Monday, February 25, 2008

 

You Can't Spell "Funding Cut" Without "Fun"

As my college stares down the barrel of a nasty external funding cut for the coming fiscal year, and a strong likelihood of another one after that, it's becoming clear to me that higher ed is in a really lousy position for dealing with recessions.

It isn't just that we're a relatively easy budget line for legislators to attack. Unlike much of the rest of the state budget, we have an alternate revenue stream available – tuition – that we can use to cushion some of the cuts. (That isn't true for the K-12 system, or prisons, or pensions.) That makes it easier to legislators to cut our line, since they can be fairly certain that a cut of 10 will be experienced as a cut of 5, with the difference made up through tuition hikes. In other sectors, that cut of 10 is felt as 10.

That's true, but it's only part of the picture. The other part is that we're positioned in ways that make it uniquely difficult to respond as the economy rises and falls. This is especially true at community colleges.

As higher ed's 'first responders,' we see fairly dramatic enrollment fluctuations as the economy changes. In my observation – and I've heard this a lot, though I've never seen it studied formally, so any prospective Ed.D.'s out there looking for a research topic, I'm just sayin' – our enrollments tend to go up as the economy goes down, and vice versa. We're countercyclical.

Which makes sense if you think about it. When the economy tanks, it's more difficult for some parents to send their kids 'away' to pricier four-year schools, so they come to us for the two-and-transfer plan. And some folks take recessions (or layoffs, more accurately) as opportunities to get retrained for other lines of work. After all, in a recession, the opportunity cost of pursuing a degree is notably lower than at other times.

The problem for us is that just when demand for our services increases, funding to provide them gets cut. And it's not like we have anything resembling 'endowments' to get through the tough times.

Yes, increased enrollment brings increased tuition revenue, and that helps. But tuition doesn't cover the full cost of what we do, and it was never intended to.

Add to this picture the annoying fact that so many of our costs are fixed or climbing – heating the buildings isn't getting any cheaper, and neither is employee health insurance – and the numbers get ugly pretty quickly.

All of which would be challenging but not awful if we were organized internally to deal with cycles. But we aren't. The tenure system is independent of budget or economic cycles. Curriculum review is independent of them, too. And increased enrollment is interpreted internally as a sign of success. So the internal dynamic is “hey, we're really doing great! Look at these enrollment figures! Now if those pinheads in [state capital] would just get their act together...”

Lest that seem entirely myopic, there's a good argument from our mission to the effect that shutting programs down just when the community needs us most would be contrary to our mission. It's just that the times when it needs us the most are the times when it's least able to pay.

You can't spell 'funding cut' without 'fun.' This should be a fun year.


Comments:
Many years ago a committee did some research, and found that a doctoral program for adults was also counter-cyclical: in recessions, people decided that a Ph.D would help them. Go figure.
 
Actually the higher ed policy research on this point has been fairly consistent since the 1960s. And post-secondary enrollments tend to go up across the board, even the arts & sciences, although b-schools and other professional schools tend to see bigger spikes in enrollment.

With the economy tanking, people feel the squeeze to update their skills and credentials. So, at my partner's CC, enrollment is up 18% over last year, which I expected. What I did NOT expect is enrollment is up 20% at my professional school. I thought our spike would be lower than at a CC.

We're scrambling at the policy gossip--word is the public u's will take a 15% hit in state funding, which will be devastating. We're already pretty lean. I suspect any hires not already made won't happen, and we might not have any searches next year.

*SIGH* And I thought the blood bath of 2006-07 was bad. Looks like it was just the warm up.
 
Don't forget the effect of the increase in adjuncts to deal with the increase in enrollment. CCs survive, but is the quality of education protected?
 
My own research suggests that there is a small, but significant, response of enrollments to local economic conditions. While I did not look at community colleges--my sample was regional campuses of a state university system, primarily offering BA/BS/MS/MBA degrees,--I found that enrollment tended to rise when local employment conditions deteriorated.
 
This makes perfect sense to me. I graduated with a BSE in 2000. I applied to and was accepted to several grad programs but decided that the job market was too good to pass up at that time. One of my (younger) professors said that one of the reasons he went right to grad school was the difficulty at the time of getting a job. Even though he was able to get a job the salary offers were low because there were so many applicants so to him it made more sense to get his masters right away. He liked grad school and went on to get his PhD.
 
DD,

You said: "It's becoming clear to me that higher ed is in a really lousy position for dealing with recessions. It isn't just that we're a relatively easy budget line for legislators to attack. Unlike much of the rest of the state budget, we have an alternate revenue stream available – tuition – that we can use to cushion some of the cuts."

I disagree with the perspective behind this statement. I mean, most level-headed politicians, even those opposed to "welfare" programs, agree that down economic times call for retraining. Calugg above pointed to this but didn't follow through. The logical step, even suggested by our current national/Republican administration, is that grants to schools with "retraining programs" (i.e. ccs) would go up. In other words, any budget cuts faced by CCs or other schools in downtimes are short because politicians eventually realize that retraining involves CCs. The people telling you that budget cuts are coming aren't realizing that their cutting off their nose to spite their face. So, grin and bear it.

- TL
 
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