Panel Discusses State Budget Challenges for Higher Ed in the Wake of Coronavirus

By Hugh T. Ferguson, NASFAA Staff Reporter

In a webinar hosted by the Bipartisan Policy Center on Wednesday, a group of higher education experts outlined approaches to mitigate the impact of COVID-19 on state higher education budgets, and highlighted potential policy options as well as concerns about how the ongoing pandemic is shaping the industry.

Prior to the pandemic, a number of states were in a position to start preparing budgets with the ideas of saving for the next economic downturn in mind and reinvesting in a number of sectors, but because of the immediate economic impact of the health crisis states have had to completely reassess their financial outlook.

“Most states have seen two consecutive years of faster than expected revenue growth in fiscal year 2018 and 2019, which had led to some sizable budget surpluses in some cases,” said Kathryn White, director of budget process studies at the National Association of State Budget Officers.

While states were investing in certain rainy day reserve funds, they were also planning for things like teacher pay increases, more funding for higher education institutions and tuition freezes, and making similar targeted investments in other areas of the budget.

“And then the pandemic happened, and it affected state fiscal conditions sharply and dramatically, resulting in steep revenue declines in virtually all sources,” White said.

The budget outlook marks an unprecedented and dramatic shift in fiscal conditions, with early analyses showing potential revenue losses in the next few years “could be double what states experienced during the Great Recession,” White noted.

These outlooks have left institutions bracing for these impending cuts, as several states have already begun reducing funding for higher education.

“We understand we're going to have to survive on less money, because no matter what happens it’s unlikely that more students will come to our system,” said Dannel Malloy, chancellor of the University of Maine System and former governor of Connecticut. “I've been through this kind of challenge before. I was there in 2008 through 2012 and I understand the significance of the problem we're in. It's changed.”

While states administered cuts to higher education during the last recession, White said upcoming budget reductions could be compounded, especially since the current public health crisis will make cuts to health programs less likely. 

“This time it will be during a period when higher education’s business model is also facing unprecedented obstacles during the pandemic, and so that's why this conversation today is so important,” White said.

With steep declines in revenue, states are likely going to be forced to slash their budgets following the economic impact of COVID-19 since they’re required by law to balance their budgets. In the meantime, states are “anxiously awaiting” what additional aid may come from the federal government that could curtail further budget cuts, White said.

Daniel Greenstein, chancellor of Pennsylvania’s State System of Higher Education, said the state was on track to address “structural weaknesses” within the system already in view before the pandemic, such as a decline in enrollments since 2010.

“Along comes the pandemic and we’re accelerating that work because there’s opportunity. It’s not about saving money, it’s actually about expanding educational opportunity,” Greenstein said.

While the pandemic is unprecedented, Greenstein cautioned any return to normalcy.

“You’ve got to ask yourself about the rationale behind bringing thousands of students from all across the nation, actually, from all across the world, into small and large communities, and what are we trying to accomplish here,” Greenstein said. “I would hate to see universities race back to face-to-face instruction because it's the economically right thing to do, because we're putting lives at risk.”

As classes have gone online, some have found a silver lining in new ways to deliver instruction. 

While there are still some kinks that need to be worked out, Jeff Andrade — senior vice president at the McKeon Group, a government relations, congressional affairs, and advocacy consulting firm — found there were only a few areas of instruction across a number of institutions he has worked with that had a hard time adjusting to virtual instruction. 

Andrade specifically cited programs for health professionals and hands-on labs coursework as programs that have struggled to adapt online, but said with some states lifting stay-at-home orders, schools have been able to modify their courses to accommodate social distancing recommendations.

For the upcoming school year, Andrade said institutions should look to reopen in a safe way, pointing to Purdue University as an example, which is among a number of institutions that plans to resume on-campus instruction in August and conclude by Thanksgiving, with plans to finish the semester remotely. The university also plans to implement a testing regime, reduce the number of administrative staff on campus and encourage telework when possible, and set aside rooms available for quarantining, among other conditions laid out in its reopening plan. 

But others said the upcoming semester needed to be approached with more caution. 

“What are we funded for?” Greenstein questioned. “Are we funded to save jobs, or are we funded to educate students? And the answer could be both, but we're not funded to that level.”

These policy implications cover just a few of the issues that will have to be continually addressed as the Department of Education (ED) continues to dole out guidance for the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and Congress begins negotiations on an upcoming aid package.

“These are the kind of policy questions that our state and federal governments have to address themselves,” Greenstein said. “Absent that we're going to have to make really hard choices with a limited number of public dollars that are available.”


Publication Date: 5/21/2020

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