Higher education and the economy

George M. Dennison

President, The University of Montana

Two very strong historical relationships persist between higher education and the economy. When the economy goes south, 1) enrollments increase because young people cannot find jobs and not-so-young people need additional education to get back into a changing workforce; and 2) state support for public higher education declines, thus requiring tuition increases to sustain the quality and to meet the additional demand, just when those seeking access have fewer resources to cover the increasing costs. All indicators from across the country and within Montana reveal the persistence of these contrary tendencies. Just when people have the greatest need for access to higher education, public policy appears to become restrictive.

Across the country, more than 40 state governments have already imposed funding cuts on public higher education for the current year, and most of the others – including Montana – have announced spending restrictions on higher education during the coming years. As a result, public colleges and universities across the country have projected tuition increases ranging from 5 to 15 percent per year. Simultaneously, the fading stock market has reduced the capacity of scholarship endowments to generate scholarships and grants sufficient to allow students to meet even current tuition requirements. These conditions affect Montana public higher education as well and threaten to overwhelm the very promising effort, implemented in the College Affordability Plan (CAP) proposed by Governor Brian Schweitzer and adopted by the Regents and the Legislature in 2007, to reverse a long-term privatization trend.

The CAP froze tuition for two years for Montanans attending public colleges and universities and maintained quality and access by back-filling for what would otherwise have required a 5 to 6 percent increase in tuition to deliver current services to the same number of students and cover inflationary cost increases. As a result, the proportion of higher education budgets supported by state funding rose from roughly 39 percent to 43 percent, while the percent of median household income required for tuition and fees went down by one percentage point on average, to less than five at the Colleges of Technology and about eight at the flagship campuses.

However, the radical decline in state revenues appears to mean that the CAP will not continue, despite the rising need for services during difficult economic times. The most recent executive budget proposal does not include funding to cover inflationary increases or any new demand, with the result that public colleges and universities will have to reduce quality and restrict access or increase tuition by 5 to 7 percent, with minimal change in increasingly noncompetitive salaries.

The colleges and universities have few options. Montana public higher education has sustained quality and assured access over the last two decades, even as state appropriations have not kept pace with inflation and enrollment increases. While students and their families have shouldered an increasing share of the cost burden in the form of rising tuition and fees, the public colleges and universities have worked hard to control costs by adopting “best practices,” collaborating to deliver programs, reallocating available funds in response to pressing needs, and appealing to private donors for financial assistance.

Consider that between 1992 and 2009, the Montana University System enrollments increased by more than 2,200 resident students as the inflationary adjusted dollars appropriated per resident student declined by $2,600 per student, from $8,500 to $5,900. Resident tuition increased and dollars expended per student increased by about $1,500 over those same years — in inflationary adjusted dollars, averaging less than one percent per year — to enhance quality and develop new programs, all funded by the tuition increase revenue that also filled the gap left by the flagging state appropriations.

Quite clearly, Montana public higher education responded to the needs of students even as they found it necessary to increase tuition in order to do so. The changing conditions appear to require continuation of that effort.

As conditions change, we have few options. But as we consider adjustments, we must do so within the context of long-term social and economic goals. Over the last two decades, the United States has lost its position of world leadership measured by the educational attainment of its citizens.

We now rank in the second tier rather than the first. Montana has paralleled the national trend, and the prospects for changing at this point do not look good. It behooves us to keep this challenge in mind as we think about ways to deal with current economic conditions.

Investment in our human resources by assuring access to educational programs from the certificate through the advanced graduate levels offers the most viable and promising means to a better future for the United States — including Montana — in a global society that puts the premium on a talented and prepared workforce and a restructured economy responsive to emerging needs for new businesses, products, systems, and strategies centered around alternative and renewable energy sources, emerging information technologies, efficient and secure methods of production and delivery of consumables, responsive healthcare systems, and supporting infrastructure.

It seems prudent to build on what we have developed rather than to return to the dysfunctional ways of the past and accept an early demise to a promising new beginning embodied in the CAP of 2007.