Pandemic in N.J. ‘Unlike Anything’ Before

New Jersey has been hit hard by the coronavirus pandemic.

The state has had the second highest number of deaths caused by the virus. The shutdown has hampered its ability to collect revenue, much of which comes from sales tax. The state treasurer froze hundreds of millions in appropriations for the rest of the fiscal year, and the governor has extended the fiscal year through September.

Now, scores of sectors that receive public funding -- including higher education -- are playing a waiting game.

"I've talked to a number of presidents. I think the biggest challenge is really the uncertainty, and that’s what I feel from them," said Zakiya Smith-Ellis, the state's higher education secretary. "They would just like to know are we getting cut and by how much, and all I can say is we don’t know."  

What Smith-Ellis does know is the budget the governor proposed earlier this year won't stay the same. But there's been little guidance on what the budget might look like.

The state has frozen nearly $1 billion in spending. About $113 million of higher education funding is included in the freeze. While that money could be restored, few colleges are expecting that scenario.

Historically, states have cut higher education expenditures to balance budgets during economic downturns. More cuts are likely to come, but Smith-Ellis said higher education won't be singled out.

Federal support could help states like New Jersey weather the pandemic, and Smith-Ellis is hopeful that will happen. In the meantime, institutions already are suffering losses.

‘Unlike Anything We’ve Faced’

Higher education experts agree that without massive federal support, New Jersey is going to be in a rough spot economically. And this could be a precursor for what's to come in other parts of the country.

Nationally, appropriations for higher education are still below what they were prior to the Great Recession, according to a new report from the State Higher Education Executive Officers association. In fiscal year 2019, appropriations in New Jersey were down about 20 percent over the past decade.

Several colleges said they had just received enough from the state to get back to pre-2009 levels. That's all out the window now.

"For all of higher education, in New Jersey and in every other state, this is a downturn and a financial challenge unlike anything we’ve faced in the past," said David Tandberg, senior vice president for policy research and strategic initiatives at SHEEO. "Unlike in previous recessions, this one is coming with unanticipated costs and multiple revenue declines."

Tandberg and others don't expect any closures for public institutions, but some states could benefit from merging institutions.

What higher education needs, said Tandberg, is a much larger federal relief bill for both the sector and individual states.

"New York and New Jersey are, in many ways, the canaries in the coal mine if this virus continues on its path," said Robert Kelchen, associate professor of higher education at Seton Hall University.

New Jersey has underlying issues that make it especially vulnerable, he said. It's reliant on income taxes from the wealthy, some of whom are taking pay cuts. It doesn't have a strong reserve fund. And the state is way behind on funding its pension system.

Kelchen doesn't expect public institutions to close or merge, though community college mergers are a possibility. But he does expect colleges to institute mass furloughs and potentially cut or consolidate programs.

"I'm worried about cuts getting made because they’re the most convenient, not because they’re the educationally soundest things to cut," he said. "If a program has a facility that needs replacements, that could be an easy thing to cut. If a faculty member is on a contract that ends in June, that could get cut. Colleges would like to do it in a more thoughtful way, but because of the severity of the crisis, they can't."

Higher education in New Jersey may be one of the first to suffer these kinds of cuts, but Kelchen predicts states across the country will follow suit.

"Unless there’s a massive influx of federal funds, I expect many states to give 20 to 30 percent cuts to state higher education budgets. State revenues as a whole are likely to trend down by at least 10 percent," he said. "Higher education tends to get cut first during recessions, and cut the deepest."

Other spending priorities, like K-12 education and health care, tend to have constitutional protection, as well as strong advocates.

"And higher ed has a revenue source called tuition," Kelchen added.

More Questions Than Answers

When the governor froze appropriations, the College of New Jersey had to make nearly $5 million in cuts in the final four months of the year.

"There were some draconian cuts we had to make at the last minute," said John Donohue, the college's vice president for college advancement.

The suburban college near Trenton enrolls about 7,400 students and has an annual operating budget of $260 million, with about $29 million coming from state support and $33 million from fringe appropriations that cover benefits like health insurance. To make the quick $5 million cut, the college instituted hiring freezes, delayed construction work and canceled what contracts it could. It also let go of student workers after trying to keep them employed as long as possible, Donohue said.

With the extension of the fiscal year through September, he's worried about what the fifth quarter of this financial year will look like. Will there be another $5 million in cuts?

"There are many fine schools in the state. Each of us have a different mission. We’ve all worked hard to develop those," Donohue said.

The College of New Jersey uses a collaborative approach to teaching, which doesn't lend itself well to online education, he said. Under normal circumstances, it lets students have a graduate school experience during their undergraduate years.

"One of the fears we have with continued reductions is we may start to lose some of that," he said.

Rutgers University, the state's flagship institution, didn't respond to a request for an interview. But a recent letter from its president, Robert Barchi, shows the university also is dealing with tough choices. It's anticipating a $200 million revenue shortfall, and each department is tasked with planning for double-digit decreases, Barchi wrote.

To show its commitment to students, the university is recommending the board freeze tuition and fees for the next year.

Picture for Two-Year Colleges

The state's community colleges are trying to position themselves to help with the eventual economic recovery.

"Community colleges play an incredibly unique and important role not only in New Jersey but around the country," said Aaron Fichtner, president of the New Jersey Council of County Colleges. ​"The economy that we have after crisis may look somewhat different than the economy before the crisis. Our colleges are launching efforts to make sure we’re connected to the business community so we can train people for the new economy."

The community colleges have started a collaborative to train health-care workers, are working with the state on how to help those who are now unemployed and are strengthening partnerships with high schools, Fichtner said.

They're also preparing for a dire budget.

About 45 percent of the colleges' budgets come from the state and their respective counties, and 55 percent comes from tuition, according to Fichtner. The counties are not doing much better than the state, as they also rely on taxes and have taken on new expenses in fighting the virus.

State funding for community colleges hasn't increased for a decade, either. Support for all of the 18 colleges was at about $161 million before the Great Recession, but now sits at $134 million.

It's still too early to predict mergers, though, Fichtner said. "Part of it will depend on all of the unanswered questions."

Will They or Won’t They Enroll?

While state funding is one piece of the budget pie, presidents of New Jersey colleges also are worried about students. Whether they enroll, and whether they can or will live on campus, are major factors in how much will have to be cut.

Stockton University enrolls about 10,000 students, and about 3,500 of them live on campus, said Harvey Kesselman, president of the college.

"For each month that we don’t have those 3,500 students on campus, that costs the institution about $3.9 million," he said.

If the university has to continue being completely virtual in the fall, and no students can live on campus, then the possibility of furloughs and layoffs would be become definites.

"But those are two large ifs, and they are two ifs I don’t believe are going to happen," Kesselman said.

Stockton is planning for different scenarios, one of which includes spacing students out across residence halls and putting some in nearby hotel spaces to continue social distancing.

Kesselman also is hopeful that Stockton's enrollment won't decline too harshly. Summer registration is at a record high, and preregistration for the fall is up 4 percent from this time last year, he said.

"If new students come in even to last year, we should be OK," he said. "But if there’s a drop, and there seems to be some evidence throughout the U.S. of that happening, then we have make very tough decisions."

Several college presidents, including Kesselman, banded together to form the New Jersey Scholar Corps program, an effort to keep students in the state for college. New Jersey is a notoriously high exporter of college students.

Community colleges could see enrollment rise as students flock to more affordable institutions. In the last recession, that's exactly what happened.

If it were to happen again, Fichtner said he expects the colleges will once again be able to expand capacity and rise to the challenge.

"We're not theoretically worried about that," he said. "But if there are extreme budget cuts, that will certainly undermine the ability to deliver a quality education to more people."

William Paterson University already is anticipating large drops in enrollment -- between 5 and 15 percent, said Richard Helldobler, the university's president.

"For the population of students we serve, that has been the population that has been hit the hardest both from a health standpoint and a financial standpoint," Helldobler said.

Nearly half of the university's students are first generation, and many are eligible for federal Pell Grants and low income. They also tend to live in the urban centers of New Jersey, where K-12 schools are shut down, leaving them without easy access to guidance counselors who can guide them to colleges.

"We try to educate students who we think will change the social fabric of the state," Helldobler said. "I really fear that, because of both the health impact and the economic impact, those students will not see college as an option."

There's some good news, though. The turnout for online events on financial aid and admissions has been higher than the turnout for their in-person counterparts, Helldobler said. More students have accepted merit scholarships, as well.

But most of the enrollment data institutions use is now relatively useless.

"If you’re looking at trend data, it’s like comparing apples to elephants," he said.

Running Out of Options

The bulk of operating costs for most universities comes from labor. Most institutions in New Jersey and elsewhere already are taking cost-cutting actions like hiring freezes and construction delays, but there's only so many "tools in the tool kit," as Kesselman said.

Doug Webber, an associate professor in the Department of Economics and Institute for Labor Economics at Temple University, said there's little left for colleges to do before using the tools of layoffs and furloughs.

First, top administrators will take pay cuts, he said, and then unionized faculty will likely bargain for furloughs or pay cuts. Most faculty in New Jersey are unionized. Several presidents expressed concern about bargained automatic raises that would take effect this summer. The state needs to step in to ask to cancel the raises, they said.

Next, fewer adjuncts may be hired, class size caps may be raised and non-tenure-track faculty might be cut, Webber said. Tenured or tenure-track faculty layoffs would be the worst-case scenario, he said, because the college would have to declare financial exigency to make that move.

But institutions in New Jersey won't be the only ones making these decisions, though they may be some of the first.

"The impact of this on state budgets is going to be absolutely devastating when they really start seeing how much the revenue shortfall is," Webber said. "So I absolutely expect that it’s not just going to be New Jersey that’s like this."