• October 22, 2014

For Colleges in Some States, Financial Relief Is Far Off

 Even when the economy begins to recover and employment picks up, public colleges shouldn't expect much immediate relief from their states, warns a report this month from Moody's Investors Service. Some states will very likely recover much more slowly than others. In more than half of the states, recovery is not projected to kick in until at least 2013, 2014, or later. And even then, the report notes, states will still face pressures for spending on public-employee pensions, health care, primary education, and other services.

"Universities need to be especially cautious about not assuming that their state will be able re-establish past support levels in the near future," says the report from the credit-rating agency.

The map shows the year in which each state is expected to see its employment picture recover, according to Moody’s Economy.com projections.

The forecast could be particularly bad news for colleges in states that are both projected to recover slowly and have relied heavily on federal stimulus funds, which will run out by the 2012 fiscal year.

Stimulus funds accounted for at least 5 percent of the budgeted state support for public colleges in 20 states in the 2009 and 2010 fiscal years. (In three states, Colorado, Massachusetts, and Arizona, stimulus funds accounted for at least 10 percent.) The map indicates which states they are, and their average reliance on stimulus funds in the 2009 and 2010 fiscal years.

The combination of a prolonged period of constrained state spending and colleges' limited ability to raise revenue through other sources means that institutions will probably face greater pressure to improve productivity, the report predicts.

It adds that while Moody's does not expect a general trend toward defaults on bonds, the risk has increased that institutions' credit ratings will be downgraded.

The report also chides public colleges, saying few have begun the "fundamental recasting" of their operations that such conditions require. For example, the report says, "due to inertia and anachronistic labor-force practices, most public universities still utilize their facilities for a only a fraction of the times that students would be willing to attend class."

Comments

1. jcas3309 - July 14, 2010 at 08:42 am

I think the tough times for public and private universities are yet to come. Public universities will be worse off unless the institution made the cuts necessary to overcome the loss of stimulus funds. Most of the state universites and colleges have not made those difficult decisions. The business model must change and minor budget cuts will not accomplish what will be necessary in 2012. President's, Provosts, and other senior leadership can avoid the issue, make small cuts, and take care of the short-term issues, but the decisions will be more difficult in the long-term when funding decreases.

F. John Case

2. tridaddy - July 14, 2010 at 09:01 am

It's like the old Fram oil filter TV commercial; pay me now or pay me later. Universities best be making cuts NOW or suffer a major hit in FY12 and FY13. Yet, IMHO, it seems leaders on many university campuses are not willing to make the tough decisions now. It as though they are hoping the financial ship will be righted before they have to do anything drastic.

3. 11134078 - July 14, 2010 at 11:25 am

I couldn't agree more with both previous comments. But there is another and more difficult question: are we seeing the end of real public higher education (as I think we are) and if so what are the consequences for our society?

4. claimjumper - July 14, 2010 at 11:33 am

There appears to be a typo below the 'Show Stimulus Funds' label: "inclue".

5. goldieb - July 14, 2010 at 12:08 pm

Re that typo. Thanks for, uh, cluing us in to that little glitch. We're fixing it even as I write this.

-- Goldie

6. agpbloom - July 15, 2010 at 10:12 pm

Blumenstyx observes,

"In more than half of the states, recovery is not projected to kick in until at least 2013, 2014, or later. And even then, the report notes, states will still face pressures for spending on public-employee pensions, health care, primary education, and other services."

Translated: Aging baby-boomers and spoliled millennials (the two largest demographics) will get the gravvvy and fight for what's left. Put an X through Gen-X faculty who had false hopes for a promising career in the system. They will get squashed in the coming generation war that will consume academia's resources.

Is this too cryptic for some of you? Just get a basic book on demographics and follow the money.

Really, it's a shame. You needed those Gen-Xers who could have translated between the two warring generations/ demographics in the academy.

Too late. You burned many of them out and now they're gone from the system...gypsie adjuncts with nowhere to go...They will be joined with other sacrificial lambs when the real budget kinives are used. The apocalypse is here.

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