Higher Education Finances and What to Expect

Inside Higher Education highlights broad-based budget cuts across the nation. Salisbury President Janet Dudley-Eshbach warns of furloughs and mid-year tuition increases. The Chronicle of Higher Education highlights expert analysis of the tough consequences for higher education in the expected recession over the next two to three years.

The economy is in poor shape, and higher education will suffer. Fiscal pressures will come from a variety of areas:
- decreased state funding support for the operating and capital, due to declining state revenues
- decreased enrollments because of a lack of income and access to loans (both potential and current students); resulting in decreased tuition receipts

Undoubtedly, the more states cut their budgets, the more higher education will be cut. And so, to offset these lost revenues, higher education institutions will be pressured to either cut expenditures and services or significantly raise tuition. Each institution will likely work to balance the two budget-balancing strategies in the way to maintain prestige/quality and accessbility/affordability.

Next month, the Maryland Board of Revenue Estimates will examine the expected revenues for the next fiscal quarter for FY09. Possibly, the Board will identify the need to cut more from the budget. Do recall, the state experienced budget cuts amounting to around $350 million after the last revenue estimates were evaluated (higher education saw a $35 million cut, or 10%). Surely, with the further downturn in the economy over the past few months, we could expect more cuts.

A few things to consider:
- higher education occupies about 21% of the discretionary portion of the state budget (the portion of the budget that is not prescribed through legislative mandate)
- higher education saw 10% of the last round of budget cuts
- higher education is often seen as a non-essential expenditure

So, I presume that while Governor O'Malley has consistently provided significant financial support for higher education, he will be pressured more and more through fiscal realities to significantly cut higher education. In other words, the more money that is cut from the budget in Maryland, higher education will likely recieve an increasing percentage of the budget cut.

So then what happens? Tuition increases or service cuts. Take your pick. This can play out in a few ways:
- mid-year tuition increases
- larger class sizes
- decreased course offerings
- furloughs for staff
- hidden student fees and surcharges
- closed and limited student services (i.e. early closing hours for library)
- decreased and enveloped financial aid
- increased prices on campus sales (i.e. food, textbooks, t-shirts, etc.)
- fewer student job opportunities
- fewer research opportunities
- less research time for faculty


So, what are you willing to sacrifice? How do you suppose me and other policy makers balance affordability and quality?

Student Response to Slots

Students across the USM are responding in a variety of ways to representative student groups taking positions on Referendum Question 2 on the Maryland ballot authorizing slots.

• The Towson Towerlight highlighted student discontent from the Black Student Union and other groups in a recent article.
• The Diamondback highlighted in an article today the inaction, despite action by other student groups, of the UMCP SGA.
• The Retriever Weekly highlighted the SGA's action in an article and opinion piece.
  
• The UMBCUnderground Blog discussed the SGA's position a few days ago in a post discussion 
• The USM Student Council endorsed the referendum (6-1-4) in a letter to Chancellor Kirwan.

In general, student groups have been split, about 2/3 in support, and 1/3 in opposition.  Many have felt uneasy supporting a position either way and would have preferred to take no position (as did UMCP SGA).  Others felt a strong obligation to take a stand.

Has any of this impacted your vote on question 2?

USM Student Council Meeting 10/12 Meeting

The USM Student Council met Sunday 10/12. Council members considered a number of issues. Here is also my report, highlighting a number of pressing issues. Here is a highlight of the meeting:

• Election of Officers- David Walker (Bowie), Chair; Brady Walker (UB), Vice Chair; Scarlett Corso (UB) Secretary/Treasurer
• The Council discussed whether or not to take a position on the slots referendum, and ended up supporting the initiative 6-1-4. Leadership will draft a letter to the Chancellor to express the opinion of students.
• Brady Walker (UB) plans to develop a "platform" for the Council on various issues to enhance advocacy efforts.
• Michael Castello (UMBC) is working with Don Spicer and Andy Clark from the USM to proactively address issues on filesharing.
• The Council discussed issues of diversity and plans to research how campuses address diversity conflicts and what resources are available for students.
  

Here is a brief excerpt from my report, highlighting the current fiscal position for higher education in Maryland:

The Governor will propose mid-year budgets cuts (FY09) to higher education to the Board of Public Works this coming Wednesday, October 15. The Sun reported that cuts might amount to $30 million, with $10 million from the operating budget and $20 million from the general fund balance. The Governor aims to cut $423 million from this year’s budget on Wednesday to make up for lower than expected tax revenues. This cut could expand before Wednesday, and we might very well see more mid-year budget cuts down the line in FY09. The decision on the slots referendum will likely impact the Governor’s cuts in coming months.

Planning for the FY10 operating budget has begun. The Department of Budget and Management has planned for a 6.4% increase in state fund support and a 4% increase in tuition. These numbers will undoubtedly change in coming months as policymakers get a better handle of projected tax revenues.

Please post any comments or questions and I will be sure that I find you the answer.

Towson SGA Endorses Slots

The Towson SGA endorsed the slots referendum Tuesday night. The Towson Towerlight covered the decision in an article today. The Towerlight also published an Op-Ed piece speaking out against the decision.

I had the opportunity to attend the SGA meeting and was impressed by the discourse of the SGA. The final vote was 17-8. The USM Student Council will consider a similar resolution this coming weekend.

UMBC SGA Endorses Slots Referendum

Last night, the UMBC Student Government Association voted to endorse referendum question 2 for the upcoming election, supporting the restricted use of slots in Maryland. The legislation outlines that funds from slots will be used to fund education in Maryland, including up to $150 million in higher education construction dollars each year. Also, the Higher Education Investment Fund funded through the Corporate Income Tax, bringing in about $55 million to higher education each year, will only be retained if slots pass. If the referendum fails, those dollars will be dumped into the general fund. Six of the nine Senators voted for the resolution, none opposed, and three abstained from the vote.

The resolution preludes an expected vote by the USM Student Council at its upcoming meeting on October 12. On a related note, the Towson student government association will consider a similar resolution this evening at their 5pm meeting.

Breaking Ground at UMB Pharmacy

I had a great time this morning attending the "groundbreaking" ceremony for the UMB Pharmacy Addition. Governor O'Malley, President Ramsay, Speaker Pro Tem Jones, Pharmacy SGA President Yara Haddad, and others participated in the event celebrating a long-awaited project. My understanding is that this project has been in queue for nearly two decades, and finally has been pushed through planning and now to the construction phase. While the building has seemed a bit auxiliary in previous years, leaders in Annapolis have recognized the great need to support the Pharmacy program becuase of the great demand for pharmacists in the region.

This case raises a question that I had for a long time, which was how are buildings actually built? And related, why does it take so long? And who pays for the buildings?

Generally, funding comes from four areas for buildings in universities:
1) state budget
2) university budget general fund balance, whether from leftover student fees or unrestricted state, federal, or grant funds
3) private partner dollars
4) bonds (loans), whether applied on the balance of the university or private partner

The USM has provided an overview of the capital budget process for the public. More information can be found at the Capital Planning page the USM website.


Universities by far prefer to recieve funding from the State for capital projects. The availability of these funds is often limited, particularly during tough fiscal times. Additionally, in higher education, buildings that are funded both through public dollars and private dollars/bonds are often easier to push through the budget process becuase of the private buy-in and initiative ( a nickel, get a dime).

State funds, though, can only be used for "core mission" facilities. Core mission facilities are those which relate directly to the academic mission of the university, such as lecture halls, academic offices, administrative offices, athletic facilities used for academic gym classes. What is not included is residential facilities, dining halls, and student unions. I talk more about this budget process in a previous post. The other three categories can be used to fund these projects.

From my view, one problem with the reliance on the state capital budget process is that universities struggle to respond quickly to the needs of the students and the State in higher education. Additionally, false hope can develop if capital porjects are delayed year-after-year in the capital budget queue. The UMB Pharmacy building serves as an example of this. Nevertheless, the State provides a great resource and investment for our universities through capital projects. And as UMBC graduate Speaker Pro Tem says at groundbreaking ceremonies, "May it be on-time and underbudget!"

Rainy Days: Budget Shortfalls for Maryland

The state estimates today released that revenues will fall $432 million short this year (Letter from Board of Estimates), and could expand to $950 million next year (Baltimore Sun Article). The Board of Public Works plans to immediately put the breaks on a number of capital projects, many of which could affect you. In this fiscal year (2009 Capital Budget Draft), the University System of Maryland is slated to receive the second greatest amount of capital dollars, right behind public school construction, with a nearly $144 million allocation. The Governor has provided a response.

Also, check out the statement by Comptroller Peter Franchot.

Implications could be rough for higher education. First, capital projects could get hit, and later, we could suffer in the operating budget.