Dozens of public universities that never fully recovered from the Great Recession now find themselves at the mercy of budget cuts driven by a pandemic that’s decimated their state’s biggest industries.
Many states managed to avoid a financial cave-in of their fiscal 2021 budgets, owing in large part to money doled out by Congress meant to shore up local economies battered by Covid-19. But those that largely depend on revenue from hard-hit industries like tourism and fossil fuels face big unknowns even with the new influx of federal relief President Joe Biden signed this week.
“The economy of the state of Hawaii has been crushed,” University of Hawaii president David Lassner said in an interview. That system hasn’t seen a steep drop off in enrollment like other parts of the country and was buoyed by federal CARES Act funding, but the pandemic has still forced them to recalibrate their mission and spending.
“We went from 10 million tourists a year to zero almost instantaneously,” he said. The drop in tourism revenue spurred Hawaii Gov. David Ige, a Democrat, to request a 15 percent reduction, about $78.4 million, in the general fund used for all campuses in the state’s university system. The legislature is expected to finalize the budget in the coming weeks.
Colleges and universities across the country are scrambling to stabilize their institutions by cutting costs and mulling tuition increases despite saying how wary they are of putting more financial strain on their students in a sour economy. Lassner said the Hawaiian system is re-imagining how it can contribute to rebuilding the state’s economy and train workers in new skills in a way that might help prove its value and prevent further cuts.
The University of Alaska, where oil and natural gas income fuels the state economy, is preparing itself for a third year of budget cuts tallied in the millions of dollars. And Nevada’s higher education system is planning a 12 percent cut after the tourism-centered economy there cratered. Colleges and universities in Rhode Island and Louisiana also expect to sustain multimillion-dollar losses this year and in 2022.
Public institutions serve the lion’s share of the nation’s college students, some 14.6 million of 19.7 million students, according to the National Center for Education Statistics. And cuts to those schools would disproportionately hurt low-income students who attend them in larger numbers than they do private universities. Some higher education groups say colleges and universities will need more than twice as much as Biden’s America Rescue Plan allots for them.
Making deep cutbacks to public higher education could hinder low-income students’ upward mobility, said Tom Harnisch, vice president for government relations at the State Higher Education Executive Officers Association.
“Higher education is one of those state budget items that is historically one of the first items to be cut and one of the last items to be replenished,” Harnisch said. His group and the think tank New America track how the pandemic has affected state higher education budgets.
When Nevada faced a $1.2 billion budget shortfall last year, Gov. Steve Sisolak (D) directed every state agency to craft their spending needs with a 12 percent cut baked into each year of the biennial budget. That came after the state’s Democratic-controlled Legislature already shaved $137 million — nearly 20 percent — from higher education appropriations for the fiscal year ending June 30, pushing officials to setup a temporary per-credit surcharge on college classes, and pay cuts and furloughs for staff.
“We have state appropriation going down and revenue and tuition going down because the impact on students and their families has been so devastating financially that there are families that are choosing to sit it out,” Melody Rose, Nevada’s chancellor of higher education, said in an interview.
Sisolak has officially proposed an end to the furlough, she said, but the system is being financially strained on all sides, including losses in tuition revenue and non-academic revenue like athletics.
“If you think about our campuses that have significant athletics programs, you have lost ticket sales, lost concessions, television deals,” Rose said. “And there are increased costs at the same time for Covid mitigation and for moving all of our learning online.”
This week the White House threw colleges and universities a life line when Biden signed a $1.9 trillion coronavirus relief bill, which includes $40 billion for postsecondary institutions. Its enactment could “take some of the pressure off of the state and their view on what kind of reductions the university has to take,” Lassner said.
The University of Alaska system has cut programs and followed through on implementing a 5 percent tuition increase as oil revenue in the state declines. After having its budget reduced by $51 million in the years leading up to the pandemic, it will also lose an additional $70 million through fiscal year 2022. The state budget won’t be updated until December.
Additionally, the governor vetoed a proposal in the legislature’s finalized 2021 budget that would have increased the appropriation to the university system by $12.5 million. The governor indicated that the CARES Act would supply that cash flow.
“The federal relief helps us with the Covid impact, but it will in no way touch the holes of the state budget reductions,” University of Alaska president Pat Pitney said in an interview.
Some states are optimistic and looking at modest boosts. Alabama, which used a rainy day fund to keep colleges and universities a float during economic downturns, increased the budget for its four-year institutions by 2.7 percent and for its two-year colleges by 2.1 percent for the current fiscal year.
Kentucky’s governor, Andy Beshear, included a 2 percent boost for postsecondary operating funds in his state budget and more than $75 million for campus asset preservation projects and pension-related costs — the state’s first investment in higher education in more than a decade.
Higher education in the state faced 12 budget cuts — about $222 million — over the past 14 years, according to Bill Payne, vice president for finance at the Kentucky Council on Postsecondary Education.
Since the 2008 recession, “Kentucky was not able to recover and has not begun reinvesting in higher education as a number of other states did,” Payne said.
Over the next several weeks, the state’s general assembly will decide what it will enact.
A combination of federal aid from Biden’s $1.9 trillion relief package and Beshear’s proposed budget “would really help to get Kentucky back on the right track,” Payne added.