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State Funding Fortunes Start Falling

February 26, 2008

In fiscal years 1996 and 1997 -- 1997 being the year that Kentucky's Legislature approved the landmark Postsecondary Education Improvement Act -- the state ranked 24th nationally in terms of per capita state higher education appropriations. By fiscal year 2008, Kentucky had climbed to 11th place, according to data from the Grapevine project based at Illinois State University.

“These last 10 years, Kentucky has been among the national leaders in reform of postsecondary education," said James C. Votruba, president of Northern Kentucky University. “This current budget is going to put that to a test, I believe.”

Kentucky’s universities are lobbying heavily against 12 percent cuts to higher education included in Democratic Gov. Steve Beshear’s recommended budget for 2009 to 2010, the proposal coming in the wake of 3 percent reductions already in effect for this year. If the governor's recommendations remain intact through the legislative session -- certainly anything but a sure thing -- “it’s very clear there will be some very dramatic financial changes on the campuses," said Brad Cowgill, interim president of the Kentucky Council on Postsecondary Education.

“They are left to choose between one or the other or both of two general strategies. One I would call revenue replacement -- to find other sources of revenue, including tuition, to make up for the shortfall in public support. The other is cost reduction. That can take shape in the form of layoffs or program reductions or eliminations or, in some cases, some form of enrollment controls” (i.e. caps).

Kentucky’s colleges aren’t alone in their plight, though their positions might be especially perilous. In Rhode Island, the governor is proposing $17.8 million in cuts to higher education in the 2009 fiscal year, as The Providence Journal recently reported. Florida universities recently got a bit of a short-term reprieve. They expect to return about $48 million in funds appropriated for 2008 to the state this spring -- significantly less than the $92.3 million projected, according to an article Friday in the Tallahassee Democrat. The article noted, however, that while that's good news for this fiscal year, the universities aren't "off the hook" for the next academic year -- and more budget cuts might be to come.

In California, which now faces an estimated $16 billion shortfall, the three public systems of higher education combined report facing more than a billion dollars in proposed funding reductions. In contrast, both California and Kentucky experienced increases in state higher education appropriations last year. Nationally, according to Grapevine data, appropriations were up 7.5 percent for the 2008 fiscal year.

But fortunes are falling, and California's and Kentucky's are just falling faster than most.

“Everybody is looking at California and Kentucky because of serious, serious budget shortfalls.... It feels like it’s the same story repeating itself, which is when we have bad budget years higher ed suffers disproportionate to other budget items. And in healthy years, states try to recover and put money into it,” said Julie Bell, education program director for the National Conference of State Legislatures. The organization released a report in November finding that state finances were worsening. While most states reported meeting or exceeding their revenue expectations at that point, a growing number, according to the report, were falling short of the numbers that forecasters had projected and that lawmakers had relied upon to build budgets.

With forecasts weakening, the "recovery" period for higher education is likely over, Bell said -- with California and Kentucky simply among the first states to feel the shifting winds. “Last year was very, very good for higher ed, very good, and we’re not going to see that for a good long while. We’re quite sure.”

“It does certainly feel like it’s a trend starting."

Back in Kentucky, higher education leaders described feeling frustrated at the possibility of being thwarted from reaching various objectives. University of Kentucky officials, for instance, frequently mention the state-mandated goal that UK land among the top 20 public research universities nationally by 2020.

Also by 2020, there’s a statewide campaign to “Double the Numbers” of college graduates in Kentucky, from 400,000 to 800,000. Additionally, university leaders cite what they call a compounding problem when it comes to increasing enrollments: a reduction in scholarship funding proposed. Under the governor's recommended budget, funding for the state's merit-based scholarship program, the Kentucky Educational Excellence Scholarships, would drop about $13 million from fiscal year 2008 to 2009, leaving a total appropriation of approximately $76 million. (Funding for two need-based scholarships also financed by Kentucky's lottery, however, would flatten, not fall.)

“The thing that concerns us is we feel we have tremendous momentum right now,” said Jay Blanton, a spokesman for the University of Kentucky. He cited a more than $20 million increase in state funding that the university received this fiscal year to support the university's top 20 goal. UK brought in a net of 60 new faculty, Blanton said, "directly as a result" of that extra funding.

In contrast, he said the governor’s proposed budget amounts to a $50 million reduction in the university’s $330 million annual state appropriation. “If you were going to make it up solely through tuition, that would be a 30 percent tuition increase,” Blanton said (cautioning that they wouldn’t take such a drastic approach to making up any shortfall in state funding by raising tuition alone, but that the number was useful for comparison's sake).

In his written testimony to the budget review subcommittee, Michael B. McCall, president of the 16-college Kentucky Community and Technical College System, wrote that “Budget shortfalls will have an immediate impact on our ability to address the mandates and goals of HB1” (the common term for the 1997 postsecondary reform act).

"The 2020 goals in HB1 have just become 2028 goals as a result of the proposed funding package for postsecondary education."

“It’s not just the stakes related to Northern Kentucky. It’s the stakes related to the ability of Kentucky to compete in a very different economic environment where talent and innovation rule,” said Votruba, Northern Kentucky’s president. “My worry is you can’t stop and start the building process.”

But, echoing others, he said he’s hoping they’ll face smaller cuts. "The governor inherited an enormous fiscal challenge,” Votruba said. “At this point, I’m not optimistic or pessimistic. What I do believe is the case is the governor’s budget reflects the worst-possible scenario. Things can only get better at this point.”

 

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