Home Trends in Higher Education The Recession, the Stimulus Act, and Higher Education Policy

The Recession, the Stimulus Act, and Higher Education Policy

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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

Public institutions are not the only ones tightening their belts.  Faced with endowment values that have plummeted due to the global stock markets declining in value by as much as 40 percent, private universities have implemented staff reduction plans as well.  The most notable of these was the plan that Harvard announced in February.  Most private institutions are not as financially secure as Harvard, and many have announced staff reductions, wage freezes, hiring freezes, etc., in order to prepare for reduced earnings on their endowment as well as lower charitable contributions. 

Meanwhile, families who find their college savings investments diminished by 40 percent or more due to lower stock values and interest rates are encouraging their children to apply to public four year and two year colleges resulting in higher application levels with fewer available spaces.  Several state institutions have announced that they will admit more out-of-state students in 2009-2010 in order to increase the tuition revenues paid to the institution.  The FAFSA applications for financial aid are up 20 percent over a year ago through February according to the National Association of Student Financial Aid AdministratorsThe Princeton Review released a survey last week of parents and students and the number who are considering a more affordable school have increased by more than a third.  Because of these concerns of families about affordability, several private institutions have announced that they have admitted more applicants than usual as they are hedging their bets on whether or not students choose to attend more reasonably priced public institutions next year.

All of this points to a crisis in the funding of higher education.  The Spellings Commission, the Measuring Up reports, and numerous papers published by other policy commissions indicate that America has fallen behind on the percentage of working adults who hold a college degree and that America will need an additional 15-16 million more college degree holders by 2025 in order to meet President Obama’s goal of returning America to its position of pre-eminence in the percentage of adults with college degrees.  The Measuring Up 2008 report indicates that a college education is unaffordable for those in the lowest quintiles of household income.  Other data indicates that the lower income population of the United States is not successful in completing or even attending college.  Affordability and access were two of the four tenets of the Spellings Commission.  The National Center for Public Policy and Higher Education measures preparation, participation, affordability, completion, benefits, and learning for each of the states in their Measuring Up reports.  Unfortunately, California is the only state with a passing grade on affordability.

In the last 50 years, states have funded the majority of the costs of higher education.  Given the importance of an educated citizenry in our quest for global competitiveness in the 21st century, we need to examine whether or not the current system is working.  Increasing the amount of Pell Grants available to low income students will not solve this problem.  If the President were to create a National Commission on the Future of Higher Education that could bring together representatives of students and families, policy organizations, the state governors and legislatures, and Congress, a meaningful dialogue could be established to address the most fundamental obstacles to the future of higher education.  The problems are systemic, the solution is not nigh, and many different factions have to align.  The major higher education initiatives at the federal level; the Morrill Land Grant Act of 1862, the G.I. Bill of 1944, and the National Defense Education Act of 1958; spurred higher education and the country to action.  Perhaps President Obama’s stimulus package and its shortcomings in relation to higher education, and the economic crisis facing higher education and our nation, will be the impetus for another call to action.

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Wally Boston Dr. Wallace E. Boston was appointed President and Chief Executive Officer of American Public University System (APUS) and its parent company, American Public Education, Inc. (APEI) in July 2004. He joined APUS as its Executive Vice President and Chief Financial Officer in 2002. In September 2019, Dr. Boston retired as CEO of APEI and retired as APUS President in August 2020. Dr. Boston guided APUS through its successful initial accreditation with the Higher Learning Commission of the North Central Association in 2006 and ten-year reaccreditation in 2011. In November 2007, he led APEI to an initial public offering on the NASDAQ Exchange. For four years from 2009 through 2012, APEI was ranked in Forbes' Top 10 list of America's Best Small Public Companies. During his tenure as president, APUS grew to over 85,000 students, 200 degree and certificate programs, and approximately 100,000 alumni. While serving as APEI CEO and APUS President, Dr. Boston was a board member of APEI, APUS, Hondros College of Nursing, and Fidelis, Inc. Dr. Boston continues to serve as a member of the Board of Advisors of the National Institute for Learning Outcomes Assessment (NILOA), a member of the Board of Overseers of the University of Pennsylvania’s Graduate School of Education, and as a member of the board of New Horizons Worldwide. He has authored and co-authored papers on the topic of online post-secondary student retention, and is a frequent speaker on the impact of technology on higher education. Dr. Boston is a past Treasurer of the Board of Trustees of the McDonogh School, a private K-12 school in Baltimore. In his career prior to APEI and APUS, Dr. Boston served as either CFO, COO, or CEO of Meridian Healthcare, Manor Healthcare, Neighborcare Pharmacies, and Sun Healthcare Group. Dr. Boston is a Certified Public Accountant, Certified Management Accountant, and Chartered Global Management Accountant. He earned an A.B. degree in History from Duke University, an MBA in Marketing and Accounting from Tulane University’s Freeman School of Business Administration, and a Doctorate in Higher Education Management from the University of Pennsylvania’s Graduate School of Education. In 2008, the Board of Trustees of APUS awarded him a Doctorate in Business Administration, honoris causa, and, in April 2017, also bestowed him with the title President Emeritus. In August 2020, the Board of Trustees of APUS appointed him Trustee Emeritus. In November 2020, the Board of Trustees announced that the APUS School of Business would be renamed the Dr. Wallace E Boston School of Business in recognition of Dr. Boston's service to the university. Dr. Boston lives with his family in Austin, Texas.

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