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

Student Loan Girl — Tue, 11 Nov 2008 23:12:00 GMT

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.

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Government Warns: Pell Grant Program in Trouble

Student Loan Girl — Mon, 22 Sep 2008 21:47:00 GMT

Without additional taxpayer funds next year, the government’s “most important” federal financial aid program may be unable to provide Pell Grants to millions of eligible low-income students, likely pricing these students out of a higher education, according to an article in The New York Times (“Pell Grants Said to Face a Shortfall,” Sept. 17, 2008).

In a memorandum issued last week, the Department of Education warned that it predicts a $6 billion shortage for the federal Pell Grant program next year, stemming from continuous budget shortfalls and compounded by the record-high number of students qualifying for the federal Pell Grant program.

Rising tuition costs, shrinking state aid to colleges and universities, and a growing number of adults who are reenrolling in college are all putting a strain on federal financial aid resources, particularly on Pell Grants, which don’t have to be repaid. This school year alone, six million students out of the nine million who applied for federal financial aid received Pell Grants, some of the highest numbers the program has seen since its inception in 1972.

“It’s the mother of all shortfalls,” said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. “There’s more unmet need than anyone predicted.”

Last year Congress appropriated nearly $14 billion for the Pell Grant program, but as the troubled economy continues to force adults out of the workforce and back into the classroom, the Department of Education said it will either need to allocate more taxpayer money to the Pell Grant program or decrease the grant award amounts students can receive next year.

Should the Education Department decide to reduce Pell Grant awards, it would make an announcement detailing its decision sometime in February 2009, according to the memorandum.

“If [the Pell Grant program] is threatened, you’ll hear about it,” said Edward M. Elmendorf, senior vice president of the American Association of State Colleges and Universities. “The decibel level will be deafening.”

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Student Loan Blog : state budgets

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

Government Warns: Pell Grant Program in Trouble