Sagging state funding jacks up college tuition

Massive cuts in state funding aren't helping the rising costs of college tuition.(Photo: Getty Images)

Story Highlights

• Higher-education funding down 30% or more in 15 states since 2007
• Cuts lead to higher tuition, staff layoffs
• States adjusting to more strategic spending

The start of a new school year is punctuated by what's become a new financial norm for public universities: massive cuts in state funding that lead to rising tuition, cuts in enrollment, sporadic class schedules and staff layoffs.

Despite some recent tuition freezes for the 2013-14 school year, public universities continue to suffer from significant spending cuts by their own states. The state funding cuts are the primary driver of tuition inflation in recent years, education experts say.

Between 2007 and 2012, 15 states have experienced declines in higher-education funding per full-time student of nearly 30% or more, according to a report on higher-education financing put out by the State Higher Education Executive Officers Association earlier this year. Since the recession, 48 states have cut state appropriations while just two have increased funding.

How schools respond to the cuts usually leads them to consider three options, says Mark Kantrowitz, publisher of the Edvisors.com network of college financial planning sites.

"They increase tuition, they shift enrollment from in-state students to out-of-state and international students, who pay higher out-of-state tuition, and they cut enrollments so that each student gets the same size slice of the pie of funding," he says.

This also often leads to staff cuts and classes being offered less frequently, making it harder for students to get into required courses and graduate on time, he says.

Meanwhile, tuition has soared, and students and their families are funding more of the cost of their educations. Trying to reverse these problems, President Obama described his plans to help lower the cost of college on a three-campus, two-day bus tour last month.

The proposed changes include a system that ranks colleges' affordability, which Obama hopes Congress will use to determine how much federal financial aid money it sends to each school. He also said he would use federal dollars to encourage colleges to experiment with innovative — and potentially cost-cutting — classroom methods.

But the plan to tie federal financial aid to colleges' affordability is complicated by the fact that the decline in state funding is the main culprit in the tuition inflation that has increasingly made college unaffordable.

The president's policies have the greatest chance of success if states and the federal government can work in tandem to lower college costs, says Rachel Fishman, a higher-education policy analyst at the Washington, D.C., think tank New America Foundation.

A federal rating system of colleges' value, which the Obama administration aims to complete by 2015, could be a step toward that partnership.

"Americans love ratings," Fishman says, and if a state's schools are "poorly rated because they're really expensive," that could be sufficient motivation to look at ways to cut costs.

STUDENTS 'HIT WITH A TSUNAMI'

The consequences of continued state funding declines are especially difficult for low- to moderate-income families, who "are increasingly being priced out of a college education," Kantrowitz says.

He lists several scenarios these families have to consider, including taking on more student loan debt, enrolling in two-year colleges instead of four-year schools, or deciding to forgo college altogether.

New Hampshire is the state that's been hardest hit by state budget cuts since 2007. Funding has dropped by more than half, the SHEEO data show. And while Kantrowitz says that state funding cuts do not directly translate into tuition increases, as of 2011, New Hampshire public university graduates had the highest average student debt load in the country, according to data from the Project on Student Debt.

The cuts hit New Hampshire's state university and community college systems, which together enroll about 40,000 students. In just the past two years, the state also eliminated about $15 million in grants for lower-income students, says Richard Gustafson, the director of the Higher Education Commission for the New Hampshire Department of Education.

"The students were getting hit with a tsunami here of sorts," he says, "with both increasing tuition coupled with decreasing financial aid support and decreasing appropriations to the schools."

In Florida, the state with the second-highest decrease in funding, at a decline of 40% since 2007, the university system "has done away with hundreds of underperforming or duplicative programs," in an effort to cut costs, says Kim Wilmath, a spokeswoman for the State University System of Florida.

Studies have found other schools face similar situations. In a survey of its member schools conducted in the spring, the Association of Public and Land-grant Universities reported an "overwhelming" number of colleges describing how decreases in funding have negatively affected financial aid, hiring and maintenance and infrastructure on campus.

A NEW WAY OF DOING BUSINESS

Though SHEEO does not yet have data available for the most recent changes in state higher-education funding this year, several states are beginning to return money to colleges as their economies improve, says Christine Keller, the association's associate vice president of academic affairs.

In July, New Hampshire restored much of its funding cut in the previous year's budget and promised tuition freezes for the next two years, although a financial aid program that previously stood at $3.5 million has not been replaced, Gustafson says.

But even with new cash, Keller says, state funding — and the way colleges operate — won't likely return to pre-recession levels. The cuts have forced schools to take "more strategic" approaches in allocating resources and adapt to a new way of doing business that Keller doesn't think will recede, despite the improving economy.

College and university leaders say they are optimistic as states start to reinvest in higher education. But on the effect of gradual funding increases, Keller says, "We're in such a hole that it doesn't have as much of an impact as it could have."