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Joe college pays the tab.

The nation's public colleges and universities have not escaped the states' budget squeeze. As a result, students are being hit with higher tuition and fees.

Jennifer Wolff, a senior, is financing her own education at Metropolitan State College of Denver. Frequent tuition increases have made her anxious to complete requirements for her bachelor's degree.

"I thought it would be easier to put myself through school," she says. "I never imagined it would be this difficult. I have two jobs, and last fall I had to borrow money from my grandmother. There's no way I could afford to go through another semester if I had to."

Jennifer is one of many students nationally who is feeling the pinch of rising tuition and fees. The principal reason for the increases? Reductions in state funding for higher education that are more severe than ever before.

Over the long run, state support for higher education has kept ahead of inflation, says Edward R. Hines of the Center for Higher Education at Illinois State University. During the 1980s, however, growth rates in state funding began to slow. In FY 1991, they stalled: The aggregate funding level nationally was $39.6 billion, an increase of only 1.4 percent over FY 1990. Funding stayed flat in FY 1992. In FY 1993 appropriations fell to $39.4 billion, $200 million less than two years earlier. Making matters worse, these amounts don't reflect the effects of inflation.

The national data are skewed by 10 big states that in FY 1993 accounted for more than half the total appropriated to higher education. These "megastates" are categorized by the Center for Higher Education as highly populated and industrialized with many colleges and universities and higher education appropriations in excess of $1 billion annually Their appropriations have a substantial impact on the national average. In recent years, growth in funding in the megastates has tended to bring the overall average down, overshadowing any gains higher education has made in smaller states.

Despite gains in a few small states, funding for higher ed is on the skids because most states are under enormous budget pressure. Not only is there less money to go around, factors outside of legislative control are eating up more of the budget. Especially troublesome are federal mandates, court-imposed mandates and spiraling cost increases in Medicaid, corrections and welfare, which monopolize most of the budget.

"The big obstacle for higher education funding is Medicaid," says Colorado Senator Mike Bird. "In 1980 it was 7 percent of Colorado's budget. Now, it's almost 20 percent of the budget and has crowded out other priorities." This scenario isn't unique to Colorado.

As a result, higher education has been squeezed. "Higher education has been the balance wheel in state budgets," says James Mingle, executive director of State Higher Education Executive Officials.

As recently as FY 1989, higher education accounted for 14 percent of the states' total general fund budgets. By FY 1993, these appropriations accounted for only 12.9 percent.

"The long-term trend is that higher education appropriations are becoming a smaller and smaller portion of state budgets," says Mingle. "This fact was obscured in the 1980s by state economic growth, but has been more obvious with the recent recession."

General fund appropriations aren't the only source of revenue for higher education, however. In some states, community colleges receive funds from local property taxes. Student tuition and fees are also part of the resource formula as are grants, contracts and private contributions.

All these sources must be taken into account to measure the total funds available. But because state general funds are the largest single source of support, they stand out as the best measure of what's happening to higher ed's finances.

Competition for state general funds is nothing new, but the battles are uglier as resources become scarcer.

"Everybody's fighting over fewer dollars," says David Longanecker, former executive director of the Colorado Commission on Higher Education. "In any environment where there is simply not enough to go around, people don't want to work together to ration resources. They want to work separately to create advantaged positions. It's not pretty."

Some observers feel that higher education is at a disadvantage because funding decisions for colleges and universities differ from those for other parts of the budget. This perceived difference stems from the ability of higher education institutions to raise tuition and fees.

"In higher education there is the feeling that tuition is out there as a last resort," says Arkansas Senator David Malone.

Something else that may be affecting higher education funding, however, is a growing feeling that colleges and universities aren't accountable to state legislatures. Many legislators are frustrated that higher education officials are less able or willing to explain, in terms that make sense, how they use their funds.

"This is one of the reasons that higher education is less successful than it used to be in squeezing blood out of the state turnip," says Ronald K. Snell, a fiscal expert for the National Conference of State Legislatures.

Whatever affects it, the fact remains that state appropriations for higher education have declined in recent years, and this has some important implications. Colleges and universities must raise revenues from other sources or cut their expenses.

According to James B. Appleberry, president of the American Association of State Colleges and Universities, the response has depended on the size and length of time of state reductions. "For the first couple of years of the recession, most institutions increased tuition to manage reduced state funding. Now, a number of additional actions are being taken."

These include holding open or eliminating administrative and support positions, holding open temporary or part-time faculty positions, cutting back on library and other acquisitions, limiting enrollment and cutting programs.

In some cases, cutbacks have been severe. "The recent program cuts are the most dramatic I've ever seen, and I've been in the education field over 30 years," notes Appleberry.

But to date, the most widespread tactic has been to increase tuition and fees. According to the College Board, tuition at public colleges and universities rose at double-digit rates for the second year in a row, increasing three times as fast as inflation. In 1992, undergraduate tuition and fees at public four-year institutions averaged $2,315--10 percent more than 1991. At public two-year colleges, tuition and fees also increased 10 percent to an average of $1,292. These hikes followed 1991's increases of 12 percent and 13 percent, respectively.

Tuition had been rising steadily, however, so the question becomes how much of the recent increases are attributable to state fiscal problems. Although precise data are unavailable, Harold A. Hovey, editor of State Policy Reports, projects that state fiscal conditions and the resulting reductions in state funding account for 57 percent of recent tuition increases.

These increases have caused higher education officials and others to worry that spiraling costs could restrict access, especially for lower-income students.

"We're all concerned about the heavy increases in tuition," says C. Peter Magrath, president of the National Association of State Universities and Land-Grant Colleges.

"We need the public to understand that if tuition increases get too burdensome, there is a real danger that access and opportunity will be cut back," Longanecker adds. "What we will lose first is access to the system. Many of our prospective students won't be able to get in--and we know who they are: the most disadvantaged folks."

If tuition rises without a corresponding increase in ability to pay, either through higher incomes or financial aid, prospective students may be shut out. There also is the "sticker shock" phenomenon where prospective students are scared away by the cost of attending a college or university. This appears to have happened in California. Even though the state ranks below the national average in attendance costs, tuition and fees have gone up substantially and enrollments are down.

Student inability or unwillingness to pay higher tuition and fees isn't the only restriction. Some institutions are capping enrollments in order to stretch their limited funds. "The question is whether to try and do more with less or cut back on enrollment," says Mingle. He notes that in today's fiscal environment most institutions are probably doing both.

Many states have attempted to address the problems of higher tuition by increasing state funds for student aid. According to the National Association of State Scholarship and Grant Programs, 47 states and the District of Columbia increased appropriations for student aid in FY 1993 by about 8 percent above FY 1992. While this news is encouraging, recent increases in financial aid usually don't offset tuition costs. In recent years, only 10 states had large enough annual increases in student aid support to keep up with the growth in college costs, which averaged about 8 percent a year.

Because financial aid isn't keeping pace with costs, another option for students is to seek more loans. But this alternative creates problems, too. "Students with high debt burdens will be unwilling to take on more debt to go to graduate or professional schools," says Appleberry. "The effect of this is to |dumb-down' America, which will have a devastating effect on our country."

Not everyone is convinced that students are getting a bad deal if they have to pay for more of their own education. Kent Halstead, director of Research Associates, a company that specializes in higher education finance research, says public college tuition remains a bargain despite sharp increases. According to his analysis, public-college students paid about 28 percent of full instructional costs in 1991-92, up from 21 percent in the late 1970s. "Where else can you buy anything that provides such immediate direct benefits to you, as an individual, and pay less than one-third of the cost?" he asks.

Some middle-class taxpayers don't see it that way. Increasingly, they are faced with education costs higher than they can afford or enrollment caps that keep their children out of the state school of their choice. In either case, there is political fallout as middle-class students are prevented from going to college. "Rightly or wrongly, some feel that government is doing to higher education what it has done to other areas--taking away the value of state government from the middle class," says Hovey.

One result of this middle-class squeeze is that some students and their families will have to pay a larger share of the costs. Some public finance experts don't think that's such a bad idea. They argue that states should follow a high tuition, high financial aid policy even if state fiscal conditions aren't a problem-because family incomes of students often are higher than the average income in the state. Low tuition means big subsidies for all students, which represents taxing the poor to give to the rich.

Although tuition and fee increases have been the most common revenue-raising measure, colleges and universities have pursued other options, such as charging fees for public services and seeking private support. Others have become particularly creative in their search for funds.

"Some higher education institutions have become entrepreneurial by moving into quasi-commercial relationships with private business and corporations," says Magrath.

One example is Pennsylvania State University's arrangement with Pepsi. The university got the funds for several new facilities by agreeing to give Pepsi certain advertising and marketing rights on 21 Penn State campuses.

"This approach is not without controversy," Magrath notes.

Many colleges and universities have also had to trim their expenditures. That has meant staff reductions, fewer class offerings and fewer student services. These actions are being taken at a time when student demographics are shifting.

"Students are needing additional services at the same time institutions are tempted to cut back on them. These services include counseling, advising and campus-based aid to assist minority students," says Hines.

"Higher education officials are taking a hard look at programs and are trying to determine how colleges and universities can become leaner and meaner," Hines adds.

In a period of retrenchment in state government this may be positive. "It's good for organizations to periodically go through a shakeout of the budget because it encourages them to root out waste that builds up over periods of budget expansion," says Steven D. Gold, director of the Center for the Study of the States at the State University of New York in Albany.

"But universities that have had their budgets really cut run the risk of having their best faculty leave," he warns.

This leads to the question of quality of services. "You can't continue to cut without diminishing service and access and eroding quality. There's a real price to pay with high demand, high need and reduced funding," says Magrath.

Continuing lean state budgets dim the outlook for higher education funding. Although legislators, academic officials and public finance experts often differ, they agree that the future of higher education funding depends on the states' ability to constrain the big-ticket items that are driving expenditures out of control.

"If and when state finances reach an even keel, if states stabilize Medicaid and if federal aid doesn't drop substantially, I would not be surprised to see higher education get increases in line with general fund increases," says Hovey, who doesn't see the possibility of a turnaround until FY 1995.

Gold isn't as optimistic. "Higher education is going to continue to go through the fiscal wringer at least until we get to a year that starts with a 2."

Students Aren't What They Used to Be

An important reason for higher education financial woes is state budget cutbacks caused by tight economies. But another important factor also comes into play: changing demographics.

On the economic side, state appropriations are lagging behind inflation and, for the first time, declining in absolute terms in many states. Higher education is showing two-year decreases in state support for the first time in history. Some of the implications of these changes include:

* Tuition levels rising rapidly without equivalent increases in student financial aid.

* Students shouldering an increased financial burden resulting in rising student indebtedness, longer time to get a degree and more frequent dropouts.

* Colleges and universities responding to financial imperatives by increasing class sizes, reducing course offerings and capping enrollments.

* Families no longer guaranteed access to the public institutions their tax funds support.

These economic pressures are occurring at a time when higher education is being called upon to adapt to important social changes, including:

* Needs to educate a growing proportion of youths and adults in order to meet a changing society and the challenge of global competition.

* Steadily changing clientele, including more minority students, more under-prepared students and more older and part-time students.

* Pressures to cope with a growing faculty shortage.

* Curricular changes necessary to match rapidly evolving technology.

Taken together, these forces have created an interesting and timely debate in the states as policymakers re-evaluate the role of higher education; the value of access, equity and accountability; and the ways in which it is funded.

Pay As You Go: Tuition Increases in the 1980s

How dependent is higher education on tuition? Very. That dependence grew fairly steadily throughout the entire decade of the 1980s.

Total (50-state) appropriations doubled over the decade from $18.3 billion for FY 1980 to $37.9 billion for FY 1990. Over the same period, revenue from tuition tripled from $3.6 billion to $10.8 billion. Tuition revenue equalled about 23 percent of state appropriations for school year 1980, and rose to 28.5 percent in school year 1990.

These figures do not include appropriations and tuition revenue for school years after FY 1990 when appropriations have fallen off and dependence on tuition presumably has grown. But they suggest two points: There has been a long-term trend toward increased dependence on tuition, and that dependence is linked with recessions.

The long-term increase shows up clearly in the graph. The sharpest increase occurred from fiscal years 1980 to 1984 to a point that was almost as high as dependence in 1989 and 1990. But economic recovery brought a surge in state tax collections in 1984 and 1985, making possible a jump in state appropriations for higher education and smaller increases in tuition. Appropriation growth began to fall off at the end of the decade, and dependence on tuition increased.

These events paralleled national economic conditions over the decade. A pair of back-to-back recessions hit the country from early 1980 to late 1982 followed by a buoyant recovery. Appropriations for higher education showed very little growth for the 1982-83 school year and only slight improvement for 1983-84, but leaped forward for 1984-85.

This may have bearing on the present. Pressures on state budgets from Medicaid, corrections and K-12 education have certainly helped restrain higher education funding over the past three years. But the biggest influence has, without question, been the recession that began in 1990 and from which the nation is only slowly recovering. Now that recovery seems to be strengthening and state revenues seem to be returning to predictable growth, the fiscal condition of higher education may improve as it did in the wake of the last recession.

Funding Varies Greatly

Seven states--Nevada, Arkansas, Soregon, South Dakota, Utah, North Dakota and Oklahoma--increased funding for higher education by double-digit percentages in the last two years, according to the Center for Higher Education. New Jersey was close behind with a two-year increase of 9.96 percent.

On the other end of the spectrum, 19 states had declines over this period with double-digit reductions in Virginia, California and Massachusetts. Of the remaining 23 states, the two-year changes ranged from 1.03 percent in Alabama to 8.98 percent in Hawaii. The inflation rate was 7.6 percent during this time.

Higher Ed Enrollment: The Next 10 Years

Enrollment is central to consideration of public higher education finance. More students mean more money from tuition and fees. But, since on average students and their families cover less than one-third of the cost of their education, more students add to the pressure on college and university finances.

Since more students probably mean that more parents and more voters are concerned with the issue of appropriations for higher education, enrollment growth can pressure legislatures from two directions--from the institutions themselves and from the growing population hit with bills for tuition and fees.

Enrollment forecasts from the U.S. Department of Education in the graph below are for total enrollment in public four-year institutions and are full-time-equivalent figures for full-time and part-time students.

The graph shows actual enrollments through school year 1989-90, after which projection lines diverge for high, middle and low forecasts. The low forecast is for growth of 9.1 percent by the year 2002; the middle forecast predicts 14.8 percent growth; and the highest forecast is for 24.8 percent.
COPYRIGHT 1993 National Conference of State Legislatures
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:includes related article
Author:Eckl, Corina
Publication:State Legislatures
Date:Sep 1, 1993
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