HIGHER EDUCATION INSTITUTIONS MUST OVERCOME INCREASING FUNDING REDUCTIONS

HIGHER EDUCATION INSTITUTIONS
MUST OVERCOME INCREASING
FUNDING REDUCTIONS

INTRODUCTION
IMPACT OF INCREASED TUITION ON FAMILIES
ALTERNATIVES TO RAISING TUITION
HOW QUESTICA CAN HELP
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HIGHER EDUCATION INSTITUTIONS MUST OVERCOME INCREASING FUNDING REDUCTIONS

INTRODUCTION
Public colleges and universities will face increasing budget challenges as states
throughout the country continue to cut back on higher education funding.
According to a new report from the national non-profit organization Young
Invincibles that analyzed state spending from 2008 to 2014, funding for higher
education has not returned to pre-recession levels, despite signs of general
economic recovery.
Only two states, North Dakota and Alaska, are investing as much in public
higher education as they did before the recession. The other 48 states have
all cut per-student spending by an average of 21 percent. However, for some
states the percentage was significantly greater. Louisiana made spending cuts
of 41 percent, while Alabama, Pennsylvania, South Carolina and Arizona all cut
funds by more than 35 percent.
The resulting impact on students and their families can be significant. As
the report noted, the two primary sources of funding for public higher
education institutions are state contributions and tuition. As such, colleges
and universities are often forced to raise tuition when state spending declines,
putting an additional economic burden on students.
“Three-quarters of all college students attend public institutions, and the
budget and policy decisions made by state and local policymakers drive the
access, affordability, and value of our higher education system,” the report
noted. “Typically the less funding a school gets from their state, the more
students will have to pay in tuition to make up the difference.”
As a result of reduced state funding, tuition and fees at both four-year and
two-year institutions have increased by an average 28 percent since 2008,
the report found. No state has managed to keep the student cost of higher
education from going up, though states including Ohio, Maine and Montana
kept increases below 10 percent. However, Arizona, Georgia and Louisiana saw
fees and tuition climb by more than 60 percent.
HIGHER EDUCATION INSTITUTIONS MUST OVERCOME INCREASING FUNDING REDUCTIONS
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IMPACT OF INCREASED TUITION ON FAMILIES
As The Atlantic noted, one way increasing tuition is affecting students is by
way of mounting debt. The publication found seven out of 10 college seniors
will graduate without paying off their student loans.
Speaking with the news outlet, Lauren Asher, president of The Institute for
College Access and Success, said the financial burden is hardest on lowincome
students and families that are seeing a greater gap between what they
can comfortably pay and what is being asked by colleges and universities.
“It’s reflected in the high debt levels of federal Pell-Grant recipients, who
mostly have family incomes under $40,000,” Asher explained. “The most
recent data show that nearly nine in 10 college graduates received Pell
grants and loans, and they owed an average of $31,200.”
As the Center on Budget and Policy Priorities reported, tuition increases have
been outpacing income increases since the 1980s. The average inflationadjusted
public college tuition has increased by nearly 270 percent since
1963, while household incomes have only increased on an inflation-adjusted
basis by 5 percent during that same time.
The result is an increase in the number of students who are choosing not
to attend college, the CBPP found. This is especially true for low-income
students who often overestimate the financial burden higher education will
place on their family.
“Significant enrollment gaps based on income exist even among prospective
students with similar academic records and test scores,” the CBPP stated.
“Rapidly rising costs at public colleges and universities may widen these
gaps further.”
HIGHER EDUCATION INSTITUTIONS MUST OVERCOME INCREASING FUNDING REDUCTIONS
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ALTERNATIVES TO RAISING TUITION
While few colleges and universities see increasing tuition and fees as a positive
step, many are left with no other option. Additionally, many state lawmakers
hope to avoid cuts to higher education but are unsure how else to balance
their budgets. Political pressure may also make it undesirable to raise taxes for
additional revenue.
“States relied disproportionately on damaging cuts to close the large budget
shortfalls they faced over the course of the recession,” the CBPP reported.
“Between fiscal years 2008 and 2012, states closed 45 percent of their budget
gaps through spending cuts but only 16 percent through taxes and fees.”
Some states have responded to budgetary shortfalls by eliminating faculty and
administrative positions at public colleges and universities. In other instances,
courses or entire departments were cut from schools, the CBPP found. Vacant
positions have also been left unfilled and class sizes have been increased.
Other schools have begun exploring alternative funding solutions. As U.S. News
and World Report noted, schools including the Georgia Institute of Technology
have begun offering online degree programs at lower tuition rates. These
programs allow the school to admit more students while saving money on
facilities usage, the news publication reported.
Student representatives from the University of California-Riverside also proposed
an alternative funding model that would eliminate upfront tuition and instead
require students to pay back a static percentage of their salaries to their college
or university for the first 20 years of their employment. As Governing reported
when the plan was first proposed in 2012, the funding model is unlikely to
come to fruition but has been debated at universities throughout the country as
frustration with increasing tuition continues.
HIGHER EDUCATION INSTITUTIONS MUST OVERCOME INCREASING FUNDING REDUCTIONS
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HOW QUESTICA CAN HELP
Though alternative funding methods will continue to be explored, public higher
education institutions will still face difficult financial decisions in their immediate
future. Balancing budgetary restrictions with the best interests of students, staff
and faculty requires careful planning and a thorough understanding of the
school’s revenue and spending.
Through Questica’s higher education budgeting platform, colleges and
universities can gain granular insight into their funding by streamlining data
from multiple sources and eliminating inefficient spreadsheets. The web-based
platform allows schools to track operating and capital project budgets, and
provides comprehensive tools for calculating expenses associated with staff
salaries and benefits.
Schools hoping to avoid increases to tuition and fees can utilize Questica to
establish and evaluate unlimited multiyear forecasting and hypothetical budget
scenarios. The flexible software also allows for performance tracking, enabling
higher education institutions to establish quantifiable success measures for
budgeting solutions and see how any changes to spending are impacting the
learning experience for students.
Public colleges and universities should contact Questica to learn more about
how advanced budgeting software can help in overcoming the challenges of
reduced state funding.
HIGHER EDUCATION INSTITUTIONS MUST OVERCOME INCREASING FUNDING REDUCTIONS
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980 Fraser Drive
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Canada L7L 5P5
questica.com
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info@questica.com