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    Introduction

    Chapter 1: Five National Trends

    Chapter 2: State Policies for Affordable Higher Education

    Chapter 3: Questions and Answers about Losing Ground

    Chapter 4: 2002 Update for the States: "A Dire Situation"

    Chapter 5: Public Concerns about the Price of College

    Chapter 6: Taking Care of the Middle Class

    Chapter 7: Profiles of American College Students

    Appendix: State Trends

    Acknowledgments

    BACK

  • CHAPTER 4: 2002 UPDATE FOR THE STATES: "A DIRE SITUATION"

    State Budget Shortfalls Trigger Escalating Tuition

    By William Trombley

    Higher tuition, more fees, fewer and larger classes-these changes await the students who will enroll at many of the nation's 3,500 colleges and universities next fall.

    The national recession, made worse by the September 11 terrorist attacks, has forced almost every state to make sharp budget cuts. As this report is written, governors and legislatures in some states are still wrestling with the details, but it is clear there will be significant cuts in support for public higher education and, as a result, there will be substantial increases in tuitions.

    If American families are anxious about their ability to pay for their children's college educations, as John Immerwahr suggests in chapter 5 of this report, they have every reason to be.

    Scott Pattison, executive director of the National Association of State Budget Officers, said at least 41 states face budget deficits, ranging from a few hundred thousand dollars in small states to California's astronomical $15 billion. In the last national economic downturn, a decade ago, only half as many states were facing red ink. This is "a dire situation," Pattison said.

    Nor is it likely to improve any time soon. Most campus and state officials interviewed for this article expect 2003 to be worse than this year. Even if the national economy recovers, it will be 12 to 18 months before the benefits are felt in the states, they believe.

    Some private colleges and universities also face serious financial problems. Endowments have been hurt by the sluggish stock market, corporate giving has declined, and high tuition rates have scared off many students and their families.

    But it is at the public institutions, which enroll 83% of the nation's college students, that budget cuts, and the price increases that inevitably follow, have gained the most attention.

    Faced with rising medical care costs, increased spending for public schools, welfare, courts, and prisons, and now asked to pay for "homeland security," governors and legislatures are hard-pressed to find the money to make up budget shortfalls. The problem is made worse by antiquated tax structures in most states. "We don't tax the things that people are buying," said David Longanecker, executive director of the Western Interstate Commission for Higher Education (WICHE).

    Governors and legislatures could raise taxes, of course, but few have been willing to do so. Instead, they look for places to cut the budget, and their eyes quickly fall on higher education, which is the largest discretionary spending item in most state budgets.

    Some of the cuts have been stunning. Facing a projected two-year budget deficit of about $1 billion, the Virginia legislature whacked $290 million, or 12.5%, from the higher education appropriation. The state's most prestigious institutions-the University of Virginia, Virginia Tech, George Mason University, and the College of William and Mary-received the biggest reductions.

    The schools have responded with substantial undergraduate tuition increases-16.5% at George Mason, 9% at Virginia Tech, and 8.8% at the University of Virginia.

    In addition, the University of Virginia will step up efforts to increase its $2 billion endowment and probably will privatize more of the university. The business and law schools already have largely divorced themselves from state support, setting their own tuition and faculty salary levels and raising their own money for new buildings.

    "Bigger classes and fewer classes are in the offing" as a result of the budget cuts, a spokesman for the College of William and Mary said.

    When the Wisconsin legislature, looking for ways to bridge an estimated two-year revenue gap of $1.1 billion, proposed slicing 12% from the University of Wisconsin system's budget, it triggered a dispute that made its way into the pages of The New York Times.

    The university's Board of Regents reacted to the proposal by suspending undergraduate admissions, saying they could not continue to accept students because they were not sure there would be enough money to run the system's 26 campuses next year. This left more than 11,000 applications in limbo. Angry Republican legislators then proposed $44 million in additional cuts, prompting the university to impose a hiring freeze.

    Assured by Republican Governor Scott McCallum and by Democratic lawmakers that the additional cuts would not be made, the Board of Regents ended the freeze on admissions but retained the hiring ban.

    Massachusetts reduced its higher education spending in the current year (2001-02) by 6.2%, the largest percentage cut in the nation, according to the annual "Grapevine" report published by the Center for the Study of Education Policy, at Illinois State University. More cuts are planned for next year.

    The state's campuses have reacted in small ways and large. At one community college, staff members were told to wear heavy sweaters because thermostats would be lowered to save money. At the University of Massachusetts at Amherst, The Chronicle of Higher Education reported, 95 people have been laid off (none of them faculty) as part of an effort to cope with a $15 million shortfall in this year's campus budget. U Mass also will drop seven of 29 varsity teams, for a savings of $1.1 million. However, the university will continue to field a football team that loses about $2.5 million a year.

    As soon as he was sworn in as New Jersey's new governor last January, Democrat James McGreevey ordered an immediate 5% reduction in higher education spending, as part of an effort to eliminate a budget deficit that could reach more than $5 billion. In Iowa, $86 million in budget cuts have led the state's three public universities to increase tuition by 19%, in addition to cutting staff and programs, postponing needed repairs, and encouraging early retirements.

    A few small states have escaped the budget axe. The North Dakota legislature approved a two-year spending increase of 8.5% for higher education. "Historically, North Dakota has been counter-cyclical to national economic trends," explained Laura Glatt, vice chancellor for administrative affairs in the state's university system. "Also, we have a long history of conservative budgeting."

    Among states with large populations, only Texas seems to have been spared. The legislature, which meets every other year, has increased higher education spending by 13.9% for the biennium, and tuition and fee increases are expected to be modest. "Our economy hasn't taken such a nosedive" as state economies have elsewhere, said Commissioner of Higher Education Don W. Brown, "and our Controller and legislative leaders have been generally quite conservative" in their economic forecasts.

    Even governors known for their strong support of higher education have been forced to make cuts.

    During the six years that Governor Paul Patton has been in office in Kentucky, spending on public higher education in that state has increased by more than 40%. Patton has succeeded in persuading a sometimes-reluctant legislature that quality higher education is the key to Kentucky's economic future. But in this year's budget, the state faced a shortfall of more than $500 million, with further deficits predicted for at least the next two years. Patton reluctantly agreed to a 2% higher education cut.

    As the bleak economic picture emerged in state after state, campuses at first responded with traditional budget-cutting measures. They imposed hiring freezes, postponed purchases of new equipment, reduced library hours, and curtailed travel. But as winter turned to spring, and the fiscal condition of many states went from bad to worse, more drastic measures were taken. Classes were dropped, and many remaining classes grew larger. In some cases, majors were eliminated. Few new academic programs were approved. Part-time faculty members were dismissed, and full-time professors were asked to do more teaching. Faculty and staff salary increases were reduced or eliminated. Intercollegiate teams that generated little revenue were dropped.

    Some higher education leaders believe the cumulative effect of these actions will be to erode the quality of public institutions. They fear the development of a "two-tier" higher education system, in which even highly regarded public universities like the University of Michigan or the University of California at Berkeley will be unable to compete with wealthy private schools like Harvard and Stanford for the best professors and the brightest students.

    "I don't think there's any question that 20 or 25 years ago the feeling around the country was that the big state universities were unstoppable, and the privates would suffer as a result," said David W. Breneman, dean of the Curry School of Education at the University of Virginia. "Now all that has changed, and there is significant slippage between the top publics and the top privates, especially in faculty salaries."

    Administrators at most public colleges and universities claim they have trimmed costs as much as possible and are left with only three ways to deal with sharp budget cuts: privatize, raise tuition and fees, or limit enrollment.

    Only a few states, among them Iowa and Wisconsin, have talked openly about reducing access. "If you spend less on education, you're going to get less of it," said President Robert Koob of the University of Northern Iowa. "So the question is, what does 'less of it' mean? Poorer quality or fewer students? You take your choice."

    Said Katherine Lyall, president of the University of Wisconsin system, "We either have to turn to tuition or downsize our enrollment. We're really at a fork in the road."

    Many higher education observers believe some states already are moving quietly to curtail enrollment-by moving up application deadlines, tightening transfer requirements, and using a variety of other bureaucratic devices. This is how California limited enrollment at public campuses by about 200,000 during the last major recession, a decade ago.

    "I'd be surprised if other states don't copy what California did then," said Donald E. Heller, associate professor of higher education at Pennsylvania State University.

    But Sandra Baum, chair of the economics department at Skidmore College, disagrees. "Public perception has changed," she said. "There is wider understanding of the need for a college degree. I don't think there will be the same kind of acceptance of reducing enrollment" as there was ten years ago.

    In most states, public campuses have sought the usual remedy for budget cuts-higher tuition. In the current academic year (2001-02), tuition increases at public colleges and universities averaged 7.7%, while increases at private schools averaged 5.5%. Both figures were well above the national inflation rate of 2.6%, and both are expected to rise next year.

    Under pressure from governors and legislatures, most public institutions are keeping tuition and mandatory fee increases under 10%, but there are some startling exceptions. When Clemson University, South Carolina's land-grant institution, raised tuition by 42%, there were such howls of protest that the university agreed to rebate $600 to each student, reducing the increase to 27%. The University of North Carolina, Chapel Hill, and North Carolina State both plan 21% hikes. In the state of Washington, the legislature has agreed to increases of up to 16% at the University of Washington and at Washington State University, up to 14% at other four-year schools, and up to 12% at community and technical colleges.

    "Public policy is clearly shifting," said Warren Madden, vice president for business and finance at Iowa State University, "from low tuition to expecting students to provide for a larger share."

    Still, in some states, big tuition increases have encountered stiff resistance.

    The University of Illinois, seeking to close a $43 million revenue gap, has proposed raising tuition by 10% next year, on top of a two-year, 37% increase for incoming freshmen and other new students. This would bring total charges (tuition and mandatory fees) to $6,736 at the university's Urbana-Champaign campus, $6,520 at the University of Illinois, Chicago.

    The Chicago Tribune responded with an irate editorial. "One might think trustees would start asking difficult questions about where else in the system's $2.6 billion budget they can come up with at least some of that money," the editorial said. "The trustees need to start questioning university bureaucracy, freebie giveaways and other traditions that can no longer be afforded." However, there are no signs that the trustees or university administrators plan to heed the Tribune's advice. President James Stukel told a Tribune reporter, "I've never had a complaint (from a parent) that tuition is too high."

    Late last year, Central Michigan University, anticipating a 5% to 10% reduction in state funding, announced a 28% tuition increase for the 2002-03 academic year, triggering a storm of protest across the state. After weeks of negotiations, Governor John Engler agreed not to cut higher education spending, in exchange for a promise that the 15 public universities would limit tuition increases to 8.5%.

    Ohio, suffering from "rust belt" problems that have helped to create a $1.5 billion budget deficit, has slashed $235 million from the last three higher education budgets. To recover some of the lost revenue, Ohio State University officials proposed increasing next year's tuition by 35% for entering freshmen and other new students, and 9% for everyone else. Ohio University sought a 19.5% hike for new students. Republican Governor Bob Taft objected to such large sums and threatened to cap tuition increases at 10%. "Ohio's universities are going through a difficult time," Taft said, "but Ohio's families also are struggling through this national economic downturn." In a compromise, Ohio State will be allowed to increase tuition by 19.5% for new students, 9% for everyone else. The state's other 12 public universities have agreed to hold tuition increases below 10%.

    All of these tuition and fee increases will cause more students to borrow more money to pay for college. This year, 58% of all student financial aid was in the form of loans, the College Board reported, and borrowing is expected to increase next year. A recent State Public Interest Research Groups' report said average student debt has doubled in the past eight years-to $16,928. The report called this level of debt "unmanageable.

    Only a few states plan to increase their need-based financial aid programs to account for higher prices. Some states are even considering scaling back merit-based aid programs.

    "Access is at risk," warned David Longanecker, WICHE's executive director. "Tuitions will have to go up-the budget cuts require it-but many states have inadequate, need-based financial aid programs, or no programs at all, which means that many low-income students will be left out."

    William Trombley is senior editor at the National Center for Public Policy and Higher Education.