Research & Commentary: Higher Education Budget Cuts

Published August 31, 2011

In 2010, states cut higher education budgets by a total of $1.2 billion. In 2011, the cuts are expected to reach $5 billion. Given the current financial condition of most states and the federal government, analysts such as Frederick Hess of the American Enterprise Institute and Richard Vedder of Ohio State University expect budget cuts to increase for at least the next decade.

Many administrators, parents, and students are understandably alarmed by the disruption shaking higher education. Some insist the cuts must stop, saying higher education contributes to individual earning potential and the economy as a whole and thus is a good investment of taxpayer dollars. They also say college must be made available to all as a ticket to a middle-income lifestyle or better, the alternative being poverty and privation. The higher education system will collapse if further budget constraints occur, they claim.

Those calling for additional cuts in subsidies to higher education point to the primacy of fiscal commitments such as Social Security, Medicare, Medicaid, and pension programs. They cite the nation’s stagnant economy as evidence taxpayers and states cannot afford to continue deficit spending. They also note previous years’ overspending on education has allowed colleges and universities to increase tuition and fees while ignoring ways to deliver their services more efficiently. They point out many young people would be better served by excellent, efficient vocational and career training as a more appropriate path to productivity and personal happiness.

The following documents offer more information about higher education budgets and government subsidies.

Pell Grants Shielded in Debt Ceiling Deal
Though Republicans targeted undergraduate federal Pell Grants during the debt-ceiling negotiations, the program received no cuts in the final deal, the Minnesota Daily reports. Instead, Congress and the president chose to eliminate government-subsidized loans to graduate and professional students by July 2012. Pell Grant funding remained at $17 billion.

Less Academics, More Narcissism
While University of California campuses drop degree programs and lose talented professors to other schools amid a budget crisis, the system continues to increase its “diversity” staff and programs, writes Heather MacDonald for City Journal. Diversity, she argues, is simply a code word for narcissism, and this focus drags down California universities’ academic missions. She examines the salaries and department funding for such pursuits, finding them highly expensive and displacing scholarly programs such as engineering and medical research.

UC Budget Lacks Transparency, State Audit Says
The University of California spends $1 billion each year on “miscellaneous” services, one example among many that state auditors give for concluding the system lacks transparency, reports the San Francisco Chronicle. Auditors criticized the system for offering no specifics on line-item expenses, which leaves the public with no idea how the university system spends its money.

Texas Gov. Rick Perry Wages an Assault on State’s University Establishment
This Washington Post article documents Texas Gov. Rick Perry’s (R) drive to run state universities in a more businesslike fashion. Measures include ranking faculty according to their cost or financial benefit to the school, assessing and paying professors based on student evaluations, and refocusing away from research and toward teaching. Perry challenged state universities to draw up a college degree that costs $10,000 in total.

Overhaul Career and Technical Education
The nation’s community colleges, vocational programs, and job training are a mess, writes Frederick Hess in The Atlantic. The $36 billion in annual taxpayer subsidies is largely misspent and functionally useless. With so many Americans working in sectors that demand these skills, this disjointed system deeply hurts the American economy, he writes. Hess calls on states, business leaders, philanthropy, and the higher education community—emphatically not the federal government—to make the necessary changes to improve the nation’s workforce.

Colleges Boost Student Fees to Fill Gaps in State Funding
Instead of increasing tuition directly, colleges are raising student fees in an effort to fill budget gaps created by decreasing state funds, reports USA Today. In some states, fees have risen three times faster than tuition, and in others fees account for a quarter of the cost of college.

The Great Fee Scam
Economist Richard Vedder, writing in The Chronicle of Higher Education, critiques the rise in college fees as disguising bloat in an era of tight budgets. He says the increasing fees make colleges appear greedy and dishonest, and he praises legislative efforts to demand cost and budget transparency. Vedder also points to the root cause of the attempts at trickery: third-party, government involvement in higher education, which blunts the incentives for colleges to innovate and reduce costs.

Will the College Bubble Burst from Public Subsidies?
When consumers buy products with money the government has supplied, it creates a bubble in the market, which must burst eventually, observes political analyst Michael Barone in the Washington Examiner. This, he predicts, is likely to occur soon in the college market. Bubbles burst when there is a breakdown in public belief in a system, and Barone notes several indicators this is currently occurring in higher education.

Opportunities for Efficiency and Innovation: A Primer on How to Cut College Costs
In this American Enterprise Institute study, Oklahoma State University professor Vance Fried discusses five cost-cutting strategies for colleges and universities: Eliminate or separately fund research and public service, optimize class size, eliminate or consolidate low-enrollment programs, eliminate administrator bloat, and downsize extracurricular programs. The root cause of college bloat, he writes, is in poor decisions about administrative structure and a willingness to divert attention away from teaching into funding superfluous activities.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute.

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If you have any questions about this issue or The Heartland Institute, contact Heartland education policy research fellow Joy Pullmann, at 312/377-4000 or [email protected].