Standard & Poor's Rating Services recently issued a negative outlook for nonprofit higher education for 2015. "Upping the Ante: Costs of Luring Top Students Keeps the Outlook Negative on U.S. Not-for-Profit Higher Education Sector" cites that colleges and universities will continue to struggle to balance their rising costs with student affordability. In addition, increased competition within the industry will require even stronger in-house management.
Education funding is taking a hit nationwide as more and more states are instituting cuts. Arizona Gov. Doug Ducey's proposed budget calls for $75 million in cuts to the state's public universities. Already heavily dependent on tuition dollars for the majority of their operating budget, educational leaders there worry how these potential cuts will further affect their bottom line - in particular at Arizona State University where officials previously announced no tuition increases for existing in-state ASU students.
Louisiana higher education officials, meanwhile, are facing the reality they may be forced to close college and university campuses to deal with potential budget cuts. State leaders there may cut $300 million or more from their higher education budget - an amount almost equal to the entire annual public budget for Louisiana's community and technical college system.
In addition, Georgia public colleges and universities officials are looking at possibly merging Georgia State University and Georgia Perimeter College - the state's sixth consolidation in the last two years. While no one has reported that funding is an issue in the latest proposal, declining state revenues were listed as a driving force when mergers were first occurring three years ago.
The University System of Maryland's Board of Regents voted last month to allow state colleges to raise tuition midyear by 2 percent as schools there deal with state aid cuts. Maryland leaders have been cutting costs to address a deficit of nearly $1.2 billion and recently cut state funding to the university system by $40 million. Four universities there are raising tuition to offset the cuts and at least one other is delaying some initiatives and spreading out costs. Others have announced furloughs of up to three days for campus employees.
Institutions of higher learning are caught between a rock and hard place. On one hand, keeping tuition affordable presents greater opportunities and attracts more students, but it limits colleges and universities financially as the downward trend in state funding continues. University of Illinois officials recently approved freezing tuition for incoming Illinois freshmen for the first time since the 1993-1994 academic year. While they raised tuition in other areas, it will be interesting to see what happens next in light of Illinois Gov. Rauner's announcement last week that he will seek $387 million in cuts to higher education.
Reports on Illinois' budget woes have become more pointed than ever. Greg Hinz at Crain's Chicago Business reported a few weeks ago that the state's budget deficit is worse than most people initially believed. A report from the University of Illinois Institute of Government and Public Affairs recently concluded that the actual deficit is likely twice what is commonly reported, meaning rather than $2 to $3 billion, the actual Illinois budget deficit is closer to $6 billion and rising.
As I have predicted for many years, it is my belief that funding for higher education will continue to evaporate over the next several years and state leaders will focus education solely on K-12. In fact, the last time most institutions have received their full 33 percent of operating funds from the state dates back to the 1980s.
In September 2014, the College of DuPage Board of Trustees voted to roll back tuition by $4 per credit hour to $140 per credit hour for the spring 2015 semester. The estimated annual cost of this decision was approximately $2.3 million in perpetuity. In addition, in December 2014, the Board voted to freeze the operating property tax levy with the College's calendar year 2013 levy. This decision had an estimated annual cost of $1.3 million to the College's revenues in perpetuity. Last week, the COD Board approved a proposal to freeze tuition at $140 per credit hour ($104.15 in-district rate plus $35.85 fees) for Fiscal Year 2016. This is the first time in COD's 48-year history that tuition has been reduced for spring term and then subsequently frozen for the entire next fiscal year. Sound fiscal management and running this institution like a business over the past six years has made the Board's recent decisions possible.
However, the bottom line remains that drastic changes must be implemented to bring about any meaningful financial reform in Illinois and other states. As the implementation of budget cuts begin this year, it will be interesting to see what unfolds in Illinois and throughout the nation.
Note: A portion of the following article written by College of DuPage President Dr. Robert L. Breuder was printed in an internal newsletter for COD employees.