The last, best chance for colleges and universities to avoid making deep cuts to programs and staff seems to be slipping away.
Congress is not expected to agree on another relief bill until after election results are confirmed, at the earliest. Higher education groups, meanwhile, have continued to press lawmakers for more money for the sector, with their latest ask at $120 billion or more.
The stalled negotiations in Washington are significant, experts say, because, unlike in previous economic downturns, colleges and universities have few other places to turn. State governments that support higher ed face their own sharp declines in revenue and an uncertain economic outlook. And institutions cannot easily raise tuition or count on increased enrollment, because, on the whole, fewer students appear to be attending college this fall than last year.
Higher ed’s funding situation is likely to get worse before it gets better.
“We’re facing a financial cliff, and higher ed is going to fall off of it,” said Jennifer Delaney, a higher ed professor at the University of Illinois at Urbana-Champaign and a member of the Illinois Board of Higher Education. “Without relief, we’re in trouble as a sector.”
While the timing will vary, Delaney said, institutions will likely start seeing stark budget actions by early 2021. By then, the $14 billion in federal relief that Congress approved for the sector in March will have run out, and state governments will have to adjust their own budgets to deal with anticipated revenue declines.
Denisa Gándara, a higher ed professor at Southern Methodist University, also anticipates a few rough years ahead.
“What we’re starting to see now in terms of cuts at the state level is nothing compared to what we’ll see in the coming years,” she said. While states often make cuts to their higher ed budgets during economic downturns, those effects are usually delayed because of the timing of state budget cycles, she said. Many states had already adopted budgets when the COVID-19 outbreak hit, she explained, and when legislators craft new budgets early next year, most of those changes won’t take effect until June 2022.
That pattern may be even more pronounced this year, because many states avoided making steep cuts in budgets drafted this spring. Only 15 states have taken action to decrease their higher ed budgets for the last fiscal year or the current one, according to the National Conference of State Legislatures.
When crafting their current budgets, most lawmakers didn’t know how severe the economic impacts of the pandemic would be or how long they would last. And some states were operating on two-year budgets passed in the spring of 2019.
Now is the time when governors and their budget offices start preparing their spending plans to present to legislators in the new year, and they’re likely to ask colleges and universities to reduce spending, Gándara said.
Earlier cuts offer a preview
A handful of states have already started pushing for cuts, offering a glimpse of what’s likely in store elsewhere.
The University of South Florida recently announced it will shut down the undergraduate programs in its college of education. The move to a graduate-only focus came after Florida’s Board of Governors asked its universities to reduce spending of state general funds and lottery money by 8.5% for the 2021 fiscal year. For USF, that amounts to more than $36 million.
The board of governors at Rutgers University, meanwhile, approved a spending plan earlier this month that imposes furloughs and freezes wages and discretionary operational spending. That follows layoffs of hundreds of adjunct instructors and other staff earlier this year.
New Jersey officials backed off on an initial plan to cut state aid to Rutgers, but the university has lost all sorts of revenue it had been depending on, including money brought in from athletics, housing, dining, parking, charitable donations and even elective surgeries at its healthcare system.
And the City University of New York has laid off nearly 3,000 adjunct faculty, leading to bigger class sizes but fewer classes to choose from. The university system has had to reduce spending, because the state’s governor withheld funding while waiting to see if more federal relief will materialize, Gothamist reported.
But so far, states haven’t diverged much in how they’ve dealt with the funding shortage and higher ed spending, said Tom Harnisch, the vice president for government relations for the State Higher Education Executive Officers Association. Harnisch helped lead a study with New America, a left-aligned think tank, looking at budget cuts states have made to higher ed during the COVID-19 crisis.
“Some states came into this situation in a better financial position than others. Some had better rainy day funds than others. And states are all across the board in how the virus has affected them and their economies,” he said. “I haven’t seen a true pattern emerge other than the outlook for 2021 state budgets — absent a federal stimulus package — is very pessimistic.”
Which colleges are bearing the brunt?
Harnisch and other experts agree that the financial crunch will affect public higher ed institutions differently, with regional public universities and community colleges bearing the brunt.
Those types of institutions generally don’t have access to the same level of research grants and endowment and donor wealth that flagship state universities do. Community colleges have also seen the biggest drops in student enrollment since the pandemic hit, according to preliminary data. The decline is noteworthy, because enrollment at two-year colleges rose during the last recession.
“The colleges that are already underfunded are facing enrollment challenges,” said Justin Ortagus, an education professor and director of the Institute of Higher Education at the University of Florida.
“The types of students who can really transform their lives and their family’s lives by entering higher education and changing the trajectory of their economic potential may now be hesitant to go accrue loan debt, or just enter higher education,” Ortagus said.
Existing students, meanwhile, could lose financial aid or student support services that would help them complete their degree, he added.
Gándara, the Southern Methodist University professor, said community colleges lost out in the last federal relief package when Congress decided to distribute money to institutions based on their enrollment of full-time students. As a result, the formula ended up mostly benefiting four-year schools, where a larger percentage of students attend full-time.
“Often, part-time students may actually have greater needs than full-time students,” she said. Around two-thirds of community college students attended part-time in the fall of 2018, according to the Community College Research Center.
Community college students tend to be lower-income and are more likely to deal with food or housing insecurity. And students who go to college part-time often work more, which means they are more likely to need childcare, and the added stresses may make them more in need of academic counseling as well, Gándara explained. That’s why community colleges and other advocates have argued that relief funds should be distributed based on how many students an institution enrolls, not on how those students stack up into the equivalent of full-time students.
“We’re facing a financial cliff, and higher ed is going to fall off of it.”
Higher ed professor, University of Illinois at Urbana-Champaign
Student financial aid is another area of concern, Gándara added. Typically, states have preserved those programs during recessions, and occasionally even expanded them. But it’s too early to tell whether lawmakers will take the same approach during this recession, she said. (A handful of public institutions have gone so far as to lower student tuition and fees since the coronavirus struck, but that approach seems to be more common among private institutions.)
Free college programs, which have been expanding in recent years, could be vulnerable as the recession leaves them with less revenue. In Oregon, lawmakers reduced funding for a free college program by $3.6 million, which led to the state rescinding scholarships for 1,000 students. Maryland officials cut $3.5 million from its free community college program, which means 3,000 people are now on a waitlist.
“The value of the promise programs is that they are a promise, a commitment,” by the state, Gándara said. “If students are counting on them, these cuts can have very serious consequences.”
Is more relief coming?
While the overall financial picture for higher ed is bleak right now, there have been a few bright spots during the pandemic.
A few institutions have been able to attract major donations to expand programs or provide scholarships. Missouri University of Science and Technology received a $300 million donation to help it add new programs and research and offer more scholarships. The University of Maine System is getting $240 million to launch a school of engineering and expand other programs. The Jay Pritzker Foundation donated $100 million to the California Community Colleges to pay for student aid over the next 20 years.
Experts warn, though, that there is no way philanthropic giving alone can make up for the deficits public institutions are likely to face in the coming years.
Virginia Gov. Ralph Northam, meanwhile, announced a refinancing plan that could allow the state’s public universities to save $300 million in the next two years. The state will refinance the bonds under terms that would allow the universities to defer payments. Other states may follow suit, but Virginia is in a particularly good position to refinance its bond debt because its AAA bond rating helps it secure good interest rates.
And Congress still could strike a relief funding deal that could help higher ed. Harnisch, the SHEEO lobbyist, said there was “certainly a possibility” Congress could pass a measure in the lame duck session, and Senate Majority Leader Mitch McConnell said Wednesday that a rescue package was one of his top priorities for the rest of the year.
If that doesn’t happen, a financial relief package would be “right at the top” of Democrats’ 2021 agenda, Harnisch said.
If Congress acts quickly, it would help governors and state lawmakers decide how much they need to cut from their higher ed budgets for the next fiscal year before they craft them. (The fiscal years of 46 states start in July.) If Congress waits too long, though, the relief funds could come too late to stave off austerity measures.
Even so, measures Democrats have passed out of the U.S. House of Representatives this year have fallen far short of what higher ed advocacy groups say is necessary. The most recent proposal included $39 billion in direct support for colleges. Senate Republicans proposed giving colleges $29 billion during negotiations over a relief package this summer, but those efforts stalled. Higher ed groups, meanwhile, have raised the amount of federal support they say is needed from $47 billion in the spring to $120 billion or more.
“The current proposals, while certainly appreciated, do not go far enough to meet the challenges of higher education coming out of the pandemic,” Harnisch said.