Out Today: Past is Prologue

In the years since the last recession, recovery has been slow and uneven. While nobody can predict exactly when the next recession will occur or how much damage it will cause, if past trends hold, state and local funding for public colleges and universities will take a substantial hit. Like past recessions, a future economic tumble will impact each state differently - but when it comes to the amount of funding that states devote to higher education, few are currently prepared to maintain funding levels in the face of declining state revenues.

In a paper out today, we use data on enrollment, appropriations, and tuition over the last 15 years, to predict how a future  recession might impact state and local appropriations for higher education, as well as the enrollment changes  each state might experience.  Given the inherent unpredictability of a future recession, this time period enables us to rely on two different models constructed using the 2001 and 2008 recessions.  Nationally, if a recession were to hit next year, per student appropriations could fall up to 8% by 2022. Tuition bills could grow by 30 percent. Meanwhile, the number of students enrolled nationally in public institutions by 2022 could be over 1.4 million higher than it was in 2015.

But these national averages belie even more dire realities in many states. Historic data indicate that Colorado’s public universities and community colleges could be the hardest hit in the next recession. According to our analysis, the state could see a drop in per-student appropriations of over 20 percent. And while tuition increases are driven by many factors, state cuts to appropriations could lead many colleges to turn to tuition increases as an alternative revenue source. Our analysis suggests that public colleges in some states could greatly increase prices as legislators find ways to deal with budget shortfalls.

For example, average tuition revenue in  Michigan’s community and four-year colleges could be as high as $18,000 for a single year. Similarly, per student tuition revenue in New Mexico could rise by over 300%. While these two phenomena tend to happen simultaneously, some states would likely see tuition increases that far outpace the amount institutions might lose in general operating support. In Oklahoma, for instance, tuition growth is projected to exceed the amount cut in state appropriations by $15,778 over the course of a future recession.

But the outlook in another recession isn’t uniformly bleak: Many states survived the last two recessions with minimal cuts. If these trends hold, states like Alaska, Nevada, and Wyoming could actually increase appropriations in a future recession.  States like Florida would also be able to keep tuition low, even in the face of per-student funding cuts.

But the consequences of an economic recession are more than just numbers on a page. As per student funding levels drop, schools must figure out ways to make ends meet, a process that often has negative consequences for students. Even if tuition is held constant, schools would have to make changes to the services they provide, and there is little reason to think that these cuts will be made in ways that don’t hurt students. A rise in the price of college will also likely dampen the enrollment of low-income and minority groups before they even set foot on campus. Rising prices at public four-year colleges will further erode the already weakened purchasing power of the Pell Grant, the cornerstone of federal student aid.

For the full breakdown of how each state fares, as well as a composite ranking of how each state’s higher education system could fare in a new recession, you can find the full report here.