LAST FIVE YEARS ARE "AS
GOOD AS IT GETS"
IN FUNDING OF HIGHER EDUCATION
|EMBARGOED FOR RELEASE:
CONTACT: Heather Jack
|TUESDAY, JULY 27, 1999
SAN JOSE, CA. -- Although higher education is enjoying prosperous times,
they are not likely to last, Harold A. Hovey, an expert in public finance and president
of State Policy Research, Inc., warns in a report released today by the National
Center for Public Policy and Higher Education.
"The last five years have been about as good as it gets in state funding of
higher education," Hovey writes in a report titled, State Spending for Higher Education in the Next Decade.
State appropriations have increased more than the inflation rate; tuition has been
frozen in some states and reduced in others; new campuses have been built or planned;
and new state scholarship programs have been started.
According to Hovey’s national budget projections, however, "this environment
will not continue." Even without a major economic downturn, Hovey projects,
39 states will experience gaps between the cost of maintaining public services now
in place and the revenues they can expect without tax increases (see Table 1).
State and Local Surplus or Shortfall as a Percent of Baseline Revenues
In Year Eight of Fiscal Projections
On top of this, Hovey projects that, largely due to enrollment increases, state
spending for higher education will have to increase faster than state spending
in other areas -- just to maintain current service levels. On average, state support
of higher education would need to increase by nearly six percent a year, whereas
support for all services would need to increase by about five percent per year, an
"annual average advantage for higher education" of one percent (see Table
2 for a state-by-state breakdown).
Percentage Change in Spending to Maintain Current Services
This chart projects the percentage increase in state spending needed to maintain
The right two columns show the projected increases in state and local spending
needed for all programs and for higher education over the next eight years. The "Annual
Average Advantage for Higher Education" shows the "extra" percentage
growth needed for higher education annually.
Positive numbers in this middle column mean that in order to maintain current
services, these states will need to increase spending for higher education faster
than for other programs. States with negative numbers will be able to maintain current
services by increasing spending.
For most states, maintaining current support for higher education will require
either raising taxes substantially or favoring higher education over competing public
service demands, such as elementary and secondary education, health, welfare, or
prisons. Hovey does not believe either of these possibilities is likely.
"If extraordinarily good times were followed by normal times, it might be possible
for states to make fiscal adjustments in less than a crisis environment," Hovey
writes. "However, extraordinarily good times are usually followed by corrections
in the private economy called recessions. When they occur, states often are caught
in a situation where their budgets are hugely out of balance."
When that happens, states tend to cut higher education budgets, which represent the
largest discretionary spending item in most state budgets. One consequence is steep
tuition increases, according to Patrick M. Callan, President of the National Center
for Public Policy and Higher Education, which commissioned the Hovey report.
"For the past quarter century," Callan stated, "the pattern the states
have followed has been to cut higher education budgets and raise tuition sharply
(or permit colleges to raise tuition) in times of economic hardship.The 39 states
that Hovey projects to encounter gaps between revenues and expenditures are the likely
candidates to repeat this pattern."
The report also finds that in the current environment of generous appropriations
for higher education, governors and legislators have exerted little pressure for
efficiencies or cost containment in public colleges and universities.
"The currently relatively generous increases in state support of higher education
do not reflect changes in patterns and practices in state budgeting," Hovey
concludes."They only reflect the standard responses to extraordinarily strong
fiscal conditions. They will disappear when those fiscal conditions disappear. Both
will disappear soon."
Additional copies of the report are available from the National Center for Public
Policy and Higher Education (fax requests to 408-271-2697 or visit our web site:
The National Center for Public Policy and Higher Education was established in
1998 to promote opportunity, affordability and quality in American higher education.
As an independent, nonprofit, nonpartisan organization, the National Center provides
action-oriented analyses of state and federal policies affecting education beyond
high school. The National Center receives financial support from a consortium of
national philanthropic organizations, and is not affiliated with any institution
of higher education or with any government agency.