Recession, Retrenchment and Recovery State Higher Education Funding

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Recession, Retrenchment and RecoveryState Higher
Education Funding Student Financial
AidSponsored by the Lumina Foundation for
Education

• NASSGAP/NCHELP
• STUDENT FINANCIAL AID RESEARCH NETWORK CONFERENCE
  
• JUNE 9, 2005

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The Problem

• There have been five recessions in the past 35
  years, but few higher education systems have been
  able to develop the processes and resources for
  weathering the storm.
• Symposium on Financing of Higher Education
• April 2004

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States Tax Appropriations per FTE In Constant
2003 Dollars Fiscal 1970 2003
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The Complication

• What distinguishes the recession of the early
  2000s from previous downturns is that it is
  posing much more serious questions about the
  values of our society and the strength of our
  commitment to educational opportunity.
• David Breneman
• 2002

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The Opportunity

• As higher education looks forward to a
  stronger state economy and subsequent improved
  state support, it is time to plan for the next
  recession.
• Symposium on Financing of Higher Education
• April 2004

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THE PROPOSAL

• Follows April 2004 ISU Symposium
• ISU/NASSGAP/SHEEO
• Proposal to Lumina October 04
• Funding Award November 04
• Project Start December 04

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PROJECT GOAL

• To identify and disseminate successful
  state-level strategies and policy tools to
  protect students access to postsecondary
  education

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Project Methodology

• Economic Fiscal Analysis higher ed
  appropriations, financial aid expenditures
  financial access
• Survey of SHEEOs NASSGAP Members
• Interviews with policy leaders in selected states

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Project Deliverables

• Final report
• Summary of analyses
• Recommended strategies and policy options
• State profiles
• Literature review and other study materials

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Economic Fiscal Analyses

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Recession

• To what extent was funding restored to higher
  education after the four previous recessions?
• Similarities and differences among states
• Student financial aid trends
• Financial access across recessions
• Purchasing power of states grant programs

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Data Set

• State Support Grapevine
• Student Financial Aid Annual NASSGAP Reports
• Enrollment NCES
• Tuition Fees Washington HECB
• GDP GSP BEA
• Family Income CPS
• CPI BLS

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MethodologyEconomic Fiscal Analyses

• What are the similarities and differences among
  states in funding trends for higher education and
  student financial aid programs?

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Comparison of Fiscal Year 1978-2004 Percent
Changes in Total State Appropriations to Calendar
Year 1977-2003 Percent Changes in Gross State
Product (Nominal )
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Comparison of Fiscal Year 1974-2004 Percent
Changes in Total State Appropriations to Percent
Changes in Average Public Four-Year Tuition
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MethodologyEconomic Fiscal Analysis

• What is the relationship between total funding
  for higher education and student financial aid
  programs?

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Comparison of Fiscal Year 1978-2004 Percent
Changes in Total State Aid to Calendar Year
1977-2003 Percent Changes in Gross State Product
(Nominal )
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Comparison of 1979-2003 Percent Changes in Total
Appropriations to Percent Changes in Total State
Student Aid
Note GA, LA, NC, NV are not listed in order to
make the graph more readable
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Comparison of 1979-2003 Percent Changes in Total
State Student Aid to Percent Changes in Average
Four-Year Public Tuition
Note GA, LA, NC are not listed in order to
make the graph more readable
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MethodologyEconomic Fiscal Analyses

• To what extent was funding restored to higher
  education after the four previous recessions?

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Interrupted Time Series
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Interrupted Time Series
Recession
Time
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Interrupted Time Series
Recession
Time
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Interrupted Time Series
Recession
Time
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Interrupted Time Series
Recession
Time
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Interrupted Time Series
Recession
Time
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Interrupted Time Series
Recession 2
Time
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Interrupted Time Series
Recession 2
Time
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MethodologyEconomic Fiscal Analyses

• Which states maintained financial access across
  recessions?

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Access-Cost Indicator

• Policies that states influence
• Balancing
• Tuition and Fees
• Student Financial Aid
• Family Income

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Access-Cost Indicator

• Purpose
• To show how states balance student aid and
  tuition and fees
• To show changes over time
• To identify states that may have done a better
  job with the balancing act

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Access-Cost Indicator

• Public 2 and 4 Year Institutions
• Average Tuition Fees Aid per FTE
• Median Family Income

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Survey of SHEEOs and NASSGAP CEOs

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Survey Objectives

• To assess the impact of the current recession on
  state higher education and student aid policies
  and priorities.
• To identify successful strategies which could be
  used to maintain financial access through future
  recessions.

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1. What priorities guided budget decisions?

• Statewide funding priorities
• Higher education funding priorities
• Student aid funding priorities
• Higher education policy issues

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Statewide Budget Priorities

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Higher Education Policy Issues
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2. What specific program and policy changes have
been made?

• Changes in application deadlines
• Changes in family contribution calc
• Changes in income limits
• Changes in length of eligibility
• Access versus choice

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3. What strategies have been developed for
financial access?

• Partnerships with universities and K-12 in an
  information service to encourage access to higher
  education
• Use of proceeds from College Savings Plans for
  student loans
• Increased emphasis on high school preparation

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4. Future outlook for higher education funding?

• We have a huge surplus keeping the legislature
  focused on our priorities is now the problem.
• Moderately and guardedly optimistic grant
  programs funded by lottery revenue face an
  uncertain future.
• The outlook is not good. The greatest concerns
  are declining state support for general
  operations and declining enrollment of low-income
  students.

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Interviews of Education Leaders in Selected States

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Recovery

• What long-term strategies have states developed
  to maintain financial access through economic
  cycles?
• Preparation for economic downturns
• Potential for states working together
• Effect of economic factors on student aid
  policies and decisions

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Discussion Next Steps