A few weeks after wrapping up their budgets for the new fiscal year, lawmakers in some states already expect a new round of spending cuts, including to higher education, as tax revenues continue to fall.
Estimates of states’ revenue shortfalls have grown worse since the spring, reaching a total of nearly $143-billion when most states began the 2010 fiscal year, on July 1, according to a survey by the National Conference of State Legislatures. But at least 11 states are already expecting to make midyear cuts, totaling more than $22-billion, according to the Center on Budget and Policy Priorities, an advocacy group.
In Colorado, public colleges and other state agencies are now facing the possibility of a 10-percent cut. Gov. Bill Ritter, a Democrat, told them to prepare for the reduction after learning that state revenues were projected to fall $384-million below the amounts that were used to formulate the budget he signed in April.
The state had estimated a $1.4-billion revenue shortfall for the 2010 fiscal year, more than 18 percent of its overall spending. As Colorado’s finances deteriorated, lawmakers cut about $151-million from higher education in the 2008-9 budget and left the appropriation at that level for 2009-10. But they offset those reductions with more than $301-million of federal stimulus money.
It remains uncertain how much Colorado’s public colleges will eventually be forced to cut, but higher-education officials are bracing themselves for bad news.
Peter S. Han, chief of staff to the president at the Colorado School of Mines, said it might have to consider cutting courses or laying off faculty and staff members if the state’s economy continues to worsen and the university has to absorb significant cuts. “We can’t rule out anything,” he said.
Elsewhere, Maryland’s governor, Martin J. O’Malley, a Democrat, cut $37-million from higher-education spending after revenue projections fell $700-million short of earlier estimates. Lawmakers had approved putting $16-million in federal stimulus money toward higher education this year, in part to pay for the University of Maryland to continue a tuition freeze for a fourth consecutive year. But the midyear cut has threatened to bring the freeze to an end.
The cut “certainly raises the possibility of a tuition increase” in the spring, said William E. (Brit) Kirwan, chancellor of the University System of Maryland.
Although $20-million of the cuts will be offset by dipping into the university system’s reserves, he said, the system will probably have to cut costs in other ways. Mr. Kirwan said he would consider filling fewer faculty and staff openings and reducing student services.
In Virginia, Gov. Timothy M. Kaine, a Democrat, has asked public colleges and other state agencies to plan for midyear cuts of 5 percent to 15 percent.
R. Dan Hix, finance-policy director at the State Council of Higher Education for Virginia, said the governor can cut agencies’ budgets by up to 15 percent. While it’s not clear when Mr. Kaine will reach a decision, Mr. Hix said it’s better if he does so sooner rather than later, to give institutions more time to spread the effects of those reductions over the rest of the budget year.
The 2009-10 budget already adopted by the state reduced higher-education spending by nearly 9 percent, as lawmakers closed a $1.8-billion shortfall—an amount equal to about 11 percent of the state’s budget.
Stimulus Funds May Fall Short
The midyear cuts being considered in these states and others are signs that the nearly $40-billion in federal-stimulus money meant to shore up education budgets for the current fiscal year may no longer be enough. While the stimulus effort was meant to help states keep spending on education at or above 2007-8 or 2008-9 levels, more than two-thirds of the states are already below that guideline. Most have set spending for public colleges and schools at amounts that are closer to 2005-6 levels, a minimum that the federal stimulus law requires for states that want to qualify for the fiscal-stabilization money.
In Colorado, a 10-percent cut in state appropriations would put higher-education spending below the amount the state spent in 2005-6, said David E. Skaggs, executive director of the state’s Department of Higher Education.
As a result, Colorado may have to apply for a waiver from the U.S. Department of Education to be able to keep the stimulus money it is slated to receive. States can be exempted from the requirement that they maintain education spending at a certain level if the amount designated for education is not cut disproportionately to the rest of the budget.
Of the 44 states that have been approved for the state fiscal-stabilization money so far, such waivers have been granted to seven: Florida, Idaho, Massachusetts, Nevada, New Jersey, Rhode Island, and South Carolina.
But if the Education Department finds itself having to issue many more waivers as states enact midyear cuts, questions may arise about whether that “maintenance of effort” provision has done much to push lawmakers to actually preserve education spending.
Some college officials say the provision has had an effect, although not necessarily a positive one, on state-budget deliberations.
To avoid violating the stimulus law’s mandate for education spending, states may feel forced to avoid reducing operating funds for colleges and instead cut other areas related to education, such as student-aid programs, said Michael A. Boulus, executive director of the Presidents Council, State Universities of Michigan, a nonprofit association that represents 15 public universities.
Michigan’s fiscal year does not begin until October 1, so lawmakers there are still working on the budget for 2010. The State Senate, though, has passed a bill that would eliminate the state’s $140-million, merit-based Michigan Promise Grant. The legislation’s prospects in the House of Representatives is uncertain. Gov. Jennifer M. Granholm, a Democrat, has said she would not support eliminating the scholarships.
Lawmakers are also considering cutting half of the $64-million in tuition assistance that now goes to Michigan residents who attend the state’s private colleges and also could halve the $16-million that is now allocated to the Michigan Competitive Scholarship program, which is based on both need and academic achievement.
