The new relief bill has $350B for local and state governments. Will colleges benefit?

Dive Brief:

  • The massive coronavirus relief package President Joe Biden signed Thursday contains about $40 billion in direct aid for colleges. It also has money for local and state governments that policy experts say could help insulate public institutions from deep funding cuts. 

  • The legislation provides $350 billion for local, state and tribal agencies to alleviate costs incurred during the health crisis. 

  • State leaders tend to divest from higher education during economic slumps in part because they know colleges can hike tuition to offset those losses.

Dive Insight:

States widely took away money for postsecondary education during the Great Recession, forcing colleges to raise tuition to counteract funding shortfalls. Average in-state tuition and fees at public four-year schools rose by nearly 25% between 2008 and 2012. Similar patterns occurred during other periods of economic contraction.

“Higher ed is the first on the chopping block, because it’s a big area of spending and it’s discretionary,” said Jennifer Delaney, a higher education professor at the University of Illinois at Urbana-Champaign. 

The same trends are playing out now. The Center on Budget and Policy Priorities, a progressive think tank, estimates state budget shortfalls will amount to $555 billion between the 2020 and 2022 fiscal years. And 22 states slashed nearly $2 billion total in postsecondary funding for the current fiscal year, according to liberal think tank the Center for American Progress. On top of that, institutions were already grappling with funding gaps after many returned room and board fees to students last spring and missed out on other auxiliary income from campus operations.

Colleges have turned to layoffs during the budget crunch. The higher education sector has lost at least 650,000 jobs since last February, according to data tracked by The Chronicle of Higher Education.

The first two rounds of federal relief funding helped protect colleges’ budgets — to a degree. They provided a combined roughly $37 billion in direct higher ed relief. But only the first measure offered local and state government aid, totaling $150 billion.

That relief was beneficial, said Tom Harnisch, vice president for government relations at the State Higher Education Executive Officers Association. But he considers the local and state aid in the third package, the American Rescue Plan Act, to be “the most underrated higher education provision in the bill.” SHEEO wrote to Senate leaders in early March urging them to support the inclusion of that aid.

It’s unclear how much of that money states would devote to higher ed, Harnisch said. But it will generally help stabilize their budgets and would avoid the most glaring cuts to public institutions, which three in four college students attend, he said.

States that accept aid for K-12 schools also must hold the line on K-12 and higher ed spending for the next two fiscal years. But the U.S. Secretary of Education has the power to waive this requirement, Harnsich noted. 

“Overall, this is great news for public higher education,” he said.

However, this recession is defying typical enrollment trends. Students usually return to college during economic downturns. But public health concerns and financial factors have kept them from enrolling, further hurting colleges’ budget. These losses are deepest at two-year schools. Preliminary data from the National Student Clearinghouse Research Center shows spring enrollment at community colleges fell by 9.5% from last year.

Even with government assistance, Delaney expects colleges’ road to recovery will likely extend years. 

When the health crisis began, per-student funding was still 8% below 2008 levels, according to the Bipartisan Policy Center.

“This is a very challenging and deep recession, and I would not expect it to be on the shorter side,” Delaney said.

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