2010 February 02

Main Street Journal: What Does 2010 Hold for Shelby County Colleges and Universities?

The Main Street Journal Website

The following article is taken from the January 2010 issue of the Main Street Journal. Click “Subscribe Online” above to start your subscription.

What Does 2010 Hold for Shelby County Colleges and Universities?
By Michael Roy Hollihan

Last year saw unprecedented meltdowns from Wall Street to Main Street. One in eight Shelby County homes faced foreclosure at some point during the year. Businesses and financial institutions closed their doors. Families cut back on spending and expenses. However, one potential crisis that has flown under the radar could be looming on the horizon. 2010 presents dangerous challenges for our local state colleges and state universities, all of whom are facing shrinking budgets and swelling student enrollments.

It is a bad situation that is slowly getting worse.

On the surface, the situation seems stable. Across the board, colleges and universities saw surprising enrollment jumps - not merely but a few percentage points but in some cases near double digits. Enrollment at two-year state community colleges and specialty schools like Baptist College of Health Science in Memphis grew at record rates.

Though rising enrollment may seem like a healthy sign in a tough economy, what this has created is a possible collision of inter-related problems – a perfect storm if you will – that threatens to wreck our web of post-secondary schools.

Make no mistake, The Great Recession is driving that storm. When the number of people competing for work grows, prospective employees need every advantage of training and education to distinguish themselves. Adults go back to school to sharpen skill sets or prepare for career changes.

Booming enrollment has been filling up colleges and universities already running at classroom and curriculum capacity. However, the State’s contribution to the total cost of running our colleges and universities has fallen by 30% in just the past few years. Rising tuition rates haven’t slowed down growth as one might expect. Nor have they provided enough additional revenue to allow schools to grow their professorial and graduate teaching staffs. Instead, as has happened with the University of Memphis, they have been forced to freeze salaries and make serious and painful cuts.

Some professors, instead of weathering the storm, are looking for greener pastures.

Last year, post-secondary schools in the Tennessee Board of Regents system saw between 5% - 8% cuts in their budgets. Next year, interim chancellor Jan Simek is already warning of another 5% -10% cut. State tax revenues have been in a freefall since 2008. The just-released projections for 2010 were deliberately low-balled below the earlier predictions of economists in hopes of finally seeing collections matching, or even exceeding, expenditures.

It is a gamble with serious risks involved.

Consider the HOPE Scholarship. For the first time, the cost of scholarships has exceeded lottery revenues. The State will have to borrow $20 - 30 million from the Federal government because lottery rules don’t allow the State to shift funds from the general accounts into the HOPE scholarship accounts. If the parameters of the scholarships don’t change – for example, decreasing the amount of the scholarships or raising the minimum GPA requirement – the fund will be running deficits for several years to come.

Don’t hold your breath though. Changes in the qualifications or awards seem unlikely. There is too much demand to get students into colleges. In fact, Governor Phil Bredesen was forced to drop one of the education reforms he was planning to introduce in the January special Legislative session – the expansion of HOPE scholarships for two-year colleges, where growth is greatest – because there is no money to fund it.

The state leaned heavily in 2009 on Federal stimulus funds to stop the bleeding – money from the American Recovery and Reinvestment Act which have flowed by the hundreds of millions into Tennessee. In the case of education, these funds were supposed to finance one-time capital projects – physical maintenance and repairs or the purchase of equipment needed by schools. Instead, the money has been spent shoring up general budgets. State officials have already warned Memphis colleges that these funds will dry up after 2011, to the tune of nearly $200 million dollars.

Then there is health care. Governor Bredesen has already warned that the latest plan discussed by Washington would cost Tennessee at least an additional $700 million on top of current costs for TennCare, CoverTN and CoverKids. All of these programs have already closed enrollment and are considering reducing benefits because of a lack of funds. No one in State government has the slightest idea where the extra money will come from.

(A cruel new idea is being tested in Pittsburgh, Pennsylvania, right now. A tuition tax of 1% on all students attending colleges within the city’s boundaries has been proposed as a way for the city to bail itself out of its revenue problems. Never mind that students can’t afford it.)

Factor it all together and you have a dangerous brew waiting to explode.

Everything presently hinges on one big hope – that the economy will recover by mid-2010. By then the new budget year will have started. With a strong economy, tax revenues will increase. Although the Tennessee Constitution restricts the spending of excess revenue collection, this hasn’t stopped legislators in the past from using windfalls to feed pet projects and gum up the leaking budget dam.

If the economy recovers and the monies come in, then college and university budgets might see some relief. And if jobs become available again, many pursuing new careers might stay put if raises and benefits rise along with the number of new jobs.

What some fear though is that the recession could stretch out late into 2010 or 2011. Then the untenable becomes impossible and we face a full-on crisis within our post-secondary schools.

There seems no solution at present, other than hope, and so politicians are avoiding going anywhere near the situation. Budgeting on wishes is no way to run a State.

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