Ever since I have been involved in higher education, I have noticed a consistent cyclical pattern in state funding of higher education. Would that this were the pattern of the future! Although funding has historically been cyclical, since the 1970s the proportion of a state's budget dedicated to higher education has shown a steadily declining trend, from 9.8% in 1980 to 7% last year (Schmidt 2004). We are witness to a changing pattern in the relationship between the states and higher education. Higher education is increasingly viewed as a private rather than a public good, and this evolving perception will substantially impact both public and independent institutions. Tuition will become more comparable and competitive.

The depressed budgets of U.S. public higher education over the last few years are well known to all. While the point in this cycle when nearly every state experienced budget shortfalls seems to have passed, in mid-FY04, 23 states still cut higher education budgets to eliminate budget shortfalls. It appears that state revenue in FY05 will be more stable (Schmidt 2004), but not strong.

In 1999, Hal Hovey noted that without new state taxes, even if economic growth continued and enrollment increased as projected, it would be impossible for U.S. public higher education to maintain the same per capita student expenditures and provide faculty and staff salary increases that kept pace with income growth throughout the economy (Hovey 1999). In the period following his report, economic growth did not continue.

Hovey noted that the states face a structural budget deficit. Pressures from other sectors in state government, in particular the growing requirements in the criminal justice system, the burgeoning needs in health care, the demand for improvement in the K-12 system, and a changing economic climate (as we move to a service economy, sales taxes bring in fewer resources), cause the structural deficit in most states to loom large.

In early 2003, Dennis Jones wrote a policy brief that built on Hovey's work (Jones 2003), projecting the structural deficit state-by-state for an eight-year period. His model was based on maintaining current service levels, current tax structures, conservative estimates of expenditures, and the improvement of state economic conditions to average, or “normal” conditions. Based on his model, Jones projected that 44 states faced a structural deficit and 12 states faced a deficit of 5% or greater.

Lest private institutions think they would not be effected, consider this: as the social compact between higher education and the states changes, and tuition grows in public institutions due to decreased state support (in other words, these institutions become more privatized), the competition between sectors increases, diminishing the ability of independent institutions to attract students. In addition, independent institutions face challenges caused by the public's trepidations about tuition rates, by the volatility of the stock market, and by the pressure to provide more financial aid.

What can your department do?

• Don't blame your administration when there are budget shortfalls. Work with them, not against them.
• Become entrepreneurial—figure out ways to sell your product by attracting non-traditional students or developing non-traditional programs.
• Think of different pedagogical approaches that conserve human resources but won't cheat the students. As we move toward serving as learning institutions rather than just teaching institutions, are there ways that technology-blended coursework can reduce the need for human resources?
• Think through your long-term scheduling: Are there low-enrollment courses that can be offered less frequently but still remain available to each cohort of majors? Remember, we are teaching for the students, not to meet faculty preferences.
• Are there nearby institutions where you can make formal or informal arrangements to trade or share courses to provide expanded offerings for your students?