For Community Colleges, Post-Recession Blues

July 17, 2014

Angeline Godwin had been the president of Patrick Henry Community College for little more than a year when, in September 2013, her administration found a discrepancy in the college’s budget.

Tuition revenues for the Virginia community college had spiked between 2008 and 2011, thanks to enrollment increases. Higher education is a countercyclical industry -- community colleges especially so. During years of economic strain, more and more people enroll to earn a credential.

From 2011 on, enrollment at Patrick Henry tapered off. Its tuition-driven revenue growth tapered off with it. But someone at the college, Godwin discovered, had treated funds from student tuition as recurring revenues instead of one-time funds and carried the money forward in the budget for fiscal year 2013. It was a false surplus of more than $2 million.

With declining enrollment and dwindling state support, the community college – not to be confused with Patrick Henry College, a Christian institution also in Virginia – had little room for error. The institution would have likely faced problems even with a perfect accounting system. As it was, the slapdash budgeting left a $1.8 million deficit that the institution had to fill.

After a year spent sorting out tangled accounting, Patrick Henry balanced its budget by making dramatic cuts, which the institution announced last Friday. The community college cut 16 full-time positions – including five teaching positions – and six part-time positions, saving slightly more than $1 million. The institution also chopped $754,000 from its non-personnel spending by canceling subscriptions to certain databases and reducing money spent on instructional supplies, among other areas.

Godwin said a primitive budgeting method, rather than an incompetent employee, was to blame for the budgeting error.

“It was a weak budgeting process,” the community college president said. “It did not drive budgeting down to budget supervisors … when times are good and revenues are plentiful, those types of budgeting strategies will serve you quite well. But when you have budget challenges, you have to manage every dollar.”

Of the 16 full-time positions that Patrick Henry eliminated, 10 employees retired voluntarily with an enhanced retirement package. Four were involuntary retirements, and two were layoffs with no retirement package. All five of the eliminated teaching positions were voluntary retirements.

The non-teaching positions were primarily support positions that served students indirectly, such as technical services or office support.

“It came down to those positions that had the most direct impact on day-to-day services to students,” Godwin said. “There’s not a position that was eliminated that did not bring value to the college, and we will have to make adjustments, not having those positions.”

The Post-Recession Cliff

Patrick Henry’s belt-tightening comes at a time when community college enrollments nationwide are declining.

Community college enrollments swelled after the 2008 financial crisis. In the 2010-11 academic year, national enrollment numbers were almost 25 percent higher than in the 2007-8 academic year, said David Baime, senior vice president for government relations and research for the American Association of Community Colleges.

The surge was brief. Enrollment at two-year public institutions fell 3.6 percent between spring 2012 and spring 2013. The numbers dropped 2.7 percent between spring 2013 and spring 2014.

Community colleges are losing students older than 24 at disproportionate rates. These students still make up roughly 40 percent of community college attendees. But between 2013 and 2014, the over-24 age group saw a 5.9 percent decline in community college enrollment. In that same period, enrollments fell just 0.5 percent among community college students 24 years and younger.

More students currently attend two-year colleges than did before the recession. But languishing enrollment numbers in the last three years have forced many community colleges to downsize.

Community colleges are particularly sensitive to enrollment figures. Enrollment outstrips all other factors in determining how much state funding a community college receives. Fewer students means fewer dollars. In addition, many community colleges became more dependent on tuition dollars during the recession.

“As we’ve come out of the recession we’re finding that … a lot of colleges, at a time when it looks like state budgets are better, are being forced to cut positions and cut spending because of drops in enrollment,” Baime said.

At many community colleges, personnel expenses approach or exceed 80 percent of overall expenditures, he said. “Very quickly you get into people when you’re involved in budget-cutting."

In 2008, Patrick Henry received more than 60 percent of its funds from the state, Godwin estimated. Now, roughly 36 percent of its budget is state-funded. The rest comes from tuition.

Between 2010 and 2012, the college’s state funding declined by 15.8 percent. Tuition rates rose by roughly 16 percent during this period, according to figures from the college. It seems the state cuts shifted the financial burden directly to the students.

The college's dependence on tuition dollars left it vulnerable when its recession-era enrollment began to dissipate. In spring 2011, Patrick Henry had 3,220 students. That number dropped to 2,851 in spring 2013 before rising to 3,128 this spring.

Many of these students, however, are part-time. The college’s full-time equivalencies – calculated by adding the total number of credit hours that students are taking and then dividing by 12, the minimum number of credits required to be a full-time student – have dropped steadily, from 2,093 in spring 2011 to 1,887 in spring 2014.

The Virginia community college system, which includes 23 colleges, has lost 2 to 3 percent of its enrollment a year for the last three years, said Jeff Kraus, VCCS’s assistant vice chancellor for public relations.

A Hard-Hit Region

Although Patrick Henry faces many of the same challenges as other community colleges – above all, post-recession enrollment drops coupled with reductions in state funding – its high-poverty setting creates an additional set of obstacles for administrators to contend with while they try to patch up the institution’s budget.

The college is located in Henry County, north of Martinsville, a city with Virginia’s highest unemployment rate (11.2 percent in April). Some 24.5 percent of Martinsville residents live below the poverty line, said Spencer Johnson, director of research and operations for the Martinsville-Henry County Economic Development Corporation. The poverty rate for Henry County is 20.5 percent. The most recent data are from 2012.

Virginia’s statewide poverty rate in 2012 was 11.7 percent, the ninth-lowest in the country.

The erosion of the domestic textile and tobacco industries left deep wounds in Martinsville and Henry County. For 57 years, Martinsville was home to a nylon factory: the second in the world, when it opened in 1941. As the textile industry grew, acres of the town’s farmland gave way to asphalt, brick and smoke. At its economic zenith, the plant employed 5,000 people.

When the DuPont nylon plant closed in 1998, a number of Martinsville and Henry County residents became eligible for Trade Act assistance. The Trade Adjustment Assistance program provides federal funds to help economically displaced workers train for a new career. In the years since the DuPont factory shut its doors, Patrick Henry has retrained “well over 2,000” trade-eligible students, college officials said.

Godwin said Trade Act funds accounted for much of the college’s recession-era enrollment surge. Students who enrolled under the Trade Act had their tuition paid for by Labor Department funds dispensed through the Virginia Employment Commission.

“The Trade Act provided somewhat of a bubble, an artificial spike,” she said.

The numbers of Trade Act students started to decrease in 2011, after the first few waves of students completed their studies. Patrick Henry’s enrollment – and with it, tuition revenues – fell accordingly.

Kraus said Trade Act assistance affected Martinsville and similar regions more profoundly than it did other parts of Virginia.

“In the southern part of the state, from Martinsville to Danville, there’s a lot of folks … who benefited from the Trade Act,” Kraus said. “As that goes away it makes a difference in a way it may not in a Norfolk or a Charlottesville.”

Patrick Henry currently has the lowest number of Trade Act-certified students enrolled since 2007, college officials said.

The pressures of poverty that weigh on Patrick Henry also carry a cultural component. Frequently, the college finds itself at odds with the blue-collar community that surrounds it. Higher education, reeking of intellectualism and elitism, can be a tough sell. This clash between town and gown has implications for enrollment. Godwin, who was a first-generation college student herself, said the region's generational poverty made higher education a hard sell.

"We have to sell, every day, the value of an education, why it matters,” she said. “Particularly in communities that have suffered such economic devastation, having the trust that if I take this pathway there will be a job, there will be an opportunity… it is a significant part of what we do.”

Many of Patrick Henry’s potential students, Godwin said, grow up “in a family where no one at the kitchen table has ever had a college experience.”

Of the college’s full-time equivalencies, one-third are high school students, Godwin said. While enrollment of older students is down, dual enrollment with nearby high schools continues to expand.

Recruiting older students is more difficult.

“You end up with cynicism,” Kraus said. “You have parents and grandparents who came up working in the mills that are no longer there. They didn’t see a reason for higher education and they don’t understand why the next generation might need it.”

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