Colleges Want No Repeat of the Last Recession's Cuts

During the last recession more than a decade ago, states slashed about $33 billion in funding for the nation’s colleges and universities from 2008 to 2012. The cuts were so bad that even though states have been gradually spending more on higher education since then, a recent study found colleges have gotten back only about two-thirds of the state funding per student they lost.

So as House Democrats work on another massive coronavirus relief package, and states are again being forced to slash their budgets, a major emphasis for lobbyists representing colleges is to try to prevent a repeat of the devastating state cuts of the last recession.

Though it faces opposition in the Republican Senate, House Speaker Nancy Pelosi has said a major priority for the Democrats' proposal, expected next week, is to give states billions in federal aid as they reel from the financial hit caused by the pandemic. Her home state, California, announced Thursday it has a $54.3 billion budget deficit, which is the equivalent of a little more than a third of its entire budget.

As first reported by Inside Higher Ed Thursday, the Democratic proposal will include additional money for higher education, in addition to funding for states in the hopes of lessening budget cuts, not only for education but other services.

However, it’s unknown if the Democrats will propose giving colleges and universities anything close to the $46 billion they say they need to pay for the effects of the pandemic, including a projected 15 percent decline in enrollment this fall.

And the associations representing colleges and universities fear that even billions of aid to the states won’t be enough to keep governors -- needing money to fill budget holes, pay their share of Medicaid coverage to the poor during the pandemic and increase the coronavirus testing needed to reopen the economy -- from again looking toward higher education to make cuts.

“States are under tremendous financial stress due to increased expenses and declining revenues. It’s unlikely even the most generous proposals to support states are going to come close to making them whole,” said Craig Lindwarm, the Association of Public and Land-grant Universities’ vice president of government affairs.

“We know all too well from history, which has demonstrated time after time that when states are under pressure, public colleges and universities are often the first target,” he said. “We can’t have a repeat of the last recession.”

And indeed, several governors have announced cuts for higher education in their current budgets, including Ohio’s Mike DeWine, who announced a $110 million cut to higher education last week as part of $775 million in state cuts. Several other governors have ordered state agencies, including higher education, to begin planning for millions of cuts in the next fiscal year, starting in a few weeks.

So groups like APLU, the American Association of State Colleges and Universities, and the Institute for College Access and Success have been pushing Congress to include in any stimulus proposal provisions to prevent a new round of cuts like in the last recession, or, if they do make cuts, to require states to restore funding for higher education more quickly this time.

Congress did include in March's $2 trillion CARES Act an incentive for states to not cut higher education. It created a $3 billion fund that governors could choose to spend on K-12 and higher education. But to get it, states have to agree to keep spending as much on K-12 and higher education as they had been on average over the last three years.

The problem, according to an APLU analysis, was that in all states except for Alaska, the three-year average was lower than what they spent on higher education last year. That meant they could cut funding for colleges and still get the grant. And, under the CARES Act, Alaska can apply for a waiver from the Education Department to be able to cut its spending on higher education, while still getting its $6.2 million share of the money.

So APLU’s president, Peter McPherson, wrote congressional leaders last month, saying Congress should require states to not reduce higher education at all in order to get federal funding.

“We need a much stronger provision than in the last bill,” Lindwarm said.

However, higher education groups are also taking a fallback position if there are cuts. McPherson, in his letter, asked Congress to at least require states not to cut higher education more than K-12 or early childhood education.

The American Association of State Colleges and Universities is pushing the same idea, said Luis Maldonado, the group’s vice president for government relations and policy analysis. “The sector is concerned that, as it typically happens, it’s expected to absorb the lion’s share in state funding reductions when compared to elementary and secondary, for example,” he said.

Meanwhile, TICAS and 24 other groups, including associations representing higher education institutions, urged in another letter to congressional leaders that the next stimulus discourage state cuts to institutions and need-based student aid. But if those were necessary, the groups wanted requirements that states restore funding more quickly than last time.

“Once state revenue has returned to a stable and strong level, state funding per student should be no lower than it was before the pandemic began,” said Michele Streeter, an Institute for College Access and Success policy analyst.

A report last week by the State Higher Education Executive Officers association found that eight years after the peak of the last recession, state funding for higher education still hasn’t recovered. In 2008 colleges received $8,980 per student, but it dropped to $6,830 in 2012. And though funding has increased since then, it has only gone up to $8,196 per student -- recovering only two-thirds of the $2,151 decrease in state funding per full-time equivalent student.

It’s unclear whether Congress will decide to give states the $500 billion that governors are asking for. Senate Majority Leader Mitch McConnell has said he wants to pause on approving more stimulus packages, after Congress has already approved about $3 trillion in coronavirus relief.

States would also presumably be reluctant to have their hands tied on how they could use the money, although the National Governors Association and nine governors’ offices declined to comment on attaching more strings to federal aid.

A House Democratic aide also signaled Democrats are thinking of an approach along the lines of the CARES Act by dedicating funding for education but giving governors flexibility in how they use the state aid.

“In addition to flexible state aid, House Democrats strongly believe that services like K-12 and higher education need dedicated funding,” the aide said. “Just as in the CARES Act, we will provide dedicated education funding in addition to state and local fiscal relief.”