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 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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