THE FINANCIAL ENVIRONMENT
Two primary economic issues in the external environment affect BGS U's strategic planning efforts. The first includes the interrelated issues of the downturn in the state support, increased tuition, and financial aid. The second concerns labor market issues that relate to employment prospects for graduates.
The national economic downturn since 2000-2001 has led to budget crises in most states as a result of tax revenue being received at a lower rate than was projected. As a result, there have been decreases in the rate of growth in state support for higher education and, in some cases (including Ohio) true cuts in state funding. State support for FTE has declined in Ohio and is now below 1990 levels in inflation-adjusted dollars . State support has declined more than 20% in Ohio and more than 26% statewide in inflation-adjusted dollars (16% and 22%, respectively, when Success and Access Challenge dollars are included . The National Center for Public Policy and Higher Education’s Measuring Up 2004 report gives 36 of the 50 states, including Ohio, a grade of F in higher education affordability. Trends in Ohio government expenditures between 1996 and 2004 reveal strong increases for K-12 education, corrections, and nursing homes and cuts for higher education . Ohio ranks 49th in affordability of college, 46th in state operating appropriations per student for higher education, and 37th in level of increase in higher education spending among the states between 2000 and 2005 according to a 2005 report from Policy Matters Ohio .
A June 2005 report from the National Center for Higher Education Management Systems , (appearing in NCHEMS News) provides a 2005-2013 fiscal outlook for state support to higher education.
- State and local governments have been working their way out of a severe fiscal crisis precipitated by the national recession of 2001 and the stock market declines of 2000 through 2002. They have drawn down reserve funds, allowed colleges and universities to raise tuition and fees in abnormally large increments, cut spending in some areas, selectively increased taxes, and tapped nonrecurring sources of revenue (such as securitizing tobacco settlement funds). . . . Even if state and local governments close their current budget gaps with regular sources of revenue, instead of relying on gimmicks that provide only temporary relief, the sad conclusion is that most states will face continuing problems in financing current services and will not have sufficient resources to support real increases in spending (p. 2).
The report attributes continued problems with state support for higher education to the facts that a) state tax revenue is not expected to grow as rapidly as the overall economy, b) spending in many states will be increasingly dominated by the need to underwrite Medicaid growth, and c) The federal budget outlook has deteriorated dramatically, resulting in administration proposals to substantially cut grants to state and local governments. According to the report, spending in all sectors of Ohio government has increases 34% in the last eight years, but only 24% for higher education.
The Ohio Secretary of State has asked the legislature to approve a bill that would cap state spending. This could potentially have severe consequences to institutional funding, as rising costs in areas such as Medicaid and K-12 education would need to be offset by decreased spending in "discretionary" areas such as higher education.
Cuts in state support have led to pressure on institutions to increase tuition in order to respond to increasing expenditures for items such as employee health care, technology, library materials, utilities, services for students, and unfunded government mandates, as they also seek to keep faculty and staff salaries competitive and to respond to enrollment growth. An article in the October 31, 2003 edition of the Chronicle of Higher Education reports average tuition increases over the last year in four-year public institutions of 14%. Additional information of trends in tuition prices and financial aid is available from the College Board . Trends in BGSU’s educational budget revenue reveal that, while state support accounted for 59% and student fees 41% in 1990, state support will account for only 34% and student fees 66% in 2006 . While there have been substantial tuition increases at many institutions, media attention to the most highly priced institutions may be leading students, parents, and the general public to considerably overestimate tuition prices at many institutions, according to a September 2003 report by the National Center for Education Statistics . State cuts, tuition increases, and rising demand for higher education is causing a crisis in college access, particularly for low income students and students of color, according to an October 2003 report issued by the Education Commission of the States .
An analysis of undergraduate, in-state fees costs among public universities in Ohio reveals that BGSU is among the highest in instructional fees, but moderate when room and board are also taken into account.
A series of articles in the December 19, 2003 and January 9, 2004 Editions of the Chronicle of Higher Education summarize the financial pressures faced by many institutions in 2004. While revenues from state support, endowment, fund raising, and federal grants is expected to decline or at best remain flat, expenditures for employee health care, salaries, computer security, new construction, and debt service are expected to increase, in some cases sharply. Caps on tuition and greater expenditures for financial aid further strain the situation. Institutions are facing ever greater pressure from all sources to show that they are accountable to the public. Gaining revenue from non-traditional sources and reallocating resources are becoming increasing priorities.
A series of articles in the January/February 2006 edition of Change magazine discuss the privatization of American public higher education. Privatization has occurred rapidly over the past few years as state support has remained static or decreased at the same time that institutional costs have escalated. As a result, institutions have seen state support as a component of total revenue sources decrease fairly rapidly and other sources, chiefly tuition, increase at the same rate. On average, state support as a percentage of all revenues sources has dropped from abut 50% to about 30% within the last decade. A review of state political and economic factors suggests that this trend will only continue in the foreseeable future. While privatization may spur operating efficiency, greater attention to consumer preferences, and perhaps lessening of state regulatory burdens, it also may decrease access, particularly to low and moderate income students, lead to conflicts of interests with sponsors of externally funded activities and donors, to which institutions will become increasingly beholden, and force consumer-driven curricular changes that may not be in society's long term best interest.
The October 21, 2005 edition of the Chronicle of Higher Education notes that health care costs are major expense drivers at colleges and universities across the Nation. The cost of employer-sponsored health care is expected to increase 9.2% for 2006. This is actually a lesser increase than over the past few years. Institutions are attempting to control costs by reducing benefits, shifting them to employees, forming consortia to take advantage of collective buying power, and promoting wellness.
Tuition increases have led to ever-greater reliance by students on financial aid during a period when much federal aid has shifted from grants to loans and many states (although not Ohio at this time) are moving from need-based to merit-based aid. The average Pell grant award at a four-year public institution covered 98% of tuition in 1986 but only 57% in 1999, according to a report entitled "Loosing Ground" published by the National Center for Public Policy in Higher Education . Average student debt levels for undergraduates at the time of graduation have increased substantially in recent years (The average indebtedness of BGSU graduates is now in excess of $20,000.). Tuition expenses and loan indebtedness are leading to increased calls for accountability from all levels of government, increased media scrutiny, and perhaps an increased consumer mentality on the part of students and parents.
Surprisingly few families are saving for college and they are overly optimistic about the amount of financial aid that they will receive, according to a recent study of college students and college-bound high school and their parents carried out by Academic Management Services and summarized in the January 2001 edition of NACUBO Business Officer magazine. Forty-seven percent of families surveyed had not established an educational savings plan. Fifty-eight percent of parents expected to contribute up to 50% of the costs of their children's college education through savings, current income, and loans. Sixty-two percent of parents expected scholarships and government grants to cover remaining costs.
Unfortunately, families at the lowest income levels, who most need information about financial aid for college, may be the group that is the least well informed about how to pay for higher education, according to a 2003 Harris Poll commissioned by The Sallie Mae Fund . Nearly half (45%) of parents surveyed with incomes less than $25,000 per year said they have no idea how they are going to pay for college for their children. The survey indicated that many parents and young adults are not aware of even basic sources of financial aid; for example, 62% of all parents and 65% of young adults planning to attend college did not name grants as a source of financial aid. The study notes that knowledge about financial aid is a key predictor of whether a student is likely to attend college; the more students know about financial aid, the more likely they are to pursue a higher education. Students of color and their families reported particularly low levels of information about how to pay for college.
Many states, including Ohio, cap tuition increases and limit additional funding to targeted performance areas such as research and development, workforce training in the two-year sector, and rewarding institutions for timely student graduation. The combination of decreased state support, tuition caps, enrollment growth, and growth in mandatory expenditures is creating a “perfect storm” situation for public college and university finance. This situation has caused institutions to have to reexamine priorities and do more with less as well as to cultivate non-traditional revenue sources. A July 2003 report by the American Council on Education discusses ways that campuses may diversify revenue streams, including instruction; research and analysis; pricing; financial decision making and management; human resources; auxiliary enterprises; development; and franchising, licensing, sponsorship, and partnering arrangements with third parties.
Higher education experts have proposed solutions including increased use of distance learning, outsourcing, increasing use of teaching assistants, decreasing time to graduation, and more to the problem of rising college costs in a new publication from the Lumnia Foundation entitled " Course Corrections: Experts Offer Solutions to the College Cost Crisis ."
As Ohio’s economy has experienced dramatic shifts over the past thirty years while it has moved from a predominantly industrial base to a more diversified economy with an emphasis on the service sector, the state’s labor market has also changed along with these trends. Recent patterns suggest a positive market for college educated employees. Given the increasing number of "baby boomers" who are expected to exit the labor market in coming years, employment opportunities should be particularly good for recent college graduates, once there is a recovery from the current economic downturn. As noted by the U.S. Bureau of Labor Statistics and Ohio Job and Family Services' Labor Market Information , clear differences in employment opportunities do and will exist across different fields and across different educational levels. The greatest growth of employment opportunities between now and 2010 for those holding an Associate Degree is expected to take place among registered nurses, computer support specialists, dental hygienists, radiologic technologists, respiratory therapists, physical therapist assistants, and paralegals/legal assistants. The greatest job growth among Bachelor's Degree holders is projected among registered nurses, K-12 teachers (all fields and levels), accountants, in all aspects of computer-related employment, insurance agents, social workers, cost estimators, mechanical engineers, training and development specialists, construction managers, purchasing agents, employment specialists, loan officers, industrial engineers, and industrial production managers. Among those with Master's Degrees, the greatest job growth will be seen in school counselors, mental health and substance abuse social workers, physical therapists, and speech-language pathologists. The greatest job growth among doctoral degree holders is expected for psychologists (multiple specialties), post secondary health and human service field faculty, post secondary business faculty, and post secondary arts faculty.
More information about economic and economic development conditions in northwest Ohio can be found from the Regional Growth Partnership of Northwest Ohio .