A coming, continuing crunch in state higher education funding

A few weeks ago my coworker asked me, rhetorically, if it could get worse. We were discussing the lack of funding this year to send students to present at a state scientific meeting. The lack of funding comes as a result of state universities in Kentucky having their budgets cut 4.5% this year. My institution is in better shape than many in the commonwealth, as we are historically underfunded on a per-student basis relative to the other state schools, and the two-year budget that just began includes some equity money (5.3 million, 10% of our current appropriation) for the 2017–2018 academic year. My coworker thought things would improve. I am not so sure.

Certainly the equity money will help next year, but following it we enter another two-year budget cycle where just about anything can happen. We are also starting a new outcomes-based funding model that uses some metrics, graduation rates, etc. to divvy up the funding. I have concerns that such models generally give the most money to the institutions that need it the least, but aside from those concerns, I have greater ones with state higher education funding, concerns that include the common complaint about a lack of funding, but also include two other factors that I haven’t seen discussed as much.

I’m going to generalize to the country as a whole, rather than focus on specific states, although plenty of data exists on them (I’m pulling data from the State Higher Education Executive Officers Association: http://www.sheeo.org/shef). First, let’s deal with a common straw-man in the battle over state funding of higher education: Yes, states are appropriating more money to state higher education now than they were in 1990, which is where my source starts. This starting point skips the boom in higher education spending and enrollment starting in the 1960’s, putting our data at a bit more of a steady-state than the post-war boom. But it doesn’t alter my concerns, as quite a few things have changed since 1990, to say nothing of what’s happened since 1960. When discussing funding, we need to consider inflation, which continues its leisurely march upward ($1 in 1990 would run $1.85 today, according to the consumer price index). More pertinently, state higher education enrollment has nearly doubled since 1990. Taking just those two factors, we as a country are spending 11% less per student than we were in 1990.

State Appropriation per FTE.
Total appropriations for all states, total tuition, and enrollment.

Consider what else has changed since 1990, and what those changes might mean for higher education. In 1990, the IT department on most campuses had to deal with the telephone network, some TV’s, and a lab or two of PC’s. The internet existed, but it was useful largely for nothing more than talking to CERN. School security wasn’t much of a concern. Advising was largely limited to what courses to take, and so could still be done by full-time professors, although there was concern about the increasing use of adjuncts even then, according to a story in the Orlando Sentinel. (Fun fact: the article quotes UCF as paying $2500 for adjuncts per course in 1990. Today it’s about $3000. Meanwhile tuition has gone up… you don’t want to know.)

State appropriation, tuition, and total cost per FTE.

As enrollment increased, those adjuncts and other contingent faculty were increasingly used to teach students, with over 75% of teaching being done by contingent faculty in 2014 according to the AAUP. The number of administrators has gone up considerably since then, and the common gripe by faculty that they lead to increased costs may have some truth to it. But some of those administrators are definitely needed. I cannot as a faculty member fulfill their roles. I’m not a Title IX expert. I can’t help with financial aid. I’m not going to negotiate with Dell on a replacement program for all the computers on campus. These are worthwhile things, and administrators and more importantly staff, are needed to provide them. The overall cost of an education has gone up, and we should be comfortable with that, if we want the education to be worthwhile. Labs, hands-on experiential learning, real-world experiences, project-based courses… all of these are significantly more expensive, both in terms of equipment and personnel, than a single professor lecturing at the head of a 300-person classroom.

Those are all concerns with higher education in general, though. My specific concern with state funding comes from the confluence of trends in three separate domains: state funding, the US economy, and demographics. First, state funding. As I mentioned, state funding for higher education as a nation is down slightly from 1990. Looking at it yearly (corrected for inflation), we see it increase slightly, drops, slowly increases, then drops. If you look at the peaks, they tend to happen around the time recessions occur. First in 1990, then 2000–2001, then the Great One in 2008–2009. The drops continue for a few years as multi-year state budgets catch up with the tanking economy. But each recovery is slightly less than the previous one. Combine that with point two: we are now in an economic recovery that is almost record-setting in its length, leading a recent poll of economists to put the chance of another recession in the next four years at just less than 60% according to story in the WSJ. State funding hasn’t yet recovered from the last recession, and we may be heading into another one. Some states are still smarting.

Point three is enrollment. You can see from the graph that there is a correlation between state funding and enrollment, but it doesn’t track terribly well. That isn’t surprising- states don’t always fund on a per-student basis, and that number can be hard to estimate anyway. However, as states decrease their appropriations, schools are forced to turn to tuition to make up the difference. States also tend to put limits on tuition increases to keep costs in line, but some increase is common. That focus on tuition pushes schools to fight to retain and attract more students. If the population of possible students decreases, then schools start competing for an ever smaller pool of students. Looking at enrollment, 2012 was the peak year. If we look back eighteen years, there were just under four million births in the U.S. We can use the number of births eighteen years prior as a proxy for ‘prospective frosh.’ It’s not perfect, omitting immigration, deaths (which are hopefully minor), the increasingly-common gap year, non-traditional students, etc. But if we look at some numbers from the 2000 and 2010 censuses, it’s a decent proxy (see estimates below). My concern is that enrollment looks to decline over the next few years.

State higher education enrollment and ‘prospective frosh’.

If we do enter a recession, and states continue to reduce funding, state schools are going to find themselves looking desperately for students who are just not there. Even if enrollment percentages of the general population continue to rise, there will likely be a crunch. Schools will find themselves turning even more into revenue generators than providers of education. I am already tired of the thought ‘yes, but does it cost any money?’ following every ‘this is a neat idea for a lab/project/program;’ I don’t want to imagine what it could look like in a few years.

But let’s try it: we have a recession next year, and states cut appropriations. The average for the peak-to-trough drop is $1355 per FTE, although the drop has gotten bigger over the past three recessions (from $836 in 1990–1993 to $1948 in 2008–2012). To make up the difference, schools increase tuition, but states still hold that number down. In turn, schools turn to enrolling more students, but they aren’t there. On the bright side, that means fewer instructors are needed, but we’re already so dependent on cheaper-than-dirt adjuncts, it doesn’t make a huge difference to the cost of the existing permanent employees. Personally, as a tenured faculty member my job is safer than just about any job in the country, meaning I’ll still have it in a few years. But I may also have someone else’s job in addition to my own. Our students will be paying more for less of my attention, and for less of what it takes to provide a good education in the 21st century: technology, supplies, experience.

Certainly any number of things could happen to alleviate the impact of these trends. The recovery we are in is not a typical recovery, as I’m sure many people feel. It might continue for some time yet, or the recession might not impact states as much as previous ones. A ‘free college’ program–community, state, or otherwise–could be rolled out, schools could shift to a life-long learning model that draws a wider portion of the population, or states could actually invest in higher education again. But I’m worried that it can get worse.

*In 2010, the census reports 234,564,071 people 18 and older in the US, with 243,275,505 16 and older. If we take the difference (16 and 17 year-olds), then divide by 2 we get a cohort of 16 or 17 year-olds of 4,355,717. Enrollment in 2011 was 11,687,594. If we take the average time-to-degree of 4.3 years, that’s 2,718,045 students per year, which would mean 62% of 17 year-olds went to college the next year. That’s much too high, but the college population is made up of much more than the 18–21 set and at state schools the time-to-degree is likely longer. We could do the same with 2000 census numbers, getting 4,010,517 17 year-olds, for 50% enrolling in college the next year. Time-to-degree was probably less in 2000, but enrollment did increase over and above population growth.