The Education Commission of States has released a report analyzing how state budget shortfalls are affecting post secondary education funding and how the American Recovery and Reinvestment Act (ARRA) is helping states cover higher education funding gaps. The report examines the budgets of six states with varying budget shortfalls before and after the passage of ARRA to show the impact on higher education. The Education Commission of States urges states to use caution when spending State Fiscal Stabilization Funds on programs or positions that require recurring funds.
"If states are not careful and thoughtful about how stabilization money is spent, they will face similar financial issues in two years," the commission states.
The following is how these Arizona, Colorado, Minnesota, Nevada, Tennessee, and Virginia are dealing with their state budgets and higher education budgets
Arizona
Before passage of the ARRA, Arizona had a 15.7% budget gap for FY 2009, according to the report. To help close the gap, $141.5 million was cut from the budgets of state universities and the Arizona Board of Regents. The University of Arizona's budget was cut by $56 million. Arizona State University's budget was cut by $63 million. Northern Arizona University's budget was cut by $21 million. Less than $2 million was cut from the Arizona Board of Regents central office. These cuts came on top of a $20 million reduction the University of Arizona took during the summer of 2008.
Under ARRA, Arizona will receive $2.3 billion for education funding. $1.017 billion is allocated to SFSF (State Fiscal Stabilization Fund). More than 80% or $831.5 million is allocated for Arizona's Education Stabilization Fund. The money will help cover K-12 and higher education budget shortfalls for FY 2009, FY 2010 and/or FY 2011. More than $725 million is allocated for higher education. To receive the available ARRA funds, state lawmakers will have to restore the nearly $150 million that was cut from the higher education budget.
Colorado
Before the passage of ARRA, The Colorado Department of Higher Education proposed $100 million in budget cuts for FY 2010, including eliminating two state grant programs. Those cuts were:
- $52 million from the higher education general fund that will be passed onto higher education governing boards and institutions
- Withdrawing the general fund increase submitted in the November 10, 2008, FY 2010 budget requests
- Eliminating the state's merit-based financial aid program and the Precollegiate Academic Competitiveness Grant for FY 2009
- Eliminating the state's need-based financial aid allocation to graduate students.
There was also a $300 million proposed cut unless $500 million was transferred from a quasi-governmental agency that offers guaranteed workers compensation to the general fund. But it was made clear that such a cut from higher education was not needed and not a solution to the budget shortfalls because of the maintenance of effort provision in ARRA. In order to close in on the shortfall and evade a $300 million cut to higher education, legislators balanced the budget by:
- Using $221.9 million in transfers from cash funds
- Saving $90 million by suspending the senior homestead property tax exemption
- Taking $65 million from tobacco-settlement funds normally used for heath care programs
- Transferring $25 million from K-12 to higher education
- Closing one prison and delayed opening another
- Forcing some state employees to take eight furlough days by year's end.
They are expected to receive $452 billion from the SFSF for higher education.
Minnesota
Before ARRA, the state was planning to cut $313 million from higher education FY 2010 and FY 2011. Budgets for the University of Minnesota and the Minnesota State Colleges and Universities would have been cut by 11%.The Minnesota State Colleges and Universities would have lost $146 million through 2011. The University of Minnesota would have lost $151 million in funding over the same two years, according to the report. In addition, work study, which currently funds 75% of the salaries of 11,900 students at colleges and universities, was scheduled to be cut by 10%. Higher education child care grants and scholarships for low-income American Indian students also would have been cut. State funding for the TEACH program, which provides scholarships to child care providers to obtain a degree in early education, also faced elimination.
After passage of the ARRA, all these previously proposed reductions were restored.
Nevada
A 4.5% budget reduction for all public two-and four-year colleges and universities was originally proposed to cover the FY 2009 budget gap. These included:
- Cutting operating budgets
- Implementing operational efficiencies
- Delaying or canceling hiring of replacement staff
- Adopting a $5 surcharge per credit hour to bring in an additional $1.5 million
- Deferring merit pay for professional staff in the 2008-09 FY
- Tapping (one-time) capital construction funds for higher education appropriations
- Using excess student fee collections in excess of the budgetary levels in FY 2007-08
A $475 million cut to higher education for the 2010 and 2011 fiscal years was also proposed.
A letter has been sent to the Secretary of Education Arne Duncan to apply for a waiver of the maintenance of effort requirement for higher education. It seems as though Nevada meets the precipitous decline in financial resources standard because sales and gaming taxes, which represent the two largest revenue sources for the state, declined by 7.7% and 20.3% respectively for FY 2009. In addition, the unemployment rate, as of January 2009, was seventh highest in the nation.
Tennessee
In order to close the FY 2010 budget gap, the University of Tennessee and Tennessee Board of Regents submitted a two-tier reduction plan. The first tier identified the amounts and areas for a $103.1 million budget reduction and the second, extended those amounts by an additional $78.5 million for a total reduction of $181.7 million. The plan included proposals to:
- Decrease operating expenses
- Reduce faculty and student travel
- Freeze vacant positions
- Increase faculty workload and class sizes
- Reduce the funding for departmental research
- Defer facility maintenance
- Reduce student services
- Implement new energy conservation strategies
- Reduce the frequency of course offerings
- Increase external funding sources for athletic scholarships
- Propose voluntary buyout plans
- Implement voluntary furloughs
- Transfer publications to online availability only
- Reduce custodial services.
Since the passing of the ARRA, the revised budget gives public colleges and universities $470 million. $100 million will go towards replacing cuts in current fiscal year and $370 million will go towards expected cuts in FY 2010 and FY 2011. There will also be an additional $136 million of the state's money allocated for higher education. However, once the federal money is gone, Tennessee schools will have to learn how to operate on permanent cuts. Schools will have to become more efficient and they have several years to consider how to make cuts.
Virginia
Proposed budget cuts for FY 2010 include a 15 percent reduction for state universities and a 10 percent reduction for community colleges. Cuts were significantly higher before the ARRA. It is hoped higher education institutions will decrease their budgets by streamlining administration, making programs more efficient and realigning current programs according to the report. It was also recommended to eliminate the Eminent Scholars Program for full or associate professors at the University of Virginia and reducing funding to the Tuition Assistance Grant program (TAG) for graduate students. Legislators proposed using the $126 million earmarked for higher education to reduce the planned cuts to an average of 5 percent after additional revenue was provided by the ARRA.
By Michael Jones II
Communications Intern
Posted 06/12/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.
