Budget gap looms in US

March 10, 2006

Every state in the US faces a potential budget deficit that is likely to leave public higher education with less financial support than ever as it competes with demands for spending on health care and primary education, according to a study.

The study, published by the National Center for Higher Education Management Systems (Nchems), says that state governments will collect 5.7 per cent less in revenues than they will need to maintain even their current level of services until at least 2013.

It also says that, in future, more of the money that comes in is likely to be spent on services other than higher education. As the population ages, the fastest-growing demand will be for healthcare.

This means that more of the burden for supporting public universities will fall to students, continuing a decade-long trend of huge tuition-fee increases and growing student debt.

"The real losers, in some ways, are not the institutions as much as the students," said Dennis Jones, president of Nchems, a private non-profit organisation whose mission is to assist higher education institutions improve their management capability.

"Higher education has become pretty capable of off-loading costs to the second payer - students - when the states don't step up."

While upper-income and middle-income students and their families have been helped by new tax credits and other programmes to offset the cost of university tuition, Mr Jones said "lower-income students are being increasingly priced out".

"The percentage of their income that has to go to pay tuition continues to go up. They're not using tax credits and those kinds of things. It's the low-income folks who have really been hammered."

Asked if there's any light at the end of the tunnel, Mr Jones responded:

"Nope."

"The real message here is that higher education is going to be hard-pressed to gain a share of the state budget, because the competition from things like healthcare is so strong. The claimants for other parts of the budget are expanding more rapidly than the claimants for higher education."

The same pressures were squeezing universities on the expenditure side, Mr Jones said. Universities also face increasing costs for healthcare, propelling their costs still higher.

"Until we do something different about how much and how we pay for healthcare, higher education is going to continue to be squeezed," he concluded.

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