Fading Stimulus Saved Colleges

As enrollments soared and state dollars dried up, the temporary fix of federal stimulus money staved off significant financial losses for higher education that are still yet to be fully realized, according to a report released today by the State Higher Education Executive Officers (SHEEO).

In the 2009 fiscal year, state support for higher education fell by $2.8 billion to $77.9 billion, but an infusion of $2.4 billion in federal funds largely offset those losses. Absent a dramatic recovery that no one expects in the coming year, however, colleges and universities are likely to feel the brunt of the economic downturn in 2010 and 2011, the report suggests. That’s cold comfort for institutions that have already been cutting budgets, raising tuition and considering or implementing enrollment caps.

Just as states were seeing revenues decline, the enrollment boom hit a record high of 10.8 million students at public institutions – an uptick of 3.4 percent between 2008 and 2009. In a predictable pattern for a recession, those students have been carrying a greater share of the cost of their education. Indeed, 37.3 percent of education revenue came from tuition in 2009 -- an increase of 2.6 percentage points in five years, the report notes.

Paul Lingenfelter, president of SHEEO, said the data make a strong case for addressing enrollment spikes with increases in state support coupled with concrete steps on the part of colleges and universities to improve persistence rates. The cold reality, however, is that some colleges and states are in triage mode, which often places true reform efforts behind developing short term survival strategies, Lingenfelter said.

“It’s really hard to do some of those things when you’re putting out fires, and the persistence of this cycle has long-term implications,” he said.

“It’s possible to make the changes within higher education, and it’s possible within government to meet these needs,” Lingenfelter added. “We need to decide it’s important and find ways to do it.”

State support per full time equivalent (FTE) student has historically waned in the years following recessions, and the most recent recession is already showing the same contours. Support per FTE fell to $6,931 in 2009, the lowest since 2006, when recovery from the recession of the early 2000s began.

“We don’t know what it will be like next year, but [support] is almost certainly going to be lower,” Lingenfelter said.

The average decline in appropriations per FTE was 4 percent, but nine states saw double digit declines. Most of the states where declines were the largest also saw above average enrollment increases.

The SHEEO data illustrate a turbulent cycle of recession, recovery and recession that Lingenfelter says makes a clear case for states to build up reserves in years of economic growth. History shows, however, that states don’t typically do that.

“I think the big picture is sort of unrelenting enrollment demand in higher education outpacing the ability of the states to finance this enrollment growth even with reasonable increases in productivity in higher education,” Lingenfelter said. “Every time we have a recession it gets worse.”

Educational Appropriations per Full Time Equivalent (FTE) Student in Constant Dollars

Note: Educational appropriations measure state and local support available for public higher education. Operating expenses including ARRA funds and excludes appropriations for independent institutions, financial aid for students attending independent institutions, and research.