Growing Expenses, Shrinking Resources: The States and Higher Education

Academe, Jul/Aug 2004 by Smith, Mark F

Bust without boom? Deepening structural problems should warn us not to depend on the usual rhythms of state financing for higher education.

In Democracy in America, nineteenth-century political philosopher Alexis de Tocqueville argued that understanding how individual U.S. states approached an issue offered "the key to all the rest." If Tocqueville was correct, and he was right about many things, higher education advocates are in for a rocky time. Over the past two or three years, states have drastically reduced funding for higher education, and the situation probably won't be getting much better any time soon.

The signs are everywhere. Over the past two fiscal years, California shrank its higher education funding by 9.6 percent-with more cuts to come. Over the same period, Colorado's funding dropped by 21.8 percent, and Massachusetts's by 23 percent. Programs are being cut, and institutions are demanding more of current professors and increasing the use of contingent faculty. Scholarly activities are often expected to pay for themselves. Some institutions push research faculty not only to fund their own salaries but also broader departmental functions. In addition, tuition has consistently risen several percentage points above the rate of inflation for many years now.1

The cuts are not directed only at the classroom. The Chronicle of Higher Education reported on March 12, 2004, that state support of the University of Georgia Press has been halved for the coming year, while the University of Idaho Press was shut down on July 1, 2004. In a 2003 report titled State Shortfalls Projected Throughout the Decade, the National Center for Public Policy and Higher Education criticized the "boom-and-bust cycle [that] has become a traditional state pattern of treating colleges and universities disproportionately well during prosperous times-and disproportionately poorly in tight budgetary circumstances." Comparing the 1990s with the past two years emphasizes the point. The Center for the Study of Education Policy at Illinois State University runs a national database of tax support for higher education. According to the database, from fiscal 1992 to fiscal 2002, state tax appropriations for higher education increased by an average of 59 percent. In contrast, appropriations declined by 4 percent over the last two years.

Although private institutions rely less on public funding than do state colleges and universities, both sectors depend critically on financial support from federal and state governments. David Breneman, dean of the Curry School of Education at the University of Virginia, describes in the spring 2003 issue of Crosstalk, a publication of the National Center for Public Policy and Higher Education, how the pieces of higher education funding traditionally fit together. "State governments and private philanthropy," he writes, "have combined historically to provide the supply-side of higher education, while the federal role has focused on underwriting student demand through grants, guaranteed loans, and work study. This division of labor between the state and federal levels of government in the United States worked well as long as both entities kept up their end of the bargain. However, when neither is doing so, the quality of education is going to suffer."

Structural Problems

One very real problem state governments face today are revenue shortfalls. The December 2003 edition of Fiscal Survey of the States, issued semiannually by the National Governors Association (NGA) and the National Association of State Budget Officers, reports that states confront not only "short-term cyclical" but also "long-term structural" problems. The survey argues that even though the economy has "begun to show some signs of improvement," state budgets have not yet started to recover. In fact, "forty states reduced fiscal 2003 enacted budgets by $11.8 billion after they were passed." The previous year, thirty-eight states cut the budgets they had enacted.

NGA executive director Raymond C. Scheppach blames the revenue difficulties on what he calls "obsolete state tax systems, which were developed for the manufacturing economy of the 1950s, not the service-oriented, high-technology, global economy that has developed during the last two decades." Scheppach clearly identifies a problem but stops short of calling for a specific revenue solution other than implying that a tax system more in line with the new economy should be developed.

During the 1990s, a decade that saw major increases in state support for higher education, serious issues were hidden. On the revenue side, structural flaws, such as obsolete tax systems, were overlooked, as were Medicaid problems on the spending side. Following the collapse of the dot.com economy and the ensuing recession, state spending on all programs became essentially flat for three years. Recent economic growth has not brought about major state revenue recovery. Shortfalls continue, and further cuts threaten higher education.