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?

Budget Cuts Finalized; $35.4 million cut for USM

Governor O'Malley brought a final list of budget cuts to the Board of Public Works today.  Among cuts, the Governor cut the state contribution for the University System of Maryland by 1.5%, totalling $15.6 million.  Notably, the USM also recieved a $20 million cut from its general fund.  Other cuts in Higher Education include:

• Community College Local Aid- $8.2 million
• Maryland Higher Education Commission Operations and Scholarships- $8.9 million

The USM saw greater than expected cuts; but in relation to other departments and the USM's share of the discretionary budget, the USM fared relatively well.  These cuts are part of a nearly $300 million budget cut proposal, as highlighted in an article in The Sun.

Budget Woes in Maryland

Budget revenues are down in the state as a result of a faltering economy, and so the Governor is considering mid-year fiscal 2009 budget cuts. Governor O'Malley will propose approximately $300 million in budget cuts. The Sun has highlighted a list of these possible cuts.

The Sun reported that the USM will receive about $30 million in cuts, $10 million from the base operating budget and $20 million from the "cash-on-hand" fund balance. Community colleges are set to receive $16.3 million and independent colleges will receive a 25% cut of state funds of 8.4 million.

While it seems like the USM is taking a significant cut, we are fairing well in the broad picture of cuts. The USM encompasses 22% of "unrestricted funding" of the state budget, and will only take about 11% of total cuts.

Of course, the Governor may very well propose additional cuts beyond these estimates tomorrow in his final proposal, considering the recent decline in the economy. Also, revenue estimates may be down again later this year--we should embrace to consider further midyear budget cuts down the road.

On a related note, the Chronicle of Higher Education has written a story about the USM's unique strategy of cutting the fat in the budget and increasing efficiencies through the Effectiveness and Efficiency Initiative. Legislators have commented that this strategy has increased their trust and confidence in budget proposals from higher education.

Presidents of USM institutions will be faced with tough decisions after tomorrow when the first round of budget cuts are approved.

**Also note an article in the Diamondback highlighting a report from the Department of Legislative Services yesterday, which recommended that policymakers seriously reconsider another tuition freeze.

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.

Looking Forward in higher education...budget cuts

I spent two days last week participating in a retreat of the Board of Regents. We reviewed strategic objectives for each campus and heard from Presidents on how they would handle budget cuts in Fiscal Year 09 (this current year) and FY10. We asked Presidents to prepare statements on a 2% FY09 base cute and a 3% FY10 cut. The most popular cuts that we heard were:
- maintaining the hiring freeze
- further backlogging deferred maintenance
- financial aid for students.

We asked the Presidents to prepare these numbers in expectation of budget cuts in the current year because of the mid-year estimated budget shortfalls (see previous entry). It is estimated that the Governor will cut just over $220 million this year, and because higher education is such a large share of the discretionary budget, we expected to see cuts.

Since the retreat, we have heard from the Governor's office that we should expect to see a base budget cut of $10 million and a cut from our fund balance reserve of $20 million. While we will see a total of $30 million in cuts this year, the lasting effect on the budget will only be a cut of $10 million from each year out.

Of course, this budget situation is a tale of two cities. The Governor has worked very hard to support higher education, and planned to fund a tuition freeze for undergraduate in-state students at the cost of $16 million and fully funded the rest of the operating budget and capital projects. On the other hand, the system did not raise tuition because the Governor planned to fund the difference; but now with budget cuts, those dollars will now not come to our institutions.

Of course, things will be difficult over the coming months and couple years. A partnership with the Governor's Office is critical to maintaining as much funding as possible for education. Governor O'Malley been very supportive in the past and I do not doubt that he will be in the future.