||Recent Experience: The Recession of the Early 1990s
For additional insights into the political and fiscal dimensions of state finance, we need look no further than the national recession of the early 1990s.16 At least five generalizations are of significance:
Will these generalizations from the last recession be useful in the current situation? I do not know, but I do know that when higher education has to face the impact of a recession, it will do so under different conditions and policies than it did in the early 1990s.
- A national recession affects each state differently: In the early 1990s, the recession was very severe in the Northeast and in California, but it had relatively little impact in many other states.
- Although a national recession may be short, individual states may face financial stress for much longer periods.
- During a national recession, individual states may face financial stress for a number of other reasons. Among such factors in the early 1990s: rising Medicaid costs, new federal mandates, higher public school enrollments, court rulings, voter initiatives, inelastic tax systems, and corrections policy.
- When states face fiscal constraints, the impacts on state services vary across states, within states, and among service sectors.
When revenue shortfalls are allocated among state services, higher education is likely to be required to absorb proportionately larger cuts than other sectors. When this happens, the state and higher education institutions are likely to shift shortfalls to students and their families by raising tuition.
16 My discussion of the early 1990s recession draws heavily on two studies: Gold, The Fiscal Crisis of the States and Patrick M. Callan and Joni E. Finney, eds., Public and Private Financing of Higher Education: Shaping Public Policy for the Future (Washington, D.C.: American Council on Education/Oryx Press, 1997).