The Realities of This Recession
By Mary Lai
Treasurer emerita, Long Island University, Brookville, New York
At a recent meeting of the board of trustees of St. Joseph's College, where I am chair of the finance committee, I stated, "Colleges and universities are countercyclical, and enrollments, especially at the graduate level, increase during recessions." A fellow trustee asked, "How can we anticipate what will happen to enrollment when this recession is different from any other we've seen?"
This recession is different. It is more than a recession, it is an economic crisis. As Warren Buffett said, "Our economy has fallen off a cliff." Such uncertainty makes planning and budget decisions almost impossible. We must plan for and establish budgets that are extremely flexible and can easily be revised as circumstances warrant.
In my 63 years in higher education—58 years as CFO and 5 years as senior adviser/treasurer emerita—we have never experienced an economic crisis like this one. Never have there been such extensive layoffs and buyouts at our "rich" institutions. The unprecedented losses in their endowments, which provide significant portions of operating revenue, have necessitated drastic cuts. Private institutions that are not blessed with large endowments and must rely on student enrollment for 80 to 90 percent of their revenues face their own challenges. Many institutions have seen declines in enrollments and net tuition revenue.
State governments, experiencing a significant decline in tax revenues, are consequently forced to reduce appropriations to state colleges and universities. These public institutions are not only suffering from the loss of these revenues but also cannot make up the shortfall simply by increasing tuition.
Many students who cannot afford to pay the tuition at private institutions are enrolling in public institutions. While this increases enrollments at community and public four-year colleges, the lack of state funding makes it difficult—even impossible—for them to accommodate the increased enrollment. Moreover, those students who are admitted find they are unable to register for some of the courses they need.
Higher education, however, remains the gateway to economic and social opportunity. Thus, if our country is to return to its greatness, education is the key to getting us there.
Easier Access to Aid
The only way multitudes of students can afford to attend the schools of their choice is through financial aid. Many parents are struggling to afford tuition costs because they are unemployed (or underemployed), their college savings and home equity have plummeted, and they are unable to get loans. Students have been burdened with loans, and now many can't even obtain loans. Financial aid provided by philanthropy has been growing but is still not enough.
What needs to be done to strengthen our colleges and universities and make them accessible? First and foremost, both state and federal governments must increase their scholarship grants. In the late 1970s a student with high need could cover the cost of a private education with federal financial aid (Pell Grant, work study, supplemental direct aid), together with state financial grants. Some 30 years later, state and federal grants cover only about a quarter of a full-need student's tuition at a private institution. Institutional grants and significant loans fund the remaining costs.
Second, our colleges and universities must become more productive and less costly. They must make good, sound choices. Some schools are considering providing a "no-frills" educational experience; however, since student services enhance a student's total educational experience, these services should be carefully reviewed and supported.
Most of us are examining all our expenditures and seeking to provide essential services at lower cost. As a consequence, most of us will be leaner, more efficient, and more productive. This could enable us to keep tuition rates from rising as they have in the recent past.
The need to review and reduce costs is pressing. The need for the restoration of appropriate levels of governmental support is imperative. President Obama understands this. Now it is up to Congress and state governments to make this possible.
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