Christy Gullion, Director of Federal Relations, recently provided an update on the sequester–the large, automatic federal spending cuts originally scheduled to take effect January 1st of this year, but delayed until March 1st thanks to a last-minute, bipartisan deal.
For background information, please see our most recent post on the topic as well as the brief put out jointly by the UW offices of Federal Relations, Planning & Budgeting, and Research.
The Grapevine project’s annual compilation of data on state funding for higher education shows that 30 states increased their appropriations for higher ed institutions and financial aid from FY12 to FY13. On Tuesday, the
researchers at Illinois State University and the State Higher Education Executive Officers released their tables summarizing initial allocations and estimates reported by states from September 2012 through January 14, 2013. As most states are in the midst of FY13, their budgets for the year are more-or-less finalized; however, some changes could occur due to reporting lag time.
Overall, states are spending just 0.4 percent less on higher education in FY13, compared with FY12—a relatively small decline given that state support for colleges dropped 7.5 percent from FY11 to FY12. The net decrease in this year’s budgets resulted from cuts in just 16 states, with the worst appearing in Florida (8 percent), Alabama (6 percent) and New Jersey (5.5 percent). Another 16 states, including Washington, are showing increases of less than 2 percent, which The Atlantic notes “will likely amount to a cut once inflation takes its bite.” Budgets in the other 18 states indicate more sizable increases, all the way up to 14 percent in Wyoming.
Generally, however, the gains that some universities are receiving this year do little to make up for massive cuts since the recession. States are still collectively spending 10.8 percent less than they were five years ago, when the recession began, and thirty-eight states have decreased their overall higher ed appropriations during that time, according to a Grapevine table. Among those 38, Arizona and New Hampshire cut their budgets by 37 percent and 36 percent respectively and a dozen states, including Washington, sliced funding by over 20 percent.
A news release accompanying the survey data, cited by The Chronicle, states, “Barring a further downturn in the economy, the relatively small overall change … suggests that higher education may be at the beginning stages of a climb out of the fiscal trough caused by the last recession.” However, even if state appropriations continue to stabilize, the Moody’s report discussed in our previous post points out that federal spending, tuition revenue, endowment returns, and other traditional revenue sources for colleges and universities face major challenges in the coming year. We aren’t out of the woods yet.
Last week, Moody’s Investors Service issued a negative short-term outlook for the entire sector of higher education based on its conclusion that every traditional revenue source for even the most elite colleges and universities is under pressure. That pressure, according to the report, is the result of nation-wide economic, technological and public opinion shifts, which are largely beyond institutions’ control.
The outlook report, released annually, articulates the fundamental credit conditions that Moody’s expects higher education will face during the next 12 to 18 months. For the last two years, Moody’s gave elite colleges and research universities a stable forecast; but this year, the following factors contributed to a negative outlook for the entire industry:
Struggling Revenue Sources:
- State appropriations are unlikely to increase meaningfully due to weak economic recovery.
- Federal spending on research and student aid could be truncated in response to the nation’s fiscal concerns.
- Tuition revenue continues to be suppressed by low family incomes and public/political pressure to keep prices down.
- Endowment returns are vulnerable to any economic volatility that could stem from federal tax and budget decisions.
- Donations are not expected to increase and could face pressure as Congress evaluates associated tax deductions.
- Financial diversity is no longer helpful as all revenue streams are strained.
- Student debt and loan default rates have increased and thus challenged the perceived value of a degree.
- High school graduates are declining in number.
- Public and political scrutiny of efficiency and degree value could add to institutions’ list of regulatory requirements.
- New technologies such as online learning and MOOCs could provide new revenue opportunities, but could also undermine traditional higher ed models.
Moody’s analysts warn that revenue streams will never rebound to post-2008 levels and leaders in higher education will need to adapt by thinking strategically and adjusting their operations.
But not all is gloom and doom. Although Moody’s gave higher education a negative outlook, most of the country’s top colleges and universities still hold the strong credit rankings. The UW, for one, continues to maintain a Aaa credit rating—the highest offered by Moody’s. Additionally, the report stressed that the intrinsic value of and demand for higher education remains stable.
Yesterday, the Senate and House of Representatives approved legislation to avert the fiscal cliff. The deal postpones the automatic, across-the-board spending cuts—known as “the sequester”—by two months and increases tax rates only for individuals earning over $400,000 and couples earning over $450,000. The bill also preserves funding for Pell Grants and extends for five years the American Opportunity Tax Credit (AOTC), which allows students and their parents to claim up to $2,500 a year for tuition and college expenses.
For details, please see the blog post provided by Christy Gullion, Director of Federal Relations, and the articles provided by Inside Higher Ed and The Chronicle
Christy Gullion, Director of Federal Relations, recently provided an update on the fiscal cliff–the combination of large decreases in federal spending and simultaneous increases in income taxes set to take effect January 1st. For background information, please see the brief put out jointly by the UW offices of Federal Relations, Planning & Budgeting, and Research.
Here are a few noteworthy headlines from the past few days of higher education news:
- History professors at the University of Florida are fighting a proposed differential tuition strategy that would hold tuition rates stable for “high-skill, high-wage, high-demand” degree programs for at least three years. Most STEM degrees made the list of majors recommended for this tuition freeze, while core Humanities disciplines (such as history) did not. The Governor-commissioned task force responsible for the proposal said, “The theory is that students in ‘non-strategic majors,’ by paying higher tuition, will help subsidize students in the ‘strategic’ majors, thus creating a greater demand for the targeted programs and more graduates from these programs, as well.” Supporters feel such an approach will provide taxpayers with the maximum return on their investment and “improve the university system overall.” However, the opposition, championed by a number of history professors, argues the strategy would detract from the university’s prestige and lead to a less “richly educated” workforce. Over 1,300 faculty from Florida and beyond have petitioned Florida Governor Rick Scott to seek faculty input for future decisions regarding Florida’s higher education system. This particular form of differential tuition contrasts with the more typical, cost-driven approach, under which students in majors that cost the university more to provide (such as STEM fields) are charged higher tuition than students studying less expensive subjects (like history).
- Carnegie Corporation President, Vartan Gregorian, is advocating for a presidential commission on higher education to “generate the kind of attention and urgency that the circumstances demanded for the nation to keep its competitive edge.” The commission’s mandate would be to address the many challenges confronting higher education (cost, access, etc.) and help policy makers determine its future. Given the drastic demographic, technological, and economic changes already occurring in higher ed, Mr. Gregorian believes now is the appropriate time to discuss nation-wide reform.
- Apprenticeships are becoming more popular in the U.S. as a means of bridging the disconnect between what students learn in college and what their future employers actually want them to know. Several Harvard professors, inspired by Germany’s “dual system” of providing students with practical job-related skills and theoretical instruction, are working with six states to establish apprenticeship programs.
The New York Times reported last week that the University of Phoenix will be shutting down 115 of its 227 locations over the next year—25 main campuses and 90 learning centers. The roughly 13,000 students affected by the closings (4 percent of the total student body) will have the option of either transferring to the university’s online classes or moving to another physical location. In addition, the Apollo Group, which owns the university, announced it is laying off 800 employees (4.7 percent of the university’s total staff).
The changes surprise some as Phoenix was a booming success for over a decade. However, in 2011, for-profits as a whole began to struggle. Tightened regulations; a poor economy; growing competition from MOOCs and other online providers; and scrutiny of the sector’s unethical recruiting practices, low graduation rates, high default rates, and use of federal funds caused for-profit enrollments to fall significantly relative to other sectors (as discussed in a previous post). And, as enrollments fell, so did revenue. The University of Phoenix was among the hardest hit. Compared with the same fiscal quarter a year ago, student enrollment at Phoenix dropped nearly 14 percent and Apollo’s net income plummeted 60 percent.
So, will the University live up to its name and rise anew from the remains of its finances and reputation? Or could Phoenix’s decline foretell the impending doom of other for-profit institutions? Time will tell.
The U.S. Supreme Court heard arguments yesterday in the landmark affirmative action case Fisher v. University of Texas (UT) (please see our previous blog for more information). Four Justices will need to support UT if it and, potentially, public colleges across the nation are to continue using race and as a factor in admissions decisions. Three justices hearing the case have historically supported affirmative action. A fourth supporter, Justice Kagan, recused herself because she played a role in preparing the Obama administration’s UT-supportive brief. The other five justices have typically expressed doubt over affirmative action’s value. Of these, Justice Kennedy is regarded as the most plausible swing vote. A 4-4 tie would uphold the federal appeals court ruling that UT’s program is constitutional.
Justices seeming to favor Fisher questioned:
- If UT could know it had achieved a desired level of diversity without setting a target and verifying its students’ self-reported race; and,
- Whether an admission process is truly fair if it benefits minority students from affluent backgrounds as much those from poverty. Justice Alito Jr. said: “I thought the whole purpose of affirmative action was to help students who come from underprivileged backgrounds.”
Justices seeming to favor UT questioned:
- Whether Ms. Fisher’s suit is even legal, given UT’s statement that she would have been rejected regardless of race considerations; and,
- Why the Court should change its 2003 decision on Grutter v. Bollinger—“A case into which so much thought and effort went and so many people around the country have depended,” said Justice Breyer.
Both sides agreed that the Court may have led colleges astray in 2003 by ruling that applicants’ race could be considered in order to assemble a “critical mass” of minority students. They said the term “critical mass” (defined by Grutter as the sufficient number of minority students to ensure they feel comfortable speaking out, not isolated) encourages colleges to aim for some numerical threshold of minority students, but such an approach could violate the Court’s ban on college’s use of quotas. After the arguments, the esteemed SCOTUSblog offered that: “Affirmative action is alive but ailing, the idea of ‘critical mass’ to measure racial diversity is in very critical condition, and a nine-year-old precedent may have to be reshaped in order to survive.”
The Court is expected to decide the case in spring or summer of next year.
The NY Times reports that researchers at the Brookings Institution have summarized why college is worth it. Their chart shows the percent of people at each income level who have various levels of educational attainment. Not surprisingly, the conclusion is that more education opens the gateway to better, higher-paying jobs.
A few findings to consider:
- Of the Americans who earn over $150,000, 82 percent had a bachelor’s degree.
- An individual with only a high school diploma is twice as likely, relative to someone with a college degree, to earn less than $40,000 per year.
- Conversely, an individual with a college degree is 9 times more likely to make over $100,000 and 13 times more likely to make more than $200,000 per year when compared to someone with only a high school diploma.
Although half of all UW undergraduates graduate with zero debt, even when factoring in debt, college is still a great investment. The same researchers developed another chart showing the return on investing in one’s higher education relative to the return on investing comparable tuition money in the stock market, long-term Treasury bills, housing, corporate bonds or gold.
Once again, the numbers show that postsecondary education opens the door to higher-paying jobs and more opportunities.
Now that both Democrats and Republicans have adopted party platforms at their respective conventions, what do we know about their plans for higher education? Below is a quick overview of each party’s higher education goals and associated action steps (past, present, or future) adapted directly from the parties’ formally-adopted platforms:
GOAL 1: To make college affordable for students of all backgrounds and confront the burden of loans.
- Removed banks as student loan middlemen, saving more than $60 billion.
- Doubled investment in Pell Grant scholarships.
- Created American Opportunity Tax Credit of up to $10,000 over a 4 year degree.
- Working to help student loan payments be only 10% of a student’s monthly income.
- Pledged to incentivize colleges to keep their costs down.
- Invested over $2.5 billion into strengthening our nation’s Minority Serving Institutions.
GOAL 2: To recognize the economic opportunities created by our nation’s community colleges.
- Invested in community colleges and called for business-college partnerships to train 2 million workers.
GOAL 3: To make this country a destination for global talent and ingenuity.
- Will work to help foreign students earning advanced degrees stay and help create jobs here.
GOAL 1: Improve our nation’s classrooms.
- Address ideological bias that is deeply entrenched within the current university system.
- Protect the public’s investment in state institutions from abuse by political indoctrination.
- Call on State officials to ensure that public institutions be “places of learning and the exchange of ideas, not zones of intellectual intolerance favoring the Left.”
GOAL 2: To address rising college costs and get back to programs directly related to job opportunities.
- Expand new systems of learning (online universities, community colleges, etc.) to compete with traditional 4-year colleges.
- Advance the affordability, innovation, and transparency needed to make lower cost alternatives accessible to everyone.
GOAL 3: To get federal student aid onto a sustainable path.
- Provide families with information necessary to making prudent choices about a student’s future.
- Shift the federal government’s role in student loans from being the originator of loans to an insurance guarantor for private sector student loans.
- Welcome private sector participation in student financing.
- Reevaluate any regulation that drives tuition costs higher.
Voters’ choices on November 6th will determine which party, and consequently which platform, has the greatest impact on the UW. In the meantime, any relevant updates or changes will be added to OPBlog.
← Previous Page — Next Page →