Budget problems at public colleges and universities have been published in the press for the past year and a half.  Approximately a year or so ago, I decided to collect articles about the situation and organized them on this blog by state under the title Higher Ed’s Economic Challenges.  As the recession continues to impact the value of residential and commercial real estate (or was it the real estate that impacted the recession?), many states’ tax collections are below the level of three or four years ago. 

Unlike the federal government that is allowed to print money, most state constitutions have a balanced budget requirement.  When taxes decrease, expenditures must decrease as well.  K-12 education and Medicaid are two of the largest mandated expenditures at the state level.  Higher education has never been a mandated expenditure at the state level, so when state budgets have to be cut, higher education has usually been one of the first areas impacted.  Some states in some years increase student tuition rather than cut their higher education expense budgets.

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I recently had the chance to read a research report titled “With Their Whole Lives Ahead of Them,” published by Public Agenda with financial support from the Bill & Melinda Gates Foundation.  The authors of the report surveyed over 600 young adults between the ages of 22 and 30.  The purpose of the survey was to compare the answers of students who dropped out of college to the answers of students who graduated within the three year (for community colleges) or six year (for four-year colleges) standards as measured by the U.S. Department of Education.  Jean Johnson and Jon Rochkind, along with Amber Ott and Samantha DuPont, wanted to validate the reasons why students depart from colleges before graduating and see if the students themselves offered reasons different than many of the recent research studies.

The authors point out that according to the U.S. Department of Education, only 20 percent of community college students graduate within three years and only 40 percent of four year college students graduate within six years.  In fact, only 27 percent of college students attend the traditional residential college that most people envision as the idyllic college environment.  Even more telling of the changes in college student profiles, 45 percent of students attending four year colleges reported working more than 20 hours per week and 60 percent of students attending two year colleges reported working more than 20 hours per week.

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It is hard to have a day go by where there is not at least one article in the major media about the high cost of college.  With the recession and its impact on state and local budgets, tuitions are being increased at many public colleges and universities and some institutions are reducing the number of students attending in order to cut costs for next year.  Unfortunately, these actions are not increasing the access and affordability of higher education in the United States.

While access and affordability of higher education have been stated goals of the Spellings Commission, the National Center for Public Policy and Higher Education (NCPPHE) in its annual Measuring Up reports, President Obama, and others, the recommendations for improving affordability are few and far between.  The Spellings Commission stated that colleges need to think more like entrepreneurs and examine partnerships and distance learning as options to improve access and cost.  Many in traditional higher education panned the Spellings Commission’s recommendations although little was said that had not already been identified by many of the other public policy organizations like NCPPHE, State Higher Education Executive Officers (SHEEO), Western Interstate Commission for Higher Education (WICHE), and The National Center for Higher Education Management Systems (NCHEMS).  This past January, I wrote an article for this blog about a survey of college presidents entitled The Iron Triangle: College Presidents Talk About Costs, Access, and Quality.  I was aghast that during a period of economic downturn, most of the presidents surveyed stated that the only solution to improving access was to provide them with more funding at the federal and state levels.  I wonder how many entrepreneurs have succeeded by waiting for more money to pay for a product rather than designing the product to meet the ability of their customers to pay for it.

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I have had a few weeks to think about President Obama’s Stimulus Act and its impact on higher education.  During the same period of time, I have read the daily headlines covering higher education in The Chronicle of Higher Education, Inside Higher Education, and New Realities in Higher Education.  The news is not good. 

In a typical year, the federal government contributes approximately $20 billion to higher education and the states contribute about $80 billion. At the state level, funding for higher education is behind mandated priorities such as K-12 education and Medicaid.  Many governors and legislatures have relied on the public’s willingness to bear tuition increases and in times of budgetary crisis, have pared back funding to higher education assuming that the colleges can increase tuition to offset the state funding cuts.  Given the fall in real estate values and real estate foreclosures, the unprecedented level of job layoffs at companies reacting to the economic downturn, the lower income taxes paid by fewer people working, lower sales taxes paid by people forced to pare back on their discretionary expenditures; it is inevitable that most of the state budgets have to be reduced this year and next.  Some states like Maryland are using some of the stimulus funds to delay cuts to education.  Other states are unable to use stimulus funds to absorb all of the declines in tax revenues and are cutting higher education before K-12.  Among the more notable state cuts that I have read about include:

• Tennessee – $180 million in cuts over two years
• North Carolina – $175 million in cuts this year and $191 million next year
• Washington – $500 million in cuts
• Arizona – $388 million in cuts
• California – $1.1 billion in cuts
• Louisiana – $219 million in cuts

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Last night, President Obama delivered an address to the nation.  He focused on the state of the economy and his administration’s plans for the economic future of our country focusing on energy, healthcare, and education.  I thought I would examine his plans for education as it relates to higher education and compare them to the public policy initiatives and thought pieces that have previously been published.

President Obama’s speech led off with a discussion of the global economy and the fact that “the most valuable skill you can sell is your knowledge.”  One of the first persons to stimulate a national discussion on this topic was author Thomas Friedman with the publication of his book, The World is Flat, in 2005.  Friedman cogently makes the point that technology has opened up the ability for companies to effectively employ engineers from India and China while conducting their business from the U.S.  Friedman also discusses the higher rates of education in countries with former third world status where it is recognized that the ticket to financial success is a good education.

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As part of my ongoing review of some of the literature and topics around the affordability of a college education, I happened to find a publication from the National Center for Public Policy and Higher Education entitled The Iron Triangle: College Presidents Talk about Costs, Access, and Quality.  Prepared by John Immerwahr, Jean Johnson, and Paul Gasbarra, the report is about a unique piece of research in which 30 college and university presidents were interviewed for their perspectives on the three major issues of cost, access, and quality of higher education (and, the corners forming the Iron Triangle).

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