Painting a Larger Picture of Budget Problems

It’s no secret that student enrollment at a majority of the nation’s 4,400 higher ed institutions has been steadily declining for years, even as higher ed budget amounts climbed. The rising costs of a college degree, a flatlining of the high school-aged population and pesky economic inflation in recent years are all in part to blame for many would-be students deciding the value of college education in 2023 isn’t worth the often astronomical price.

Most colleges and universities, at least for a while, continued to spend even as enrollment fell. The federal government helped prolong that trend by cushioning the economic blow of the COVID-19 pandemic with some $76 billion in funding. But professionals in and around the higher ed industry say the chickens are finally coming home to roost.

Doors Closing As Funds Recede

With federal COVID-19 grants exhausted and bills for faculty and expansion reaching a tipping point, this school year (and likely several more to come) may be remembered most for the hundreds of schools facing financial crises. Efforts to reconcile budgets via state funding, endowment or other options could decide whether dozens of schools can keep their doors open altogether.

Perhaps the best example is West Virginia University, a flagship state school where officials have approved more than $175 million in new construction projects during the past eight years despite the number of enrolled students dipping nearly 10% in that time. The result is a $45 million budget deficit entering the 2023-2024 school year, requiring unprecedented cuts to major programs.

WVU earlier this month proposed cutting 32 majors, equal to 9% of all on-campus majors, including its entire world language department as well as undergraduate literature and linguistics programs. On the graduate level, the university proposed getting rid of degrees in English, math and music, among other programs. After significant pushback from students and the public, WVU eventually compromised by dropping 28 of its majors — some 8% of all majors — and cutting 143 faculty positions — about 5%.

Other schools to confront major budget shortcomings in the past couple of semesters include New Jersey City University —  which ended 48 undergraduate programs, 28 graduate programs, 10 certificate programs and a doctoral program back in December — and Henderson State University, a public school in Arkansas that declared financial exigency earlier in 2022. That move also led to the slashing of dozens of programs, faculty, and staff.

Enrollment Woes Plague Less-Selective Schools

Michael Nietzel spent three decades as an administrator at the University of Kentucky and five years as president of Missouri State University, from 2005 to 2010. He now dedicates his time to investigating spending in higher ed and is writing his third book about the industry’s inevitable financial crises.

Much of Nietzel’s research boils down to enrollment trends. Like many, he believes prestigious, selective schools such as those in the Ivy League will not have any problem maintaining robust student populations in the years to come. But non-selective schools, as well as smaller liberal arts colleges and regional universities, will have some serious soul-searching to do, he said.

More than a dozen higher ed institutions, almost exclusively regional schools and small liberal arts colleges, have already closed in 2023 or at least announced plans to close. That’s significantly higher than trends from 2019 to 2022, which saw one school shutter every two months on average.

“Colleges simply need to be more conservative in how they spend their money,” Nietzel said in an interview with Volt. “All indications are that the pool of high school graduates is going to decline over the next decade. So it’s going to be very difficult for the majority of schools to keep their enrollment numbers where they are.”

Cuts to Faculty, Programs Mean Serious Budget Problems

Between 65% and 70% of most university budgets go directly to paying faculty and staff. But when economic conditions force higher ed to tighten its belt, colleges often tiptoe around cutting those expensive teaching positions, Nietzel said. When schools cut teachers and academic programs, that can signify serious budget issues.

Furloughs normally come first, according to Nietzel, then a reduction in non-faculty staff.

“Maybe then a school will postpone their deferred maintenance or they’ll decide not to fix a roof of a building or an HVAC system,” he explained. “Small nibbles first.”

Nietzel said to avoid laying off employees, too many universities have resorted to trying to “grow their way” out of budget deficits — an issue that has mostly just made the problems worse.

“We’ve seen institutions spend money on capital projects and go into debt to build residence facilities and academic facilities during a time when the institution overall is contracting,” he said. “It has given them almost a false sense of security, and it can be completely counterproductive.”

Finally, if the budget hole is deep enough, universities will seriously address personnel and programs. The first majors on the chopping block usually involve fields with declining numbers of students, Nietzel said. In the case of West Virginia University, that meant majors in humanities, such as philosophy and foreign languages.

Many colleges, when cutting programs, try to merge the core classes of eliminated majors into other programs, Nietzel said. For example, if a university eliminates its French major, that usually doesn’t mean it will stop teaching French altogether.

WVU’s case is extraordinary because the school did take that extra step.

“Their plan was to drop language instruction with the exception of Spanish and Chinese,” he said. “It’s really unprecedented for a flagship university of that size. It’s one of the last places you’d expect to see cuts of that magnitude.”

Financial Aid May Be an Incentive

Could expanding financial aid offerings be an answer to encouraging more students to enroll? Nietzel and a prominent Washington D.C.-based activist believe so.

Rachel Rotunda, director of government relations at the National Association of Student Financial Aid Administrators, has been lobbying Congress for years to double the maximum award for federal Pell Grants. She advocates that doing so will help convince undergraduates with “exceptional financial need” that college is worth their investment.

Pell Grants gift students of families with a household income under $40,000 up to $7,395 in aid to spend on tuition each school year. It’s the nation’s largest federal grant program, with more than $25.9 billion given out in the 2021-2022 school year. Rotunda also advocates for increased funding for the Federal Supplemental Educational Opportunity Grants (SEOG) and Federal Work Study programs.

“Students are relying on these programs to cover the costs of attending college, everything from tuition and fees to the cost of housing, food and transportation,” she said. “The programs make it possible for so many people to even go to college in the first place.”

While average tuition costs have increased by an estimated 5% to 8% annually during the past eight years and inflation has averaged 3.4% growth annually, the maximum Pell Grant allowed per student has grown less than 3% per year, from $5,775 to $7,395, during that same span. Rotunda said unless aid increases can match or exceed tuition increases, students have plenty of reasons to reconsider enrolling in higher ed.

“The purchasing power of the Pell Grant has not been able to keep up with rising college costs,” she said. “Just holding these programs even is not enough to address current needs.”

Nietzel agreed, “Obviously, the states are the largest funding mechanism for universities, but the federal government must also maintain its investment in students for this all to work.”