As higher-education advocates prepare for state legislative sessions across the country, a new reality has set in about what they can expect from state budgets.
“The new ‘good budget’ is the no-reduction budget,” says Daniel C. Holsenbeck, vice president for university relations at the University of Central Florida. “I think we’re looking at a good budget.”
Even as state tax revenues creep back into the black, lobbyists for public colleges are not expecting lawmakers to increase appropriations substantially, or at all, for the next fiscal year. In most cases, a flat budget might look good compared with recent years. Florida lawmakers, for instance, cut state appropriations for higher education by nearly 25 percent from 2008 to 2013, according to figures from an annual survey by researchers at Illinois State University.
Colleges that do hope to see larger appropriations are increasingly having to prove to lawmakers that they deserve them. Accountability has become the watchword of legislators who are interested in tying performance standards, such as completion rates, to state dollars.
Lawmakers are putting strings not only on the money they give to colleges but also on the dollars that colleges collect from students. With threats or actual measures to limit tuition, money from students is no longer a simple way for colleges to bolster revenues. Legislators are paying critical attention even to how colleges spend or save the money they do take in, whether it’s kept in cash reserves or used for financial aid for low-income students.
“It’s an election year, and I think a lot of our elected officials are sensitive to things constituents are concerned about, especially student debt,” says Rochelle A. Black, vice president for government and community relations at Oakland University, in Michigan.
To try to preserve their relevance in statehouses, colleges emphasize that they are central to the state economy by attracting or retaining businesses that require well-educated workers and by enabling those employees to earn more money than if they had only high-school degrees.
“All they want to talk about right now is getting the economy going,” says Dawn S. Wallace, director of state- and local-government relations at the Maricopa Community Colleges. “What they want to hear is, How does my organization help the state bring more high-wage jobs to Arizona or cultivate them from within?”
Slow Growth
The picture has brightened a bit for higher education since the recession, with some restoration of the cuts that were made during the depths of the economic downturn. For the current fiscal year, about three-quarters of states increased spending on higher education, by an average of more than 3 percent, according to an informal survey by the American Association of State Colleges and Universities. In a few states, such as California, Colorado, and Massachusetts, elected officials and voters have made above-average increases in higher-education spending.
In general, however, spending on higher education remains lower than in 2008, and the lukewarm expectations for the next budget cycle reflect overall concerns about the nation’s economy. States are continuing to see increased tax revenues, with only four—Alaska, Indiana, Tennessee, and West Virginia—anticipating budget gaps for the current fiscal year, according to a fall report by the National Conference of State Legislatures.
A tone of caution remains about the slow pace of economic growth. “Although budget gaps are rare and policy makers may have some added flexibility to deal with spending overruns or other unexpected developments, there appears to be little room for major new policy initiatives,” the report warns.
As usual, higher education will compete for attention and money against high-profile needs like elementary and secondary education and health care, as well as such other legislative concerns as state pension liabilities. Medicaid accounts for nearly a quarter of state budgets, and elementary and secondary education for 20 percent, according to the National Association of State Budget Officers. Higher education, by comparison, accounts for about 10 percent of state budgets.
Performance Counts
What nearly all public colleges can expect during the coming legislative session is higher expectations for how they use the state money they receive. Those expectations are being expressed through legislation that sets performance benchmarks for some or all appropriations to higher education. About 20 states have put such measures in place in recent years, says the state-colleges association, and more are certain to follow.
Massachusetts, Minnesota, New Mexico, and North Dakota are among the latest states to enact financial incentives for public colleges to increase completion rates for courses and degrees, says the group.
In the coming year, Texas community colleges will be working with the state’s higher-education coordinating board to set new rules for performance standards, such as how many students complete 15 or 30 credits or receive some sort of credential, says Justin H. Lonon, vice chancellor for public and governmental affairs at the Dallas County Community College District.
Colleges have not resisted such plans, but they are wary because legislators don’t always understand the varying missions of different kinds of colleges, says Nick Kallieris, director of resource development and legislative affairs at the College of Lake County, in Illinois.
“Legislators might lump all of us together as ‘higher education,’” he says, but community colleges serve a much different population, and students are not always interested in earning associate degrees.
The Squeeze
Legislators are also putting the brakes on tuition increases at public colleges over concerns about affordability and student debt. More than a dozen states froze tuition or capped tuition increases during the 2013 legislative sessions, sometimes in exchange for modest increases in appropriations.
Colleges can expect more of the same in 2014. “Governors have already made controlling tuition hikes a priority,” says a policy brief from the state-colleges association that cites Colorado, Florida, South Dakota, and Tennessee as states where lawmakers are considering such measures.
What has been a bigger problem for higher education is legislators’ interest in how colleges are using their tuition revenues. Issues of affordability and student debt have pushed lawmakers to take a close look at the financial practices of institutions with which they may have little experience.
“They often don’t appreciate the complexity and diversity of our institutions,” says David F. Giroux, executive director of communications and external relations for the University of Wisconsin system.
Beyond undergraduate education, the system supports statewide extension services and federally funded research, he notes. “There are so many pieces that contribute to the state that lawmakers might not have encountered as college students.”
The Wisconsin system has been under scrutiny precisely because legislators didn’t realize that a multibillion-dollar enterprise would keep cash reserves on hand like any other business. Lawmakers responded to a report on those reserves—which the major bond-ratings agencies generally regard positively—by freezing tuition and requiring the system’s universities to spend down their reserves. Those measures will result in an estimated $62-million budget shortfall if they are not reversed, Mr. Giroux says.
In the coming legislative session, he says, the Wisconsin system will work to develop standards, which will have to be approved by lawmakers, for financial and academic reports. System officials are concerned, however, that such reports may not reflect the complexity and contributions of the state’s universities.
“We hear the word ‘dashboard,’ but there’s a big difference between the dashboard of a Volkswagen Beetle and a Boeing 777,” Mr. Giroux says. “Our institution is probably more similar to a Boeing.”