Although some parts of the economy have recovered since the recession, budgets are still tight on many campuses, and colleges are struggling to find new sources of revenue.
State budget cuts and reductions in private donations present mounting challenges. Many less-prestigious private colleges are struggling to keep their discount rates, or the percentage of tuition covered by institutional aid, in check, while many institutions have still not seen their endowments gain back the losses they incurred in the recession.
Colleges are increasingly turning to students, staff, and faculty to buffer their losses. Tuition continues to go up on almost every campus, and many institutions have frozen or plan to freeze salaries in the coming year. With unemployment high, housing prices slumping, and the stock market unsteady, families and donors are feeling the pinch.
“The mood is dark, to say the least,” says Daniel J. Hurley, director of state relations and policy analysis at the American Association of State Colleges and Universities. Campus leaders have worked hard in recent years to trim their budgets, he says, and they are increasingly looking to the academic side to contain costs. Budget crunchers are eyeing less-profitable departments, looking for inefficiencies among faculty and staff, and demanding more accountability from everyone.
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At least 35 states expect budget shortfalls—many of which surpass their higher-education allowances—in 2012, and colleges in some states are bearing the brunt of the cuts. Thirteen states chopped their higher-education budgets by more than 10 percent over the past two years. In North Carolina, which has traditionally had strong state support of education, double-digit cuts have prompted departmental consolidations and are threatening many academic programs. Even in states with less severe cutbacks, colleges are making uncomfortable compromises: The State University of New York’s Binghamton University, for example, has shut down 16 of its restrooms and reduced cleanings to keep costs in check.
The dwindling state support comes as applications to many colleges are on the rise. As a result, some public universities are being forced to limit enrollment while raising their sticker prices. Eleven states had to cap the number of students matriculating at their flagship campuses this year. While the applicant pool keeps growing, the number of students enrolled at public colleges in California decreased by 165,000 for the 2010-11 academic year. After the state reduced spending on higher education by $1.4-billion this year, its higher-education system raised tuition by 9.6 percent, on top of an 8-percent tuition hike that was approved last November. For the first time, college students there will contribute more toward their education than will the state.
As the $9-billion in federal stimulus money ended this summer, President Obama is pushing for states to take the lead in supporting public colleges. The President’s 2012 budget provides a total of $50-million to states that invest in improving their university systems. Mr. Obama’s message is clear: The federal money will bolster state support of higher education but cannot replace it.
Increased Financial Aid
To compensate for the growing number of students in need, many colleges have bumped up financial aid. Private colleges spent a record 42.4 percent of their total tuition-and-fee income on aid for first-time freshmen in 2010, up from 37.1 percent in 2000.
But the higher discount rate leaves institutions with less cash to cover their operating needs. And as colleges have had to distribute aid to a wider pool of eligible students, that defrays less of the cost of college for students who need it most. Small private institutions like Middlebury College have looked to alumni affinity groups to set up scholarships directly, which relieves budget pressures for aid.
There were some glimmers of hope this year: Endowment values, which plunged during the recession, climbed 8 percent in 2010. They have still not regained their prerecession highs, however, with many still off by more than 20 percent.
Following a sharp, two-year falloff in charitable donations, philanthropic giving to nonprofits, including colleges, went up by 2.1 percent in 2010 (but after adjusting for inflation, the numbers actually fell slightly). Especially worrisome: Donors with the deepest pockets pulled back by an estimated 55 percent during the downturn.
Some observers say that despite all the challenges, they could help change for the better the way colleges are run.
Paul E. Lingenfelter, president of State Higher Education Executive Officers, describes college administrators’ attitude toward the economic hurdles as “more sober than defeatist.” The fundamental challenge he sees facing colleges this year is simple: “How do you do the best you can with the money you have?”
Mr. Lingenfelter contends that colleges can innovate even as they streamline their spending. Small investments in updating traditional teaching methods could bring huge payoffs, he says. By experimenting with new technology and emphasizing collaboration among faculty, colleges can pursue both excellence and efficiency.
“I think we have sort of passed the point where people imagine that we can achieve educational progress and solve our problems by infusing substantial amounts of new money,” he says. “If you think seriously about the issue of improving quality and productivity, money helps, but it only is part of the equation. More and more people are realizing how we have to change the way we use available resources.”
