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Filling the Budget GAP

Filling the Budget GAPUniversity administrators face tough choices as states cut deep into higher education budgets
By Page Boinest Melton Norfolk State University President Marie McDemmond hoped this year to tackle the university’s student space shortage. Troubled that financial aid students spill out the doors of the administration building, and that admissions officers interview prospective students in hallways, McDemmond longed to add a new student-services wing.
But the addition wasn’t meant to be, a casualty of cost-cutting initiated to cover Virginia’s projected $3.8 billion two-year revenue shortfall. Norfolk State not only lost the new wing, it will collect less state aid than expected for operating expenses and compliance with federal Office of Civil Rights-mandated programs. With the state cutting deep into higher education budgets, Norfolk State did what hundreds of other colleges and universities are doing this year: raised tuition to help fill the budget gap.
Although Virginia rolled back tuition for colleges and universities six years ago, increasing tuition by 6 percent for in-state students and 18 percent for out-of-state students was “a difficult decision,” McDemmond says. State law requires the university’s out-of-state students to cover their costs and the tuition increase is sending some to other schools. Delaying work on the student-services wing “really hurts my heart,” she says. “We’re deficient in space and it makes us look less efficient.”
Nationwide, at institutions of all sizes, McDemmond’s colleagues are in the same bind. All but a handful of states face budget cuts this year because of depressed tax revenues. The National Conference of State Legislatures reports that 29 states already have reduced, or are considering reducing, higher education appropriations. If the economy remains sluggish as predicted, colleges and universities will be vulnerable well into next year — an uncertainty that has forced campus leaders to seek the right mix of their own budget cuts, fee increases and postponed projects to absorb shrinking state appropriations. The goal: Preserve as many campus programs as possible while ensuring that a college degree isn’t priced beyond the reach of students.
The balancing act can be painful. “State funding was being reduced and as a consequence, the choice we had was to cut back on programs or the quality of what we do or find other sources of income to sustain our programs,” says Purdue University President Martin Jischke. Neighboring Indiana University already had raised tuition as much as 9 percent and doubled student technology fees when Purdue opted for a 10 percent tuition increase, tacked on to a $1,000 fee approved in November for new students. Trimming the university budget also ate into Purdue’s share of an economic development fund that helps local companies develop new products — an ironic twist, given Jischke’s belief that the fund will grow Indiana’s economy and ensure future revenue for state-aided programs such as higher education.
“In the long run, it’s exactly the kind of program that is the solution to our problem,” Jischke says of the state’s 21st Century Research and Technology Fund. Being forced to choose between a reasonable operating budget and the university’s commitment to Indiana’s economic development, he says, is a “strategic mistake.”
Elsewhere, the stories are similar. Some South Carolina institutions are imposing tuition increases nearing 30 percent. The Mississippi state system increased tuition 8 percent, even though some campus presidents wanted more. Minnesota, which raised tuition 10.9 percent for the current year, added another 10 percent increase for the new school year. Out-of-state students at a California State University campus will pay $1,100 more in tuition a year, the system’s first tuition increase in a decade.
Though campuses enjoyed generous state funding in the economic boom years of the 1990s, colleges and universities have increasingly relied on student costs to cover more expenses. The National Center for Education Statistics’ study of costs from 1988 to 1998 found that tuition’s share of higher education revenue rose as much as 4.9 percent a year, depending on the institution. And that was before the recent economic declines ravaged state budgets. “We went from being state-supported to state-assisted,” says McDemmond of Norfolk State. “There are cynics who will say soon that we are only ‘state-located,’ as the state allocation becomes a smaller portion of our budget.” Tuition Increases Not Enough
Given the magnitude of state budget shortfalls and rising enrollments — despite higher costs, more students are still choosing college — tuition increases may not generate enough revenue to close the gap. The University of Washington’s 16 percent tuition increase for in-state students is among the larger percentage increases nationally, but it won’t balance the annual budget. The university will not fill about 40 teaching vacancies in the college of arts and sciences, much less cover a 2 percent pay increase expected by faculty under a new compensation policy.
Students and university leaders worry about the long-term impact: UW faculty salaries lag behind peer institutions by an average 11 percent, and a local newspaper depicts the university’s English department as a farm team raided by schools offering better pay. “We expected the tuition increase,” says Alexandra Narvaez, a junior from Seattle. “But students are going to be paying more and getting a less quality education, with larger class sizes and less staff helping out.”
On top of affecting college experiences, budget pressures are adding to students’ financial burdens. Because tuition increases are eclipsing the inflation rate — and in most states, the growth in family income — college costs account for a greater share of household budgets, as much as one-quarter of a low-income family’s yearly income. In a recent study, the National Center for Public Policy and Higher Education found more students going deeper into debt to pay for college, with financial aid failing to keep pace with tuition increases.
The trends raise warning flags about accessibility, especially for lower-income students. “We need to recognize the significant impact these tuition and fee increases, without student financial aid increases, are having on low-income students,” says Richard Wagner, consultant to the National Center study and former executive director of the Illinois Board of Higher Education. “The long-term fear is the impact on young families and on students’ choices of occupations and profession.” Graduates saddled with heavy student loans may avoid lower-paying jobs, he says.
Beefing up financial aid is a must, Wagner says, even though student assistance will be competing with a host of increasing costs for colleges and universities. Institutions will end up doing more on their own, like Norfolk State’s decision to raise more money for student assistance through its foundation, about $2 million this year. “States are making some progress on financial aid — it can be done,” Wagner says. “There just aren’t as many champions out there for the financial needy students as there are for the institutions.”Crafting New Strategies
Colleges and universities navigating financial challenges will be looking for more champions of their own, gambling on legislators and voters to come up with extra cash. That’s the strategy for Austin Community College in Texas, where students already pay a dollar more per credit hour this year. College President Richard Fonte says he won’t push another tuition increase but instead hopes voters will raise the local tax rate that helps fund the college. “We’re saying we’re not going to do it again. We’re beyond where we want to be.” Fonte’s campus is suspending a reduced tuition program for the year and expects to lose students who pay higher tuition for living outside the Austin district. “We know that people are price sensitive and enrollment will be impacted adversely if we increase tuition,” he says. If voters reject a tax increase, like they did in 1999, “we will have to offer less. We’re at a crossroads as an institution.”
Likewise, some University of Washington regents have suggested that without more effort by the state, the university may want to consider taking fewer students. “The frustration among the regents was palpable,” university spokesman Bob Roseth says of the decision to increase tuition. Some “would like to go back to the legislature and say you can’t continue to give us less money and expect us to serve the same number of students with less quality.”
With that kind of soul-searching under way on campuses nationwide, the greatest fear may be what still lies ahead. After all, schools like those in the Mississippi state university system are in their second year of significant tuition increases after raising tuition 15 percent last year. Others are mindful of fiscal forecasts suggesting that state budgets may not recover in the coming fiscal year — a warning that more tough choices and tuition increases lie ahead.
 “We know how we are going to deal with the short term — next year,” says Purdue’s Jischke. “For the longer term we are hoping we will be able to recover resources.” And while University of Washington’s Roseth maintains that his school remains the state’s “institution of choice,” there’s a limit to what the university can pass on to students. The tuition hike won’t depress enrollment, he says, because the university is still a bargain for in-state students, compared to private schools and universities out of state. “But we sure can’t keep increasing tuition by 16 percent.” 

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