Economic crisis squeezing colleges, universities

McClatchy NewspapersNovember 19, 2008 

WASHINGTON — Shrinking endowments, state funding reductions and families struggling to pay tuition are forcing many colleges and universities to cut staff and spending or to delay construction and development plans.

From well-heeled Ivy League schools such as Harvard and Dartmouth to large public institutions such as the California State University system, many schools are facing difficult financial decisions stemming from the nation's economic standstill.

This week, the California State University system announced plans to trim 10,000 students across its 23 campuses in the next school year because of funding problems caused by a state budget crisis. The CSU system — the nation's largest, with nearly 450,000 students — will make the cuts by moving up application deadlines and raising academic standards for incoming freshmen.

"We have been, for the last two years, over-enrolled by over 10,000 students that the legislature has not funded," CSU Chancellor Charles B. Reed said. "We can't continue to admit more and more students without receiving adequate funding."

Dartmouth College recently announced a hiring freeze and plans to cut its budget by 10 percent, or about $40 million over the next two years, because of the situation. Staff reductions are also possible.

In previous economic downturns, college enrollment remained steady as more people bolstered their education to help improve their work prospects.

However, the unique aspects of the current slide — falling home values and stock prices, rising unemployment, tighter credit and fewer student-loan providers — have made a college education harder to finance and much more difficult to obtain.

Neil Theobald, the vice president and chief financial officer at Indiana University, said recently that his staff was seeing more affluent families struggling with tuition payments.

"Based on the applications, these are families that look like they can afford college, but with the economic conditions, I think they have investments that have gone poorly over the last several months," Theobald said.

Families who would have considered an expensive Ivy League education now may opt for less-expensive private schools. Others may choose even cheaper public colleges.

An October survey of more than 2,500 prospective college students by MeritAid.com, a college search Web site, found that 57 percent were considering less prestigious schools because of cost. Many students are cutting costs even further by attending community colleges for two years before transferring to four-year institutions to complete their undergraduate studies.

Enrollment at Oklahoma regional universities fell by 1.5 percent this semester, while the state's community college enrollment jumped by an almost identical amount — 1.3 percent — according to the Oklahoma State Regents for Higher Education.

Community colleges, however, are facing their own economic problems. State budget cuts and declines in funding from local property-tax revenue have forced many of them to scale back popular programs, particularly vocational/technical courses that are more costly to offer and require additional state money.

"Unfortunately, the most expensive programs that correlate to the highest-wage jobs are the ones that are most at risk," said Stephen Katsinas, the director of the Education Policy Center at the University of Alabama. In a recent survey of community college officials in 49 states, Katsinas found that nearly half expect their states to impose midyear cuts in higher education appropriations, which are typically the largest discretionary items in most state budgets.

The funding problems also have limited the amount of student financial aid that community colleges can offer and are creating enrollment waiting lists at a time when applications for admission are growing.

In Texas, community college enrollment is up 6 percent this year, an increase of more than 34,000 students, said DeJuana Lozado, a spokeswoman for the Texas Higher Education Coordinating Board.

At four-year schools, slowdowns in charitable giving, state funding cuts and poor investment returns have forced many to circle their financial wagons after nearly a decade of solid enrollment gains, tuition increases and generally robust business cycles.

The University of Florida is slashing 430 positions, trimming enrollment by 1,000 students and imposing a 15 percent price hike on in-state undergraduates.

Williams College is postponing renovation of an athletic field and other capital improvements, deferring maintenance work and imposing a hiring freeze on nonessential positions.

"How long these positions remain open will depend on the time it takes for the college's revenue to stabilize. That's likely to be many months and in the case of some positions, it could be years before we'll be confident enough to fill them," Williams President Morton Owen Schapiro wrote in a recent letter to the college community.

Even venerable Harvard University announced that it's considering budget cuts this school year and next due to investment losses, mainly in its mammoth endowment, which was valued at $36 billion this summer.

"We must recognize that Harvard is not invulnerable to the seismic financial shocks in the larger world. Our own economic landscape has been significantly altered. . . . While we can hope that markets will improve, we need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial constraint," Harvard President Drew Gilpin Faust wrote to the university community earlier this month.

It wasn't always like this.

For many years, strong public funding for higher education was a given. As more conservative Republican lawmakers were elected to Congress and state legislatures, however, spending priorities changed and funding dried up, forcing the higher education sector to step up its lobbying efforts.

In the 1990 election cycle, education ranked 39th among 80 industries in terms of lobbyists' contributions with $2.4 million, according to the Center for Responsive Politics. This election cycle, the education lobby ranks ninth and has contributed more than $38 million, mostly to Democratic candidates.

Even if it gains influence in the solidly Democratic-led Congress, however, getting more money for higher education won't be easy in the current economic climate.

Robert Berdahl, the president of the Association of American Universities, which represents 62 research universities in the United States and Canada, recently wrote congressional leaders from both parties to ask that they increase loan limits in federal student-lending programs, increase research funding at the National Institutes of Health and provide underwriting or insure capital for university construction projects.

"If Congress and the administration can assist research universities in addressing the challenges these institutions are facing, the return on that investment will be a stronger economy not only in the coming year, but in the decades to come," Berdahl wrote.

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McClatchy Newspapers 2008

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