The nearly $54-billion that Congress is directing to state aid for education as part of the stimulus bill President Obama signed on Tuesday may stave off the worst budget cuts proposed for public colleges. But the money is unlikely to be able to plug all of the budget holes, and some university officials worry the measure could make it easier for states to spend less on higher education in the future.
And while colleges welcome the extra money from federal coffers, they note that the money comes with some strings. The funds also will have to flow through the complex political process in the nation’s statehouses before it is appropriated to educational institutions, giving legislators and governors a greater opportunity to influence who will benefit from the money.
Close to three-quarters of the money in what the bill dubbed the “state fiscal-stabilization fund” is designated for states to funnel to public colleges and school districts, which could use the money in various ways, including to restore budget cuts, prevent layoffs, or modernize facilities (The Chronicle, February 16). The rest of the money in the bill will be given to governors to spend on high-priority needs, which could include construction money for public or private colleges, and to the secretary of education to reward performance.
The stabilization fund is a portion of the $787-billion law meant to revive the flagging U.S. economy with a large injection of federal money.
“Because we know America can’t outcompete the world tomorrow if our children are being outeducated today, we are making the largest investment in education in our nation’s history,” President Obama said at a ceremony in Denver in which he signed the bill. “It’s an investment that will create jobs building 21st-century classrooms, libraries, and labs for millions of children across America. It will provide funds to train a new generation of math and science teachers, while giving aid to states and school districts to stop teachers from being laid off and education programs from being cut.”
Mammoth Budget Woes
The size of the states’ fiscal problems may still overshadow the solution that Congress and the president have crafted. Estimates of states’ budget gaps range between a total of $132-billion and $350-billion for this budget year and the next.
In California the Legislature is trying to close a $42-billion budget shortfall, but the state is slated to get nearly $6-billion from the stabilization funds, according to estimates by the Congressional Research Service. Gov. Arnold Schwarzenegger, a Republican, has proposed cutting 10 percent, $264-million, from the University of California and California State University systems, and cutting $8.6-billion from public schools.
Daniel J. Hurley, director of state relations and policy analysis at the American Association of State Colleges and Universities, said state budget negotiations over money for higher education would remain “intense” in many places across the country. Because the money in the stimulus bill is meant to be used only for the next two fiscal years, state budget planners will have to figure out a way to maintain higher-education funds after the stabilization pot runs dry, he said.
Another difficulty for some states will be the law’s requirement that states provide as much money for higher education in each fiscal year through 2011 as they did in the 2006 budget year. If they don’t meet that standard, the states would not be eligible for money under the stabilization fund.
So far two states—New Jersey and Rhode Island—appear to be failing that standard, known as the “maintenance of effort” requirement, but several more states are in the process of making midyear budget cuts.
In Nevada, where the state is facing a $1-billion budget gap, the governor’s proposed budget for higher education for the next fiscal year falls nearly $276-million short of what it received in the 2006 fiscal year, said Dan Klaich, executive vice chancellor for the state’s higher-education system. If Nevada is able to remain eligible for the stimulus bill’s stabilization fund, the state would receive $387.4-million.
States will be allowed to apply to the secretary of education for a waiver from the law’s maintenance-of-effort provision, but Education Department officials have not yet set a standard for how they will determine whether to grant exceptions to the law.
Although the law sets the goal of restoring higher-education appropriations to their 2008 or 2009 level, whichever is higher, Mr. Hurley is concerned that some states will treat the 2006 amount as a maximum level of spending for higher education for each of the next three years, not a minimum amount. So instead of basing higher-education budgets on the current needs and costs of universities, lawmakers will use an older and generally lower figure as a baseline, which could reduce spending on colleges in the long run as well, he said.
“When this process is done, they may have set a ceiling rather than a floor,” he said.
Dividing the Pot
Among the biggest uncertainties about the state stimulus money is what will happen when the governors and legislatures divvy it up, and whether they will favor more funds for the public schools over higher education.
“You’re going to find a little turf fighting since nearly all state constitutions split the budgeting authority between the governor and legislature,” said David Shaffer, a senior fellow at the Nelson A. Rockefeller Institute of Government, the public-policy research arm of the State University of New York system.
College officials say they are unsure how much money will eventually flow to them. “Certainly, the stabilization fund will help the state over all,” said John D. Haeger, president of Northern Arizona University. “Then the question becomes how much of that will come back to the universities.”
The Arizona Legislature recently cut more than $141-million from the state’s three universities and is considering much larger cuts for the next fiscal year to help deal with a roughly $3-billion budget shortfall.
Georgia’s General Assembly, which was supposed to wrap up its lawmaking session by the end of March, has modified its schedule to deal with the stimulus money, said Shelley C. Nickel, associate vice chancellor for planning and implementation for the University System of Georgia. Although Gov. Sonny Perdue, a Republican, is a University of Georgia graduate and may be particularly sympathetic to the university’s needs, there is uncertainty about how the allocation of the money from the federal government will shake out, she said. “We’re not counting our chickens until they’re hatched.”
