls for the 2011 fiscal year, which begins in July in all but four states. And about half of the states will have spent all of their stimulus money for education by the end of the current fiscal year.

With the help of the stimulus legislation's fiscal-stabilization fund, a few states were able to give higher education sizable budget increases for this year. In Montana, for instance, lawmakers raised higher-education spending by 30 percent for the 2010 fiscal year compared with 2008.

The budget cuts, combined with a quarter-century of continuous enrollment growth, have placed higher education at a "turning point," wrote Paul E. Lingenfelter, president of the State Higher Education Executive Officers, in response to the report, which is commonly referred to as "Grapevine." The United States must confront the conflicting constraints of increased demand and reduced resources, he said.

James C. Palmer, editor of the report, concluded that the budget shortfalls and the end of the federal stimulus money will force state lawmakers to make hard choices. The fiscal reality, he said, will complicate states' ability to improve higher education.

"Prospects in the near future for increased state funding," he wrote, "appear bleak."