Coronavirus scrambles higher ed’s state funding outlook

Heading into this year’s legislative sessions, higher education experts and advocates expected lawmakers would continue to add modest increases to public college and university budgets. A few states, they thought, might even pass ambitious laws to make tuition free for more students.

But the onset of the coronavirus pandemic has upended almost all of those expectations. Colleges and universities have switched almost entirely to online teaching. Governors and mayors have shut down schools, restaurants, bars and other major contributors to their local economies. The stock market suffered some of its biggest single-day drops in a century.

All of a sudden, states’ budget outlooks appear much bleaker. 

“It seems likely that we’re headed into an economic recession,” said Jim Palmer, an Illinois State University education professor and editor of the annual Grapevine report, which tracks higher ed spending across states. Some economists say we’re already there.

As state tax revenues decline, so will states’ capacity to fund higher ed, he said, citing “competing demands on state budgets for money outside of higher education, such as unemployment insurance, health care or other unanticipated challenges.”

He and other experts cautioned that it’s too early to tell how much of an impact the coronavirus will have on state budgets, or what that will mean for state spending on higher ed. 

Most states were in good financial shape just a few weeks ago, notes Thomas Harnisch, the vice president for government relations at the State Higher Education Executive Officers Association (SHEEO). In fact, many states socked money away in “rainy day” funds after the last recession to cushion the impact of future downturns. That preparation could delay the impact of state revenue drops on public colleges and universities, Harnisch said.

But state lawmakers and college officials are already trying to grapple with the fallout from the coronavirus on higher ed, particularly when it comes to the shuttering of most aspects of campus life, said Andrew Smalley, a research analyst at the National Conference of State Legislatures. Those closures have left students in limbo when it comes to work-study programs, or simply having a place to eat and sleep.

On the financial side, Smalley noted, Massachusetts lawmakers are considering legislation that would create a $125 million emergency fund for public colleges. They could use the money to cover lost revenue, pay unexpected expenses, such as having to offer online courses, and deal with new employment-related costs like lost wages or expanded sick time.

Still, the coronavirus could hamper earlier plans to rework higher ed spending. Even if the money or political will were still there, state legislators are cutting their time together short, either by adjourning early or postponing their sessions until the risk of infection is lower.   

Here’s a look at some of the spending-related proposals at stake:

Free tuition programs

The idea of providing free tuition at state colleges and universities has been picking up steam in recent years, especially in states controlled by Democrats. Several Democratic governors said earlier this year that they wanted to build on existing free-tuition programs to make more students eligible for the aid.

In New Mexico, Gov. Michelle Lujan Grisham signed a budget that included $17 million to cover community college tuition for in-state students; the money is seen as the first step toward her plan of eventually making all public colleges tuition-free for state residents. 

Washington state lawmakers shored up a free-tuition program they passed last year by hiking the business taxes that paid for it but applying them to fewer companies. They revisited the issue because more students than anticipated signed up at four-year institutions under the plan, while the taxes were complex and brought in less revenue than expected.

Pennsylvania Gov. Tom Wolf asked lawmakers to use $204 million that is now spent subsidizing horse racing to provide tuition for residents who attend Pennsylvania’s system of 14 state universities. Under his proposal, students would have to stay in the state after graduation for as many years as they received the aid or else repay it.

In New Jersey, Gov. Phil Murphy wants to expand the state’s free-tuition efforts from two- to four-year colleges. Murphy asked lawmakers to pay for the first two years of tuition at public four-year institutions for students whose families earn less than $65,000 annually.

And New York Gov. Andrew Cuomo called for expanding the state’s Excelsior Scholarship, one of the most generous free-tuition programs in the country, to cover more families. He asked lawmakers to increase the income threshold for households who would qualify for the program from $125,000 a year to $150,000 a year.

Likewise, in his budget proposal, Illinois Gov. J.B. Pritzker called for a 5% increase in higher ed funding. That will help the University of Illinois at Urbana-Champaign, the state’s flagship, with its move to raise its income threshold for free tuition for state residents from $61,000 to $67,000.

Many proposals faced significant obstacles before the coronavirus outbreak.

Cuomo’s pitch in New York came as the state stared down a $6 billion budget gap driven by increasing Medicaid costs. On top of that, tax revenues could fall short of projections by $4 billion to $7 billion depending on the size of the anticipated recession, according to a new analysis of the coronavirus’s potential impact.

Illinois’ financial situation has been precarious for at least a decade, and the state owed nearly $8 billion in unpaid bills as of Friday morning.

And the president of New Jersey’s Senate told NJ Spotlight he opposed the governor’s plan to introduce a tuition-free program at four-year schools because he didn’t want to undermine community colleges.

Job-training programs

With low unemployment and growing demand for technical jobs at the start of the year, many states were looking for ways to fill additional positions, said SHEEO’s Harnisch. Lawmakers have used all sorts of strategies to attract those workers, including loan forgiveness programs, tax credits for employer training and student financial aid.

In Arizona, Republican Gov. Doug Ducey proposed spending an additional $35 million on what he called the “New Economy” initiative. Using that money, the governor said, Arizona State University would launch a center for engineering education and research. The University of Arizona would explore personalized medicine and new health care delivery models, while Northern Arizona University would prepare students for jobs in mental and behavioral health.

Virginia Gov. Ralph Northam, a Democrat, secured funding for a program to allow low-income students to attend community colleges or trade schools for free if they study for a high-demand job. The initiative would cover up to $2,250 a year for full-time students.

Nebraska lawmakers gave their initial approval to spend $4 million to provide scholarships for students at two- and four-year institutions who enter certain fields that need more workers.

And in South Carolina, Gov. Henry McMaster, a Republican, called for spending $18 million to upgrade equipment for training students to work in high-demand industries.  

Student health and safety

NCSL’s Smalley said state lawmakers have in recent years shown more interest in providing noneducational services to students, ranging from food assistance to mental health counseling. In California, advocates have been pushing Gov. Gavin Newsom, a Democrat, to allow financial aid to cover costs beyond tuition for more students, such as housing and food. But Newsom’s budget blueprint did not include money to do so, setting up a potential fight in the legislature. 

Lawmakers have been looking at smaller initiatives to help students. In Illinois, one state legislator is pushing a proposal to include contact information for suicide prevention and mental health services on the back of student identification cards.

Meanwhile, Illinois State’s Palmer says colleges are scrambling to adjust to the coronavirus outbreak and its financial consequences. 

The shift to online coursework could strain their infrastructure, and a recession could increase enrollment, particularly for community colleges. State lawmakers may have to cut higher ed programs, even if they don’t want to, because of the many demands on state budgets right now. 

“There is no script for this,” Palmer said. “Colleges and universities are building the airplane as they fly it.”