Two-Year Colleges Will Be Most Affected by State Budget Deficits

Published 11 November 08 04:12 PM | Student Loan Girl

The financial outlook for community colleges in nearly half of all states is “not good,” with many institutions anticipating midyear cuts in funding, according to a member survey by the National Council of State Directors of Community Colleges (“State Budgets Are Likely to Squeeze 2-Year Colleges,” The Chronicle of Higher Education, Nov. 7, 2008).

But this “not good” outlook may not even address the full extent of state budget problems for community colleges, being that respondents began completing their surveys prior to Wall Street’s huge drop in mid-September, the Chronicle reports.

More than half of the 22 surveys that came in after September 18 indicated that a midyear budget cut was likely. But the long-term state budget trends may have the most substantial impact on schools. The survey found that three in five respondents said chronic state budget deficits, due in large part to state spending on Medicaid, will hurt public schools, particularly community colleges, in the future.

“Medicaid, corrections, and K-12 impose incredible structural restraints on state budgets,” said James Palmer, director of the Grapevine Project, which conducts annual surveys on state-tax support for higher education. “We have been aware of these problems for some time, and over the last year, a growing number of folks in higher education have become more aware of how spending in these other areas causes pain for colleges.”

While many governors have petitioned Congress for another federal stimulus package that would, in part, help states overcome their budget shortfalls, Palmer says that the stimulus package would only help colleges rebound if it included a provision to alleviate state’s Medicaid costs.

Survey Findings Indicate States’ Widening Fiscal Crisis:

Eighteen of 28 states weren’t able to get the all the state funds they needed to operate at full capacity in 2007-08 academic year.

In the public education sectors, including secondary and elementary schools, community colleges experienced the biggest drop in state appropriations, 5.2 percent. State appropriations to flagship universities, in comparison, only declined 1.8 percent.

69 percent of survey respondents said that rural community colleges would suffer the most from tight state budgets, compared with 54 percent who said that suburban community colleges would face the most strain and 46 percent who believed that urban community colleges would fare the worst.

In 28 states, college tuition increases since 2000 had far outstripped state-based student aid. And in a full eleven states, need-based aid amounts designated in the most recently passed state budgets had not kept pace with tuition increases.

Only four states had need-based aid programs with enough funds to enable low-income students to complete college without going into debt. The percentage of students who graduate with "significant loan debt" had grown in the last few years in 21 states.