Higher Ed Finance
Given the ongoing impacts of COVID-19, many higher education institutions have felt financial strain related to increased costs, decreased enrollment and concerns about future funding streams. It is important that institutions be thoughtful about their finances and the way they adapt to the changing landscape. The Higher Education Recovery Task Force has provided four recommendations for institutions:
1. Understand the financial impact of COVID-19 on state budgets.
- While the scope of the long-term economic impact of the COVID-19 pandemic remains to be seen, it is already evident that state revenues have taken a hit. According to a report from the Urban Institute, state tax collections were down 6.4% from March through August 2020 compared to the same period the year before.
- When examining how states are responding to projections and fluctuating budgets, the National Association of State Budget Officers reports that many governors have directed state agencies to develop budget reduction plans for up to 20% for fiscal years 2021 and 2022, anticipating the potential for even more severe losses ahead.
- As state governments respond to current and likely future budget shortfalls, it seems very probable that higher education will be significantly impacted. State system and institution leaders should seriously consider where they can make cuts that will have the smallest negative effect on students. The National Conference of State Legislatures has compiled a database that is tracking state budget-cutting and revenue-increasing measures.
2. Review the Consolidated Appropriations Act of 2021, particularly Governors Emergency Education Relief and Higher Education Emergency Relief funding.
- In December 2020, Congress passed the Consolidated Appropriations Act of 2021, which includes a stimulus and pandemic relief package that provides $81.88 billion for the Education Stabilization Fund. These funds are available through September 30, 2022.
- Each state with an approved application under the CARES Act passed in March receives funding, to be awarded within 30 days of the passage of the new act. The GEER funding in the Appropriations Act is divided into two streams:
- $1,303,060,000 is allocated to states based 60% on a state’s proportion of population age 5 to 24 to the total population of that group nationally, and 40% on the relative number of children counted for Title I.
- $2,750,000,000 is included for emergency assistance for non-public schools. The governor in each state administers this funding, which is based on the number of children ages 5 to 17 at 185% or less of the federal poverty level enrolled in non-public schools in the state in relation to the number of all such children in all states. Funds must be allocated to the non-public schools within six months.
- The HEER funding is allotted directly to institutions of higher education, and institutions are required to provide at least 50% as emergency aid to students, as was required by the CARES Act. Institutions with approved applications from the CARES distribution are not required to submit a new or revised application. Institutions of higher education may use the funds to defray expenses associated with the coronavirus pandemic (including lost revenues and expenses already incurred), technology costs associated with distance learning, faculty and staff training, and payroll. Institutions may also use funding to carry out student support activities or provide financial aid grants to assist with any component of a student’s cost of attendance or emergency costs arising from the pandemic, such as tuition, food, housing, health care, mental health care or childcare.
- This SREB analysis of the Consolidated Appropriations Act provides additional information regarding the provisions regarding to allocations.
- The Chronicle of Higher Education has also compiled a table illustrating how much money institutions are in line to receive from the latest stimulus package.
3. Engage in critical self-reflection with regards to resources and offerings.
- Huron Consulting Group has created a roadmap of questions that institutions can use as a guide in determining their financial health and working to avoid paths to closure.
- Institutions should ensure they have a clear understanding of their institutional financial landscape moving forward. Leadership should evaluate and align academic and research portfolios, evaluate alternative service delivery models, and implement an integrated budget and financial planning model that includes forecasting capability for projecting scenarios. This will allow for better-informed decision making in times of limited resources.
- The Lumina Foundation, Bill & Melinda Gates Foundation and HCM Strategists have partnered to develop a framework to aid state leaders in navigating this uniquely challenging time in higher education budgeting. The report includes specific recommendations and examples of state actions based upon five guiding principles:
- Prioritize funding for institutions that can best serve Black, Hispanic, Native American and low-income students and those institutions that provide timely opportunities for unemployed or underemployed individuals to reskill.
- Protect and expand need-based financial aid through increased or reallocated investment.
- Support programs and strategies that advance students’ ability to complete credentials.
- Expand resources and invest differently to drive economic growth.
- Evaluate and improve system and institutional cost structures.
4. Consider the ramifications of funding challenges on
students and families.
- Historically, when higher education institutions have faced decreased state support and declining enrollments, this has had significant financial implications for students and their families. Institutions have often raised tuition or cut academic support or programs in order to make up for the difference in funding. However, this has negative impacts on graduation and completion rates for students, particularly low-income and minority students. While institutions will likely be in a difficult situation financially for the upcoming fiscal year(s), it is strongly recommended that they take an equity-focused approach in their responses.
- Some states and institutions have taken innovative approaches to supporting student success over the past year. Examples include:
- Northern Virginia Community College used federal stimulus dollars from
- the CARES Act to create a new academic summer bridge program called JumpStart, which provides incoming students with online instruction in
- entry level courses to deliver transitional supports for students. The National Governors Association has noted that the positive outcomes associated with summer bridge programs may warrant statewide replication.
- Michigan launched the Futures for Frontliners program in September 2020 using GEER funding. The program provides short-term scholarships for individuals who do not have a degree and worked as essential workers between April and June 2020, providing them with tuition-free community college courses toward a certificate or degree program.
- The Connecticut State Department of Education and the Connecticut College and Career Readiness Alliance partnered to launch a statewide FAFSA challenge. Eligible school districts compete for a $10,000 prize and receive additional resources to help more students complete the FAFSA. Ensuring that students complete their FAFSA is one crucial step in ensuring access, as FAFSA completion is strongly associated with postsecondary enrollment.
- Another low-cost policy change that many institutions have implemented to increase access to higher education during the pandemic has been the removal of standardized test requirements. Over 200 institutions across the country, including the entire University of California system, have decided to go test-optional for upcoming admissions cycles. This is due in large part to a desire to make higher education more accessible given the challenges of taking standardized tests during the pandemic, particularly for low-income and first-generation students.