Between a rock and a hard place

As state support declines, universities try to make ends meet

Bob Bruininks inherited a difficult financial situation when he took on the job as University of Minnesota president. Bruininks is optimistic that when the economy rebounds, the state will again be able to commit more money to helping students attend college.

Photo by Tom Foley

by Rick Moore and Martha Coventry

From M, fall 2003

Getting a college education is still part of the American dream. More people are going to college, and from 2002 to 2003 freshman applications increased dramatically at the University of Minnesota. A recent national poll by the Chronicle of Higher Education showed that 91 percent of respondents think that every high school student who wants a four-year college education should have the chance to obtain one. But the economics of higher ed are shifting. In this article we look at what that means at the University of Minnesota.

More than half the states, including Minnesota, cut support for higher ed this year, with an average cut in base funding of about five percent. When the budget needs to be balanced in hard economic times, something has to go and, more and more, it has been higher education funding that has been taking major cuts. The result is that, after reducing expenses and finding other creative ways to save money, more schools have had to raise tuition to help cover the cost of educating their students.

The University of Minnesota is no exception. This year it will cost undergraduate resident students on the Twin Cities campus about $7,300 for tuition and fees--a 14.7 percent increase following double-digit-percentage increases the previous two years. At the Duluth, Morris, and Crookston campuses, increases in tuition and fees will range from 12.4 percent to 14 percent. Compared to the other Big Ten universities, the U's tuition falls at about the middle of the pack, the same position it has held for many years.

Taking into account family incomes in Minnesota and the availability of scholarships and grants, an education at the University is still affordable for most students, even with tuition increases. But there is concern that higher education costs nationwide are rising too rapidly. Under a proposal floated by Rep. Jim McKeon of California, colleges that raise their tuition by more than twice the rate of inflation for two consecutive years would face penalties, including the loss of federal financial aid.

All of this puts the University of Minnesota--and its students and employees--between the proverbial rock and a hard place, with no soft edges in sight. With state support flagging and costs for new technology and top-notch faculty rising at or above the rate of inflation, the University is being forced to cut expenses and raise tuition. Over the past three years, employees and students have been sharing--almost equally--the burden of state budget cuts. The University has frozen pay for faculty and staff, eliminated positions, delayed new hires in certain departments, and asked employees to share more health care costs. Students, of course, have to pay more for their education.

A new trend?

Since before the start of fiscal year 2003, less than a year-and-a-half ago, the University's state funding has been reduced three times for a total of nearly $235 million. This includes the latest reduction, approved by the legislature in May for the current biennium, of $185 million--the largest cut in the University's 152-year history.

Not only have the recent cuts in state funding dropped the University to the approximate level of support it received in 1998, the U is now receiving roughly the same level of state assistance (when adjusted for inflation) it had in 1986, when the state and the University were rebounding from a recession. Whereas historically, the University has received about 33 percent of its revenue from the state, that amount is now only about 26 percent.

"Unfortunately, I think the trend is reducing state funding and requiring the students and families to pay more," says Sen. Sandy Pappas (DFL-St. Paul), chair of the Senate higher education budget division, the committee that recommends appropriations for the University.

Despite the fact that most public office holders in Minnesota have a college degree, Pappas thinks that lawmakers increasingly see a college education as more of a private good than a public good--"that you benefit more as a private citizen than the community benefits by you being educated."

If continued reduction in state funding is a trend in Minnesota, as Pappas suggests, then the University will have to make more hard decisions in the future about its educational priorities.

"We will need to continue to raise tuition at higher-than-expected levels in the short-term," says Bruininks. "Some of that [lost state funding] simply has to be made up by asking students to pay more for the cost of their own education; there's just absolutely no alternative. But we're going to work very, very hard--faculty, administrators, Board of Regents--to keep these tuition increases as low as we possibly can."

One thing the University can't do is tap into private donations to solve the budget crunch. The U's endowment--which took years to elevate to its current level--would have to approximately quadruple overnight just to yield enough interest to make up for the amount of funding lost from the state over the past year-and-a-half.

Students affected in varying degrees

In many ways, Jessica Fraher could be the poster child for students of moderate means determined to get a higher education. While growing up, she was encouraged to attend college, but there were no bank accounts dedicated to that pursuit and Fraher always knew she would be responsible for paying her own way.

The University of Minnesota junior will work 35-40 hours a week this school year as a receptionist at an advertising agency to pay for her tuition bills and rent with two roommates in Dinkytown. But the costs are catching up with her, and she may be forced to take out her first loan next spring or fall. The increase in tuition and fees on the Twin Cities campus isn't the only thing driving her work schedule, but it's a contributing factor.

"It's inevitable; tuition is always going to increase," says Fraher outside Coffman Memorial Union a week before classes begin. "But I did not know it was going to be 14.7 percent, which is a considerable amount."

Even while raising tuition, the University has made a concerted effort to shield students who are in the greatest financial need. By increasing funding for its own grant fund for students by $2.5 million for fiscal year 2003-04, support for the lowest income students--coming from a combination of University, state, and Pell (federal) grants--should increase by approximately $1,000 per student. "We have significant levels of support, particularly for low-income students, to assist with these cost increases, and we take our responsibilities very seriously to maintain access and affordability for citizens of this state," says Bruininks. Raising scholarship money to help offset tuition has become a higher priority for the U's private fundraising efforts.

Optimism prevails

While Bruininks, like Pappas, is concerned about the trend of decreasing state support, he remains optimistic that when the economy rebounds, the state will again be able to commit more money to helping students attend college. "If we could sustain state support at roughly 33 percent of our budget, I am totally confident that this University can take care of the rest of its responsibilities and needs," he says. "But we simply have to have a higher level and a more sustained level of state support."

In the meantime, Bruininks is quick to point out the value of a college education, especially in lean times. "It positions a person to be a thoughtful, contributing citizen, one who can continue to learn and adapt to constant changes in our environment and our world," he says. "And as far as economic value goes, it's hard to argue with the numbers: the average college graduate earns at least a million dollars more over her or his life time than the average high school graduate. Higher education is still, in my judgment, the best single investment a young person or a working adult can make in his or her future."