Sorting Out CARES

This is a very rough, first-impression attempt to sort through the implications of the CARES legislation (the stimulus) for community colleges. I reserve the right to rescind some or all of it as the dust settles or circumstances change.

There’s some obvious good news for the sector. Higher ed is getting some direct support, based largely on the percentage of Pell-recipient students at a given college: each Pell student counts three times as much as a non-Pell student. Students who were entirely online prior to the emergency don’t count, which is probably an attempt to minimize the share of aid going to for-profits. (Community colleges often have plenty of online classes, but most of the students who take them also take on-site classes at the same time. Purely online students are the exception here.) There’s also some new support for Title III and Title V.

Apparently, the majority of the money going to any given college has to be earmarked for direct emergency aid to students. In Brookdale’s case, for instance, the total dollar figure that the AACC calculated is slightly over $6 million, which means that the actual amount going into the operating budget should be around $3 million. For a sense of scale, the current operating budget is about $83 million per year, so a stimulus package with a jaw-dropping headline number winds up as less than a 4 percent increase in our operating aid.

It’s absolutely welcome, especially given the unbudgeted expenses the virus has caused. (For example, we just bought 400 laptops to lend out to students who otherwise couldn’t get online, and we had to buy a collegewide site license for Zoom.) Assuming we’re able to put together the rain-check system I referenced last week, we’ll have some students in classes that require a physical presence come back in late summer or fall to finish what they started. They’ve already paid for the class, so we won’t charge them again, but the employees who teach and support the makeup classes will need to be paid for that. That’s cost without revenue, which is where stimulus money is ideal.

But it isn’t as rosy as that. CARES officially comes with a “maintenance of effort” requirement, which is the term given to a rule that requires states not to use federal funding as an excuse to cut their own. But in this case, the MOE has a gaping hole in it that renders it more of a suggestion than a rule: it allows states to skirt the requirement if state tax revenues come in lower than expected.

It’s a pandemic. Nearly the entire retail sector is frozen. What do you think will happen with sales tax revenue?

In my own state, the governor has already frozen $9.7 million of operating aid to community colleges this fiscal year. (Nerdy but important: the state fiscal year runs from July to June, but the federal fiscal year runs from October to September. That misalignment leads to some misunderstandings when it comes to fiscal allocations.) It has postponed the income tax deadline until July, after the start of the new state fiscal year. I would be surprised if the current rescission/freeze/cut was the last.

As toothless as it is, the MOE at least exists at the state level. As far as I know, it does not apply to county or local governments at all. (I’d be happy to be proved wrong on that.) In many places, including my own, county funding is a larger portion of the budget than state funding.

Historically, the saving grace for community colleges in recessions has been that enrollments in this sector run counter to economic cycles. Generally, when the economy is hot, our enrollments go down; when the economy tanks, our enrollments go up. The short explanation is changes in opportunity cost: when we’re competing with paid work, we lose, but when we’re competing with sitting on the couch, we win. Especially with financial aid and low tuition, college can be an excellent place for many people to ride out recessions. That happened with a vengeance in 2008-09, when the Great Recession hit; in the fall of 2009, enrollment where I worked jumped 13 percent over the previous year. That brought tuition revenue that helped offset state cuts.

I’m hoping that something similar happens this time. But this is such a different kind of recession that it’s hard to say. The previous several recessions, including the Great Recession, were part of the business cycle. This one has some of that, but it’s much more abrupt and driven by something entirely exogenous. We might get a boost in September but then have to shut campus doors again in October to deal with a resurgence of the virus. Do that once, and folks may forgive and return. Do it twice, and they may well decide it’s not worth it.

That said, perversely enough, circumstances could also work in our favor. If colleges and universities everywhere have to close doors repeatedly and move folks online, how much value are you really getting for premium tuition? (As the parent of a student paying out-of-state tuition at a public flagship, I understand this viscerally.) I could imagine folks staying close to home and favoring low-cost options, both of which bode well for community colleges. We have a track record of recessions, so we know roughly what to expect from those, but (happily) we don’t have a track record of pandemics. That makes it hard to say which variables will matter more than others.

We already have reports of four-year schools lowering admission requirements for the fall, essentially fishing in our pond. As frustrating as it is, I suspect more of that is to come.

I’m told that the CARES package also includes aid to states, which is heartening, but I don’t know enough about the scale of it to know how much stock to put in that. I’m also told that this stimulus isn’t likely to be the last one. I hope that’s true. There’s certainly no shortage of need, and it’s not abstract at all. The Boy had a summer job lined up at an amusement park; they’ve all since been closed. My sister-in-law is a cosmetologist; she’s not working at all right now. In neither of those cases is laziness the issue. They’re hardworking, and they’ve been sidelined through no fault of their own. Many students work in retail or hospitality and are going unpaid through no fault of their own. If ever there was a time to loosen the purse strings, this is it.

Budget projections are always a blend of pattern recognition and guesswork, but this time around, there’s more guesswork than usual. Early word on CARES is vaguely encouraging. Here’s hoping that a year from now, we’re in a better place, and this reads as a quaint little period piece. I wouldn’t mind that at all.