States pay out to make up losses

November 21, 1997

NORTH AMERICA. Public funding in 1997/98 for institutions soars, but long-term prospects remain unstable

Higher education spending in the United States's 50 states has soared in 1997/98, the strongest evidence yet that public funding for universities and colleges is making up some of the lost ground from the recession years.

State governments provide most of the direct grants to higher education, while Washington is chiefly concerned with student grants and loans. The combined spending rose by 6 per cent, or $2.8 billion, last year, reaching $49.4 billion.

In the early 1990s, the US recession squeezed state budgets as tax revenues fell sharply. The resulting cuts brought an end to years of growth, forced colleges into painful reviews of their spending, and saw new pressure for "accountability" to taxpayers and politicians.

This year's rise followed a similar increase in 1996/97. The gains for colleges, 11.5 per cent over two years, fly in the face of gloomy warnings about funding gaps, money crunches, and a future crush of students overwhelming under-financed institutions.

The figures are from an annual survey conducted by the Center for Higher Education at Illinois State University. They show a financial picture looking rosier than it has for years, said Edward Hines, professor of higher education, who led the study. But the relief, he warns, may be temporary.

The turnaround has been led by the Sunbelt states, in particular California, a state so large that it skews the national figures. California allocated $6.4 billion this year in spending, two-thirds of it on the giant University of California system. Texas ran a distant second, with $3.5 billion; New York, Florida, Illinois and North Carolina each spent over $2 billion.

The recession hit California late and hard, with the post-cold war collapse in defence spending. Cuts in state funding for higher education ran to 25 per cent and prompted a minor exodus of students to Oregon. The turnaround has been as dramatic; with the state booming and basking in a budget surplus, spending has risen by 24 per cent in two years.

There was an even more dramatic rise in Nevada, fed by the rapid growth in the state's population and helped by gambling revenues from Las Vegas: funding has increased 30 per cent in two years. But Florida, Louisiana and Oklahoma also saw spending run up by more than 20 per cent.

On the East Coast, conservative governors led the drive for cuts earlier this decade. In these and other states, funding is recovering. In Georgia and Mississippi, mostly black colleges, which did badly last year, have begun to bounce back. At public universities, the US states provide about 60 per cent of operating costs, with the rest coming from tuition fees and some federal government funds. In community colleges, states provide about one-third, with the rest coming from fees and local taxes.

Spending on higher education as a proportion of state budgets comes third nationally, taking a smaller slice than schools and health care, but ahead of welfare and prison spending. But spending on colleges is discretionary, rather than mandated by law. As a result, when money is scarce, it has suffered badly. In some states - notably California - prison spending nosed ahead of higher education.

The cuts of the early 1990s are blamed, in part, for a sea change in American higher education. They helped a rapid increase in tuition fees, well ahead of inflation, which in turn brought new political scrutiny and criticism of the college system, Professor Hines said.

Tenure came under attack, and colleges began to look at which departments and programmes were carrying their weight. With the tightening of the purse strings, political control has increased.

"Higher education will likely take a nosedive whenever the economy goes seriously awry," Professor Hines said. "It will go through the same kind of cycle that we went through five years ago. It's an optimistic story now, but the long-term prospects are somewhat unstable."

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