The nearly $54-billion that Congress is directing to the states for education as part of the stimulus bill President Obama signed last week may stave off the worst budget cuts proposed for public colleges.
But the money is unlikely to save institutions from the state budget ax entirely. And some states slated to get the most aid from that pot of money, known as the “state fiscal-stabilization fund,” are not necessarily the ones facing the greatest budget gaps or even proposing the sharpest reductions for higher education.
While public colleges welcome extra money from federal coffers, they note that new dollars may also come with new strings attached. Money will also have to flow through the complex political process in the nation’s statehouses before it is appropriated to educational institutions, giving legislators and governors the opportunity to influence what programs will benefit.
Close to three-quarters of the 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 rest of the money will be given to governors to spend on high-priority needs, which could include construction at 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.
Mammoth Budget Woes
But the size of the states’ fiscal problems may overshadow the solution that Congress and the president have crafted. Estimates of states’ budget gaps, in total, range between $132-billion and $350-billion for this budget year and the next.
In California the Legislature is trying to close a more than $41-billion shortfall, while the state is slated to get nearly $6-billion from the stabilization fund, according to the U.S. Education Department. Gov. Arnold Schwarzenegger, a Republican, has proposed cutting 10 percent, or $264-million, from the University of California and California State University systems, and $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 negotiations over money for higher education would remain “intense” in many places across the country.
Because money from the stabilization fund is largely distributed to states based on population, smaller states facing some of the nation’s largest budget gaps will not get as much money as some bigger states with less-severe fiscal troubles.
For example, Nevada, with a $1-billion budget gap that equals nearly 38 percent of the state’s general fund, is set to receive $396.6-million from the fiscal-stabilization fund. Oklahoma will get $578-million, even though its shortfall of $309-million is just over 4 percent of the state’s budget, according to the National Conference of State Legislatures.
Arkansas is one of the few states not yet facing a significant shortfall, but it is still slated to receive $443.8-million from the state-stabilization fund.
Another difficulty may 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 to be eligible for the stabilization funds. So far, only New Jersey and Rhode Island appear to be failing that standard, known as the “maintenance of effort” requirement, but several more states could fall short.
To close Nevada’s budget gap, Gov. James A. Gibbon has proposed cutting more than a third of the state’s appropriations for higher education, leaving the system nearly $276-million short of what the sector received in the 2006 fiscal year, said Dan Klaich, executive vice chancellor of the Nevada System of Higher Education.
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 such exceptions.
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.
Meanwhile, Gov. Mark Sanford of South Carolina, a Republican who opposed the stimulus legislation, is uncertain whether he will accept the money designated for his state in the stabilization fund. “We’re getting into a danger zone with our country’s borrowing,” said the governor’s spokesman, Joel Sawyer.
Even if Governor Sanford decides to reject the federal aid, the stimulus legislation allows the federal government to disburse those funds if the state’s General Assembly passes a resolution to accept the $694.1-million slated for South Carolina.
Higher-education officials in the state would most likely welcome the extra aid no matter how it gets to them. South Carolina lawmakers cut funds for colleges nearly 18 percent from the previous budget year, the largest percentage reduction in the nation, and the state is facing a $535-million shortfall, 9 percent of its general fund, for 2009-10.
| THE ECONOMIC-RECOVERY LAW: WINNERS AND LOSERS The $787-billion economic-stimulus legislation that President Obama signed into law this week contains large sums of money for students and researchers. But the final version of the plan excludes billions of dollars that Congress had considered giving to various higher-education programs. Here’s a look at how the law, as enacted, produced both winners and losers. WINNERS Students from low-income families The maximum Pell Grant is set to increase to $5,550 by 2010, aid that the bill’s authors say will help seven million students. Students from families who do not earn enough money to owe taxes have also become eligible for a tuition tax credit for the first time. They may take up to $1,000 of the bill’s $2,500 benefit. Students at community colleges and other low-cost institutions Textbooks can now be counted as an education expense that students can claim under the bill’s $2,500 tuition tax credit, helping people who have not previously paid enough tuition to benefit. Students eligible for the Federal Work-Study program The bill includes $200-million for the program, an increase that the bill’s authors say will allow about 130,000 more students to be paid to work part time while they are in college. Biomedical researchers Close to half of the $18-billion the bill provides for research and development will go to the National Institutes of Health, which will receive $8.7-billion for biomedical studies. The legislation also allocates $1.3-billion to renovate and equip university research facilities and help them compete for biomedical research grants. People seeking job training at community colleges Almost $3-billion is set aside for programs under the Workforce Investment Act that provide money for job training, including courses at community colleges. The law allows institutions to receive money to provide instruction to groups of students, a change from the previous process that awarded money only to individual students. College officials say the new approach will help them cover the full costs of their programs, particularly those in technical fields that are in growing demand but are expensive to operate. LOSERS Students who benefit from Perkins Loans The final legislation excluded money that the Senate measure contained for Perkins Loans, low-interest loans that often help students from lower-middle-income families that earn too much to be eligible for Pell Grants but that cannot afford to pay for college without assistance. Undergraduates who want to borrow more money for college Annual borrowing limits on unsubsidized Stafford loans will not change under the law, which excluded a provision that had been in the House bill to increase the limits by $2,000 for undergraduates. Financial-aid administrators had advocated the increase, saying it would prevent students from having to take out more-expensive private loans, but student groups worried it would encourage colleges to raise tuition. Student-loan companies The companies had sought a temporary change in the way the government calculates the subsidies it pays to lenders that participate in the federal student-loan program that would have increased their payment rate. The companies argued that the change, which had been included in the House bill but excluded from the final version, was needed to help ensure the availability of loans and because the commercial-paper rate that is used to calculate the subsidy no longer reflects the true market. Higher-education facilities College administrators had eagerly been preparing lists of repairs and renovations that they hoped might be financed by the $7-billion the House bill had contained for higher-education facilities. But the final measure does not include a separate pot of money for college construction, although the projects could get some money from funds governors will receive to allocate to high-priority needs in their states. |
| THE NEEDIEST STATES MAY NOT GET THE MOST AID FOR EDUCATION A $54-billion pot of money in the federal economic-stimulus measure is primarily intended to help buffer colleges and schools from state budget cuts. But because aid from that “state fiscal-stabilization fund” is largely distributed to states and Washington, D.C., based on population, some of the states slated to get the most money are not necessarily facing the greatest budget gaps.  |  | NOTE: State budget situations are constantly changing. These estimates are as of February 10. | | SOURCE: U.S Education Department | SOURCE: Center on Budget and Policy Priorities | |
http://chronicle.com Section: Government & Politics Volume 55, Issue 25, Page A24
