Study: State Shortfalls Projected to Continue Despite Economic Gains; Long-Term Prospects for Higher Education No Brighter

Study: State Shortfalls Projected to Continue Despite Economic Gains; Long-Term Prospects for Higher Education No Brighter

      Although most state budgets for 2006 have improved, the long-term prognosis for state finances is poor, according to an analysis released by the National Center for Public Policy and Higher Education. The study concludes that all states face potential budget deficits that will result in difficult fiscal circumstances for higher education funding.

      For the nation as a whole, the study’s projections indicate that state revenues will be 5.7 percent lower than the level required to maintain current services. State-level projections show that every state faces at least a small gap, with 29 states looking at gaps of 5 percent or more.

      Even starting with balanced budgets, all states face fiscal imbalances that will make it impossible to maintain current public service levels, the report says. The result for higher education will be increased competition for what resources remain, intensified by greater growth in the demand for other state services.

      The study finds that for all states, the prognosis for the next eight years is continued financial stress.

      These conclusions were drawn from eight-year projections of likely revenues and expenditures required in each state to maintain current public service levels (1) given current revenue structures, (2) given conservative estimates of expenditures, and (3) projecting average, or “normal,” state economic conditions. Despite generally improved fiscal conditions, the study’s long-term projections suggest that there will be structural budget deficits in every state.

      “For most states, it is difficult to see a future for higher education that recreates the prosperity of the late 1990s,” says Dennis Jones, author of the report and president of the National Center for Higher Education Management Systems. “Colleges and universities — and the students who enroll in them — are likely to face continued financial strain.”

      The projections were developed for NCHEMS by the Nelon A. Rockefeller Institute of Government. A copy of the study can be obtained at www.highereducation.org/reports/pa_shortfalls/index.shtml.



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