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Almost exactly a year ago, I posted a piece titled “Want to Save Colleges? Save the States!” The argument was pretty much what the title would lead imply: the states have tremendous impact on the operating budgets of most of public higher education, and unlike the federal government, the states (mostly) can’t run operating deficits. They routinely issue bonds to fund capital projects, such as buildings, but they aren’t supposed to do that for ongoing expenses.
It also featured some pretty specific predictions, of which all but one have come true. Hint: the one that missed the mark is the one in parentheses. Other than that, it tracks pretty closely. That’s because the connection between tax revenues and expenditures is pretty tight, at least below the federal level. The feds have the option of deficit spending at scale; nobody else really does.
I bring this up because the COVID relief bill that just passed the Senate, and which is likely to pass the House in its revised form and get signed into law by President Biden, contains $350 billion in relief for state and local governments.
For public higher education, this is a real win.
It’s a limited win, in the sense that the funding is nonrecurring. But the pandemic should be nonrecurring, too, so that makes sense. In my own state, for instance, the state simply skipped one quarter’s payment to colleges last year; that lost revenue had to come out of other things. Backstopping the states to prevent that from happening again will make a real difference.
I see the move as a sign of hope in two ways.
The first is the obvious one: allowing the states to remain solvent will allow them to stop going after colleges’ appropriations. Higher ed is “discretionary” in a sense that K-12 and corrections are not, so it tends to get hit harder when they need to cut something. And it’s hard to build back after it has been cut, because simply restoring the status quo ante looks like a significant percentage increase in any given year. In practice, we’ve had a decades-long history of one step forward, two steps back.
The second is less obvious, but possibly more important. Coming from someone like Biden, who has a long history as a creature of the Washington consensus, such a bold move indicates a new openness to a different way of looking at deficits. I don’t know if he’s conversant in Modern Monetary Theory, but the idea of throwing $1.9 trillion into a single bill is much more damn-the-torpedoes than I would have expected from him. It’s very MMT, whether he knows it or not. Until recently, that kind of thinking only applied to regressive tax cuts. Applying it to desperately needed public services is new, and welcome.
I’m not accustomed to hailing news from Washington, so this caught me a bit off guard. But in a good way.
Here’s hoping we seize the opportunity to do more than just stop the bleeding …
