Higher Education

How better higher education budgeting can overcome funding reductions

Public colleges and universities will face increasing budget challenges as states throughout the country continue to cut back on higher education funding.


According to a report from the national non-profit organization Young Invincibles that analyzed state spending from 2008 to 2014, funding for higher education has not returned to pre-recession levels, despite signs of general economic recovery.


Only two states, North Dakota and Alaska, are investing as much in public higher education as they did before the recession. The other 48 states have all cut per-student spending by an average of 21 percent. However, for some states the percentage was significantly greater. Louisiana made spending cuts of 41 percent, while Alabama, Pennsylvania, South Carolina and Arizona all cut funds by more than 35 percent.


The resulting impact on students and their families can be significant. As the report noted, the two primary sources of funding for public higher education institutions are state contributions and tuition. As such, colleges and universities are often forced to raise tuition when state spending declines, putting an additional economic burden on students.


“Three-quarters of all college students attend public institutions, and the budget and policy decisions made by state and local policymakers drive the access, affordability, and value of our higher education system,” the report noted. “Typically the less funding a school gets from their state, the more students will have to pay in tuition to make up the difference.”


As a result of reduced state funding, tuition and fees at both four-year and two-year institutions have increased by an average 28 percent since 2008, the report found. No state has managed to keep the student cost of higher education from going up, though states including Ohio, Maine and Montana kept increases below 10 percent. However, Arizona, Georgia and Louisiana saw fees and tuition climb by more than 60 percent.


Impact of increased tuition on families


One way increasing tuition is affecting students is by way of mounting debt. The publication found seven out of 10 college seniors will graduate without paying off their student loans. Speaking with the news outlet, Lauren Asher, president of the Institute for College Access and Success, said the financial burden is hardest on low income students and families that are seeing a greater gap between what they can comfortably pay and what is being asked by colleges and universities.


“It’s reflected in the high debt levels of federal Pell-Grant recipients, who mostly have family incomes under $40,000,” Asher explained. “The most recent data show that nearly nine in 10 college graduates received Pell grants and loans, and they owed an average of $31,200.”


As the Center on Budget and Policy Priorities (CBPP) reported, tuition increases have been outpacing income increases since the 1980s. The average inflation adjusted public college tuition has increased by nearly 270 percent since 1963, while household incomes have only increased on an inflation-adjusted basis by 5 percent during that same time.


The result is an increase in the number of students who are choosing not to attend college, the CBPP found. This is especially true for low-income students who often overestimate the financial burden higher education will place on their family. “Significant enrollment gaps based on income exist even among prospective students with similar academic records and test scores,” the CBPP stated. “Rapidly rising costs at public colleges and universities may widen these gaps further.”


Alternatives to raising tuition


While few colleges and universities see increasing tuition and fees as a positive step, many are left with no other option. Additionally, many state lawmakers hope to avoid cuts to higher education but are unsure how else to balance their budgets. Political pressure may also make it undesirable to raise taxes for additional revenue.


“States relied disproportionately on damaging cuts to close the large budget shortfalls they faced over the course of the recession,” the CBPP reported. “Between fiscal years 2008 and 2012, states closed 45 percent of their budget gaps through spending cuts but only 16 percent through taxes and fees.”


Some states have responded to budgetary shortfalls by eliminating faculty and administrative positions at public colleges and universities. In other instances, courses or entire departments were cut from schools, the CBPP found. Vacant positions have also been left unfilled and class sizes have been increased.


Other schools have begun exploring alternative funding solutions. As U.S. News and World Report noted, schools including the Georgia Institute of Technology have begun offering online degree programs at lower tuition rates. These programs allow the school to admit more students while saving money on facilities usage, the news publication reported.


Student representatives from the University of California-Riverside also proposed an alternative funding model that would eliminate upfront tuition and instead require students to pay back a static percentage of their salaries to their college or university for the first 20 years of their employment. As Governing reported when the plan was first proposed in 2012, the funding model is unlikely to come to fruition but has been debated at universities throughout the country as frustration with increasing tuition continues.


How Questica can help


Though alternative funding methods will continue to be explored, public higher education institutions will still face difficult financial decisions in their immediate future. Balancing budgetary restrictions with the best interests of students, staff and faculty requires careful planning and a thorough understanding of the school’s revenue and spending.


Through Questica’s higher education budgeting platform, colleges and universities can gain granular insight into their funding by streamlining data from multiple sources and eliminating inefficient spreadsheets. The web-based platform allows schools to track operating and capital project budgets, and provides comprehensive tools for calculating expenses associated with staff
salaries and benefits.


Schools hoping to avoid increases to tuition and fees can utilize Questica to establish and evaluate unlimited multiyear forecasting and hypothetical budget scenarios. The flexible software also allows for performance tracking, enabling higher education institutions to establish quantifiable success measures for budgeting solutions and see how any changes to spending are impacting the
learning experience for students.


Public colleges and universities should contact Questica to learn more about how advanced budgeting software can help in overcoming the challenges of reduced state funding.