Weighing Funding Options
As Public Funding Shrinks, Colleges Turn to Private Funding
It was roughly two years ago that a pair of community college leaders stood before a group of their colleagues and provided a glimpse of the future of college financing. It was an unsettling picture.
At the time, the country was still feeling the effects of the Great Recession. The financial crisis had drained state tax coffers. State support for higher education was in a downward spiral.
Stephen Curtis, then president of the Community College of Philadelphia, and Rufus Glasper, then and now chancellor of Maricopa Community Colleges, made the case this was no one-time anomaly. Colleges could no longer look to state goverments as their primary source of funding.
Then they invoked what had become a dirty little word in community college circles: privatization.
The erosion of government support for their institutions meant that colleges must rely on money from private sources — primarily tuition and fees — to operate their institutions, they said. Colleges needed to begin acting like private schools or businesses, paring their operating budgets, reducing services and programs and devising and developing new ways to raise revenue: renting out space on their campuses, contracting with businesses for workforce development classes, launching foundations and creating endowments.
Since that presentation at the annual convention of the American Association of Community Colleges, Curtis and Glasper have proved prescient. Even as the economy is recovering five years after the onset of the recession, higher education funding from state governments remains far below pre-recession levels.
A recent report by the Center on Budget and Policy Priorities (CBPP) found that states have begun to restore some of the cuts they made to higher education since the beginning of the recession. Spending is up by about $450 per student, or 7 percent, among states that have increased higher education spending.
Still, the report found that state spending on higher education was 23 percent less in the current fiscal year than it was in 2007. Thirty-seven states have cut education funding by more than 30 percent since the start of the recession.
To make up for declining state investment in higher education, colleges across the country have been raising tuition and fees.
According to the National Center for Education Statistics, the average cost of attending a public community college full-time in 2012-13 was $9,180. That’s up from $8,909 from a year before, and 18.3 percent more than the average cost of $7,637 in the pre-recession 2007-08 school year.
“These sharp increases in tuition have accelerated longer-term trends of reducing college affordability and shifting costs from states to students and their families,” the CBPP report said. “Federal student aid and tax credits have risen, but on average they have fallen short of covering the tuition increases.
The tuition increases have contributed to a swelling in student debt levels since the start of the recession — up 20 percent for the average bachelor’s degree recipient.”
Community colleges now get more money from tuition and fees (29.5 percent) than from state appropriations (28 percent). The balance of community college funding comes from localities, the federal government and other sources.
State legislators have been reducing higher education funding for numerous reasons. The most obvious is that the financial crisis led to a steep decline in tax revenue. But reductions in college subsidies are actually part of a trend that predates the recession. Mandatory spending on things like prisons, pensions and health care are crowding out discretionary funding for colleges, even as a college degree has become practically a prerequisite for getting a job.
According to the National Governors spending category, consuming an average of 23.9 percent of state expenditures in fiscal year 2012, the latest year for which figures are available. Elementary and secondary education, for decades the largest state spending category, now ranks second. Higher education accounts for about 10 percent of state funding, down from the historic high of 20 percent 30 years ago.
Colleges are always an inviting target for budget-cutters. While states can’t make prisoners pay for their confinement, colleges can always raise tuition to cover fiscal shortfalls. But the spending cuts have fueled rapid increases in student debt. According to the Project on Student Debt, students who graduated with a bachelor’s degree in 2012 had average student debt in excess of $29,000.
The skyrocketing levels of debt are having a rippling effect through higher education.
“High levels of student debt are a major problem, and rapidly rising tuition is scaring some students away from enrolling in college altogether,” said Michael Mitchell, a CBPP and author of its recent report. “States can help relieve students of crippling debt and keep college affordable for students and their families by re-investing in public colleges and universities.”
According to the annual State Higher Education Finance report issued by the State Higher Education Executive Officers Association (SHEEO), state and local funding for higher education reached an all-time high of $88.8 billion in the 2007- 08 academic year. Between then and 2012, state and local support dropped every year before increasing by .7 percent in 2013, to $78.8 billion.
The report also found that public colleges overall now receive 47 percent of their revenue from tuition and fees, compared to 24 percent in 1988. In many states, the share of educational costs borne by students and families exceeds 50 percent.
The cost-shifting from state governments to families and students raises important questions for the future of higher education, not the least of which is whether higher education is a private benefit or a public good.
From the earliest days of the country, through the founding of land-grant colleges and the creation of a nationwide system of community colleges, higher education was seen as a public good whose benefits were shared among the entire populace and whose costs should therefore be shared.
Research has shown that higher education has benefits for the entire economy.
College also is one of the best tools for promoting social mobility among lowincome populations. But as the cost of a college degree continues to rise, some observers question whether the public can afford to pay.
more immediate concern for educators is the squeeze they find
themselves in, coming under growing pressure to improve graduation rates
and educational outcomes even as funding dries up. Indeed, even as
funding has been reduced, colleges have been increasing the number of
“As states has shifted their limited resources to other parts of their budgets, such as corrections, K-12 education, employee pensions and health care, public colleges and universities have been forced to place an increasing share of the cost of education on students and their families,” said Bob King, SHEEO executive committee vice-chair and president of the Kentucky Council on Postsecondary Education. “This is not sustainable in an era when more and more students from lower-income families need to attend and graduate from college. Colleges need to find ways to reduce costs, but states also must find ways to direct more money to support their students.”
Glasper, for one, does not expect state funding for higher education return to pre-recessions levels anytime soon. In an article he recently authored for the AACC, Glasper said the stable funding models of the past are just that. When it comes to college funding, leaders can expect an uncertain future, what scholar Peter Vaill termed “whitewater,” Glasper wrote.
“We need to accept that the fact that higher education’s whitewater is our new normal,” Glasper wrote. “State support of public funding is unlikely to ever return to previous levels. We need to stop looking to the past as a means to change our future.”
Sources of Revenue For Community Colleges
A state support for higher education has receded since the start of the Great Recession, tuition is now the top source of revenue for community colleges. Here is a look at where community colleges get their money.
Price of Attending An Undergraduate Institution
The average net price (total cost minus grants) of attendance differs by institution level and control and by student living arrangements. At each institution level and control, the average total cost was lowest for students living with a family.
Average total cost of attending degree-granting institutions for first-time, full-time students, by level and control of institution and living arrangement: Academic year 2012–13: