A Brighter Financial Picture for CollegesIs the downturn over yet? That's the question on the minds of college leaders as the 2004-5 academic year gets under way.In just the past four years, a sluggish economy has forced states to close a combined $235-billion shortfall in their budgets. They did that in part by slashing appropriations for public colleges, by putting few new dollars toward student aid for those attending both public and private institutions, and, of course, by raising tuition and fees. The legislative sessions that recently wrapped up in many states show that higher education still has plenty to worry about. While 44 states finished the fiscal year that ended June 30 with a combined $18.4-billion surplus, a 50-percent increase over the end of the previous year, much of that cushion is likely to dissipate in the next year. The biggest budget buster is Medicaid, where costs are expected to grow more than 13 percent in the coming year, the result of states' filling in dollars cut by the federal government. In a few states, the continuing fiscal problems spelled particularly bad news for colleges. Nowhere was it worse than in Oregon. After making major cuts in the higher-education budget in the 2001-3 biennium, lawmakers called for an additional 11-percent reduction in spending on the public-university system and a 12.2-percent reduction for community colleges for the 2003-5 biennium. The rejection of a tax increase by voters later resulted in additional cuts of 1.1 percent for the universities and 3.2 percent for the two-year colleges. In the neighboring state of California, the new movie-star, governor Arnold Schwarzenegger, a Republican, presented a budget in January filled with spending cuts, enrollment reductions, and tuition increases for the University of California and California State University. Following several months of tense negotiations with the Democratic-controlled Legislature, many of the cuts were scaled back. The final spending plan contained a 6-percent cut for the University of California and a 7.6-percent reduction for Cal State. California's community colleges fared well with a 7-percent increase in their budget. Elsewhere, there were some encouraging signs for higher education. Of the 44 states that had completed work on their 2004-5 budgets and responded to a survey by the State Higher Education Executive Officers, only seven states froze or cut higher-education spending. By comparison, about half the states reduced college funds in 2003-4. Of the 37 states that raised their higher-education budgets, 28 increased them by more than 2 percent. In some states, the new dollars barely made up for budget cuts from previous years, and in several places they were quickly eaten up by the rising cost of health-insurance premiums for college employees. But in others, the increases were sizable, according to Chronicle reporting. In Florida, the Legislature provided a 7.1-percent increase for the operation of the university system and a 9.7-percent increase for community colleges. It called for spending on university construction to rise by 18.3 percent, to $215.8-million, and provided about 14.2-percent more for the maintenance and repair of university facilities. Almost $280-million in new taxes approved by Virginia lawmakers this year will go to public colleges during the 2004-5 and 2005-6 budget years. The new taxes, along with faster-than-expected revenue growth, allowed the legislature to increase the operating budgets of the state's public institutions by $79.7-million, or 7.6 percent, from the year before. And in South Dakota, where rising grain and livestock prices helped fuel strong growth in personal income and in state revenue, the Legislature provided a 4.5-percent increase for colleges, which were set to receive a total of $148.3-million in 2004-5. States also committed themselves to spending more on higher education in the future through the issuance of bonds. Maine voters approved a ballot measure authorizing $19-million in higher-education bonds, $12-million of which will benefit community colleges. Meanwhile, the Board of Trustees for the University of Alabama System agreed to issue $284-million in bonds, the largest bond issue ever for the system. Most of the proceeds will be used to help pay for renovations at the Tuscaloosa campus. As states looked for ways to sustain their economic recovery and replace manufacturing jobs lost during the downturn, policy makers and legislators also took a lot more interest this year in university research, especially in those areas that could have commercial applications. Higher-education officials in Oklahoma called on institutions to take such steps as developing tenure and promotion policies that reward faculty members whose research leads to commercial successes and adopting strategic plans that spell out how universities could help their local economies. Kansas lawmakers created the Kansas Bioscience Authority and Emerging Industry Investment Fund to recruit researchers in medicine, science, and technology and to encourage collaboration among state universities, bioscience companies, and experts that the fund's board hopes to lure to the state. In Ohio, Gov. Bob Taft, a Republican, has already committed the state to providing $1.1-billon in grants and loans to support research at state universities as a key part of his "Third Frontier" economic-development plan. Eventually, some states hope that such research will not only stimulate the economy but also make public colleges less dependent on taxpayers. The once-distinct lines between public and private higher education continued to blur in 2003-4, as states searched for ways to get out of the higher-education business. In South Carolina, Gov. Mark Sanford, a Republican, suggested letting public colleges transform themselves into private institutions, as long as they were willing to give up direct state financial support and to sign a covenant agreeing to charge South Carolina residents lower fees than their other students. And Colorado legislators agreed to one of the biggest changes in higher-education financing in decades in 2003-4, making it the first state to provide sizable funds for higher education directly to students through a voucherlike program. Beginning in July 2005, the General Assembly is to set aside money for the fund, which would then pay stipends to state residents who enroll in undergraduate programs at Colorado public colleges. Low-income residents who enroll at some private colleges in the state could be eligible for half of the amount that public-college students would receive. To participate in the program, both public and private institutions would have to agree to meet certain goals -- like improving graduation and retention rates -- that they would agree on with the Colorado Commission on Higher Education, the state's coordinating board.
http://chronicle.com Section: The 2004-5 Almanac Volume 51, Issue 1, Page 3 |
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Copyright © 2004 by The Chronicle of Higher Education