Cuts Expected for State Higher Education Funding in the Wake of COVID-19

By Hugh T. Ferguson, NASFAA Staff Reporter 

States aiming to circumvent the havoc that the COVID-19 pandemic will likely have on their annual budgets are looking toward their education departments to soften the blow.

Missouri has already frozen millions of dollars to its department of higher education, and state colleges and universities in Arkansas, Colorado, North Carolina, and Nevada are preparing for similar cuts to their public higher education programs.

According to Open Campus, as of April 6, roughly a dozen states are projecting or preparing for significant losses in revenue for their departments of higher education. 

“I think quite a few of the cuts to this point have been out of an abundance of caution from states, that they're very concerned about what the budgets may look like going forward,” said Robert Kelchen, associate professor at Seton Hall University. “I think everyone has been very cautious with their money and just in a ‘wait-and-see’ mode, and nobody — students, states, or colleges — really want to spend money until they know when this crisis will end.”

What makes the timing all the more fraught is that higher education funding is being tinkered with in the middle of the fiscal year.

“What makes this especially painful is a number of states are looking at pulling back funds in the middle of the fiscal year that some colleges may have already spent, or at least have committed [those funds],” Kelchen added. 

However the projected economic downturn for public higher education is not all that surprising.

Antoinette Flores, director for postsecondary education at the Center for American Progress, said that in the wake of the Great Recession public education funding has faced more significant cuts than other sectors.

“Funding to public colleges is seen as a little bit more discretionary because institutions have options to fill budget holes,” Flores said. “They could hold back on spending on construction projects, on hiring, they can raise tuition, and so that's one of the reasons why I think higher education in particular is vulnerable.”

These freezes and cuts will amount to colleges and universities losing access to potential pots of funding that they were anticipating having access to in the next calendar year.

This impending financial strain caused by the viral outbreak is set to be compounded by the reality that funding for public higher education is still recovering from the Great Recession in 2008.

Nearly a decade following the last recession, state funding for higher education stood at $9 billion less during the 2017 school year than it did in 2008 for public four- and two-year institutions, according to data from the Center on Budget and Policy Priorities (CBPP), though that number ticked up to a $6.6 billion discrepancy by 2018.

While some states have made more progress in their recovery, an economic recession spurred by the novel coronavirus could greatly upend those gains.

CBPP has found that one-third of states are unprepared for a moderate recession. They came to that conclusion by analyzing states’ reserves, unemployment insurance systems, accessible Medicaid programs, and affordable public colleges and universities.

That said, “every state likely will face significant budget gaps in the coming months, even those best prepared for the downturn, and will need aggressive help from the federal government,” said CBPP, pointing to findings from its state recession preparedness report.

In the last recession, higher education took a toll and there is concern that similar dynamics could unfold.

“Worst case scenario, there are dramatic cuts, tuition goes up, debt goes up, you see an increase in for-profit colleges and online education the same way that you saw at the end of the last recession,” Flores said.

At this point in time, Flores said, it is hard to tell what the overall impact of COVID-19 will be, since it is unclear how long social distancing practices will remain in place. 

However, she anticipates the challenges presented to higher education during this crisis will be far greater than those posed by the Great Recession, which stem from the fact that businesses today have had to physically shut down in an attempt to contain the spread of the virus.

“There's also a risk that students will withdraw and [institutions of higher education will] experience declines in enrollment,” Flores added, highlighting additional budget challenges. “Then there's a lot of questions about what the recruitment and enrollment process will look like for the next semester, given that so many things are uncertain.”

Adding to the uncertainty is how colleges and universities will not only manage to wrap up the calendar year online, but also if and how they will administer remote learning in the summer, and possibly the fall.

While the prospect of online education has gained traction with members of Generation Z, implementing online courses en masse would require a great deal of coordination in a short time frame.

“It takes a lot of resources to be able to do it well — it's not something you learn overnight. And so institutions are kind of learning and implementing on the fly, as are course instructors,” Flores said.

Online learning will also have implications on revenue with schools left possibly unable to collect room and board fees, making their economic outlook all the more dire.

While the latest COVID-19 relief package, H.R. 748 (116), provided immediate financial relief to student borrowers and institutions of higher education, longer term financial strains, especially as they relate to state budgets, are beginning to emerge.

Flores worries that if additional aid for higher education is not in the next congressional package that there will be significant financial strain on institutions trying to cope with economic uncertainty in the months ahead. 

“I think you're going to start to see some of the more immediate impacts just because states are getting towards the end of their fiscal year now and need to make budget decisions,” Flores said. “So it's really important that higher education is part of the next package.”

For more information and resources on how the spread of the novel coronavirus is impacting student financial aid, please refer to NASFAA's COVID-19 Web Center.

 

Publication Date: 4/8/2020


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