NCSL Report: Declining state revenues impacting Higher Education across the country

The recession has taken a brutal toll on state budgets and its impact has hit higher education particularly hard, says a new report from the National Conference of State Legislatures about state revenue shortfalls and how it has translated into further budget cuts in fiscal year (FY) 2009 and FY 2010.

Because states, unlike the federal government, are required to balance their budgets, state funding for higher education is heavily influenced by the states’ fiscal situation, reflecting a cycle unique to higher education, the report said.  Funding typically takes a disproportionate hit when state fiscal conditions are weak, but experiences more robust increases when state budgets recover.

“The rationale is simple: Colleges and universities can find other sources of income, such as tuition, to compensate for reduced state support. This is not an option available to other state services. As a result, fluctuations in state fiscal conditions often have a greater impact on higher education,” the report said.

According to the report, financial woes brought on by global economic weakness have been especially hard on higher education institutions, which typically rely on three major funding streams: state appropriations, school endowments and tuition. In addition to declining appropriations, university endowments have received fewer gifts and experienced massive investment losses. With two of the three major funding sources down, many state policymakers turned to the only remaining source and raised tuition, thereby increasing the proportion that students and families pay for higher education.

According to research conducted by the State Higher Education Executive Officers (SHEEO), tuition increased 2 percent between FY 2008 and FY 2009 and is now more than 37 percent of total education revenue. In FY 1984, it was less than 25 percent.

Click here to view the full report.

Passion Rules!