Want to Save Colleges? Save the States!

Putting on both of my professional hats at once -- political scientist and academic administrator -- here’s what’s causing me to lose sleep, beyond the obvious concern for family and friends:

March: The economy comes to a screeching halt, with total shutdowns of most local retail and the attendant loss of jobs.

April: States see tremendous drops in sales tax revenue from the sales that weren’t made, coming simultaneously with large unbudgeted expenditures for health care.

May-June: States enact massive cuts to everything discretionary, with public higher education taking its usual disproportionate share of the cuts (remember that states can’t run deficits).

June-August: Brutal financial triage on campuses, declarations of financial exigency, mass layoffs, some campus closures.

September: Smaller entering classes at many campuses make bad budgets worse.

(For once, community colleges might just be in better shape than some others, if only because folks may be more financially strapped and more leery of sending their students away to live in dorms. As the low-cost, live-at-home option, we might be better positioned for enrollment than many other places.)

In the spirit of the Ghost of Christmas Future, everything after March is still up for grabs. We can avoid this dystopian future if we make the right choices now.

The linchpin of the financial disaster is state revenue shortfalls. That’s what turns a health emergency into a budgetary emergency. If we could prevent the states from going broke, we can prevent most of the downstream consequences.

Conceptually, that’s easy enough. All we have to do is get the federal government to bail out the states. Replace the lost tax revenue, support increased health spending and get checks to people. By itself, that would allow states to continue to support everything from K-12 and police to social services and public higher ed. Just save the states. That’s it.

I’m hearing discussions of one of those three items. The idea of sending money to individuals seems to have some traction, and it’s a good idea as far as it goes. (I’d go with a universal benefit that’s also taxable, rather than trying to pre-gauge who needs it, but that’s a smaller issue.) It has obvious humanitarian benefit for folks who’ve lost jobs or income, and it sustains aggregate demand at a time when we desperately need that. But it doesn’t replace state tax revenue, which is to say, states would still be pushed into draconian cuts even with a quick and well-executed round of payments to individuals.

I haven’t yet heard meaningful discussions of replacing state revenue shortfalls or picking up unbudgeted state costs for health care. In the absence of either of those, let alone both, the picture gets ugly fast. Given how utterly foreseeable the shortfalls are, that’s astonishing.

This should cut across party boundaries: we should save blue states, purple states and red states. Given the range of responsibilities that states have, and the sheer scale of the likely dislocations and health-care costs, leaving states to their own devices would be negligence.

For present purposes, both garden-variety Keynesians and proponents of Modern Monetary Theory should be fully on board. Interest rates are at historic lows; the cost of borrowing is low at the exact moment that the need for it is high. With sudden catastrophic job losses, inflation is a weaker threat than it has been in decades, and that’s saying something. Monetary policy has already gone as far as it’s going to go. Fiscal policy has to step up. And because only the federal government can run deficits, it has to come from there.

This isn’t a panacea; states have been disinvesting from public higher ed for a long time. But going from a slow decline to a dead stop would be catastrophic for many colleges, and once that capacity is gone, getting it back is much more time-consuming and expensive.

Yes, we need to look at different ways of doing business. But to do that, we first have to survive.

Save the states!