Business

College Funding Under Pressure As International Students Decline And States Cut Money

A recent Grapevine Report by the Center for the Study of Education Policy at Illinois State University and the State Higher Education Executive Officers, concluded that during 2018 initially approved state fiscal support for higher education nationwide would rise by a modest 1.6% from fiscal 2016-17 to fiscal 2017-18, the lowest annual percentage increase in the past five years.

Student Loans Outstanding Surpass Size Of US Junk Market

Get The Full Warren Buffett Series in PDF

Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

StockSnap / Pixabay

The percentage increase is even lower when you strip out California, Florida, and Georgia which together accounted for the bulk of the modest increase. Excluding these regions, total funding across the remaining 47 States rose by only 0.2%.

These figures add a different dimension to the higher education funding debate. While most commentators are focusing on student debt, and the burden that it is placing on borrowers, the funding squeeze universities themselves are facing is going relatively unreported.

Higher Education Funding Underpressure From State Funding Cuts

According to research by credit rating agency Moody's, public universities are set to see a 4% increase in expenses during this fiscal year, significantly more than the 1.6% average increase in state funding.

The pain is expected to be felt most with small public universities, where almost 30% of operations are paid for with state appropriations.

With less public income expected, higher education institutions will either have to increase income from other revenue streams or cut costs. The latter of these could be harder to achieve than the former. As Moody's notes, tensions between unions and rise in pension obligations at universities is choking their ability to enact changes to staffing levels or cut staff costs. In addition to this headwind, in an increasingly competitive higher education environment, universities cannot afford to cut spending on education programs, facilities, and technology as they try to produce the best environment for students. Cutting investment will restrict the ability to attract new students and generate income.

The less high-profile institutions are expected to suffer the most as flagship universities have more diversified enrollment and revenue streams as well as greater financial reserves and endowments.

Another reason for declining college finances? You can blame Russia! Moody's notes in a different report that:

"International students accounted for approximately 40% of universities’ science and engineering graduate student enrollment in fall 2017."

The analysts expect less international students to enroll in Universities although it does not specifically mention Trump's migration stance.

Looking forward, it doesn't appear as if the situation will improve anytime soon either. Moody's notes in its report that while governors in California and New York "have proposed an increase in higher education funding, governors in Kentucky, Louisiana, and Missouri have proposed cuts."

On the positive side, maybe Universities swill stop funding some of their rather useless degrees.

 

Higher Education Funding