In 2017, federal spending on higher education programs amounted to $74.8 billion, which doesn’t include student loans. Local funding was at $10.5 billion and state investments totaled $87.1 billion.
Total education spending varies year upon year, with a history of highs and lows over the last 15 years. However, COVID-19 is impacting education budgets across the board, creating the need for much adaptation on the part of universities.
In 2018, total spend on post-secondary education spending decreased from $74.8 billion to $23.4 billion, then rose in 2019 to $34.1 billion. It’s difficult to spot trends within these spends, particularly if you consider that the allocation of spends by state will vary by state, school district and particular school. Overall, only a small percentage of US GDP goes towards education, with 3% of the $3.8 trillion federal spending going to education in 2015.
Regardless of trends, there’s a particular focus on COVID-19’s effect on the future education budget. Across the United States, university budgets are being negatively impacted by the economic hardships the pandemic is causing. The World Bank states that due to government revenues falling, education financing will have the largest and most immediate impacts placed upon it, writing:
The overwhelming need to give priority to responding to the public health emergency and to strengthening safety nets is likely to reduce the amount of funding that is available for other public investments, including education.
In the World Bank’s report, ‘The Impact of the COVID-19 Pandemic on Education Financing’, while it does state that budget cuts have ‘small negative impacts’ on education and enrollment rates, there is still ‘considerable concern’.
On March 27th, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress. It was a $2 trillion economic relief package and of that allocation, $14 billion was given to the Office of Postsecondary Education, under the title of the Higher Education Emergency Relief Fund (HEERF).
The impact of the coronavirus pandemic is not universal in its negative fallout. Different universities, different departments and different processes will not feel the same impacts across the board. The circumstance for one institution may not be the same as the other.
However, it’s worth investigating a general view of the effects on budgets and other financial implications.
In a 2020 survey by NACUBO and TIAA, it was found that for all respondents, endowments experienced losses during the first quarter of the year. Institutions with smaller endowments experienced greater losses than those with larger endowments. While smaller endowments are riskier in terms of lost investments when equity markets decline, they’re also more likely to represent a smaller portion of the operating funds for a university.
The survey also found that, in contrast to the increased spending of endowments in times of economic hardship (for example, the 2008 Financial crisis), institutions are refusing to spend this money in order to protect their financial position in the future.
Budget cuts have swept across the US higher education system. For example, California has experienced a $1.7 billion cut to its higher education services, Colorado has experienced a $3.1 billion cut and Ohio has seen a $110 million cut. With services strained and educators teaching from home, there have been many calls for further help with funding, on top of what is guaranteed by HEERF.
The budgetary restrictions and other issues that universities face are also causing uncertainty around current and future enrolment, alongside student retention. With students unable to return in full to campuses and everyday university life, higher education could face a historically high attraction rate.
This could be caused by a myriad of factors, such as dissatisfaction with remote learning or inability to afford tuition costs.
In 2017, the US was home to 24% of international students. Now, with travel restrictions in place, universities are losing out on a large amount of their revenue. While they are offering distance learning in many instances, a lot of students don’t enjoy this style of working. Others also argue that tuition prices are not worth the cost of learning online.
The decrease in international students also has an impact on US talent pools. If talented students are not coming to study from abroad, there’s less potential for innovation, fewer suitable candidates for research projects and a smaller amount of new talent entering the American workforce.
The decisions on how to respond financially to a crisis such as this is a lengthy, difficult process and involves many trade-offs. As the US goes in and out of lockdown situations, immediate funding priority is given to health and social protection, in order to protect both lives and livelihoods.
The pandemic also provides the US Federal government with the opportunity to reassess budgetary allocations. For example, during the 2008 Financial Crisis, 15% of the resources in the US Federal American Recovery and Reinvestment Act (ARRA) went to fund education. The current COVID-19 pandemic has also seen a large amount of the CARES Act go towards supporting education.
In situations where financial help cannot be secured, current budgets should be readjusted to ensure frontline services remain protected. Existing funds need to cover the costs of both pandemic responses and quality education services.
This may involve postponing any planned capital investments, reducing training budgets or shifting budgets from non-essential services. Readjustments such as these must be carefully assessed in order to determine whether or not they reduce the quality of education offered. Not just in the US, but everywhere, the pandemic issues a stark reminder that budgets need to be used equitably above all else.
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