Cuts to financial aid, postsecondary institutions will have significant impact on students and campuses

by | May 2, 2018

With the 2018 legislative session now fully in the books, it’s time to review in full what happened to funding for postsecondary education in the enacted state budget and its potential impacts.  Over the next two years, total funding for both state financial aid and institutional funding will see declines of 2.5%.  For Kentucky’s public colleges and universities, this continues a pattern of state disinvestment since 2008 totaling $222.6 million or 21% – a disinvestment whose costs are ultimately born by students and families.

Financial Aid

The enacted budget decreases state financial aid $12.6 million in FY 2019 and adds back $8.2 million in FY 2020. The majority of the decrease comes from reductions in the Work Ready and Dual Credit scholarships. Needs-based CAP and KTG would receive 45% of the net lottery proceeds, as compared to the 55% required by statute – but substantially more in dollars than the previous budget, approximately $28.5 million more over two years.

Only 94.5% of net lottery revenue would go to financial aid, meaning $13.9 million would be shifted to other areas of government.  The current budget had returned 100% of net lottery revenue to financial aid. The enacted budget returns to a practice of budgets in years past that uses lottery revenue to pay for other areas of government.

Institutional Funding

The enacted budget decreases state funding to public postsecondary institutions by $25.5 million in FY 2019 and another $1 million in FY 2020.  While campuses are directly reduced approximately 6%, some of this cut may be earned back through performance-based funding.

In FY 2019 $31 million and in FY 2020 $38.6 million is allocated through the performance-based funding model based on institutional success at meeting goals.  Both years would be less than the $42.9 million allocated to performance-based funding in FY 2018.

It is also important to note that Kentucky’s regional universities and the community college system are impacted by increasing pension costs like much of the rest of state and local governments. These increases are estimated at $47.2 million and come in addition to funding reductions.

Impacts?

First and foremost, all institutions have undergone significant belt tightening – some that is probably necessary and some that may have long-term impacts on the state’s ability to provide high-quality, affordable opportunities.  Many of these are detailed here and include the elimination of faculty and staff positions.  For example, KCTCS has eliminated over 800 positions, while Western Kentucky University has announced the elimination of over 100 positions and Eastern Kentucky University has announced the elimination of over 150 positions and the suspension of 12 degree programs.

Even with belt tightening at the campus level, affordability trends are not promising.  Rising tuition prices, declining state support, increasing student debt levels, and stagnant wage growth are threatening to erode college access, particularly for lower-income students. Since 2006, costs borne by students have risen from 34% to 50% of total funding.  Such costs have come at a time when students and families have had less financial capacity to keep up.  As seen in the table, since 2008 tuition has risen substantially as state support has declined and income remained flat.  A trend that is likely to continue with the Council on Postsecondary recently approving tuition increase of up to 6% over the next two years. Although, Eastern Kentucky University and Morehead State have announced tuition freezes at least for next year

Sources: State Funding – Prichard Committee Analysis of State Budgets; Tuition – CPE Tuition Reports; Income – U.S. Census Bureau, 2016 American Community Survey 1-Year Estimates; Inflation – Bureau of Labor Statistics CPI Supplemental Files

Kentucky cannot expect to meet its needs for economic growth and quality of life through continued disinvestment in education. Our human capital is the primary economic engine and it is imperative to support the educational opportunities necessary for success in school, career and life. Despite increases in some state financial aid programs, issues of affordability and access to postsecondary opportunities for all Kentuckians’ make further reductions to institutional funding difficult to stomach. 

Want Further Detail?

We’ve created a detailed summary with one page to show financial aid changes and a second to show the institutional budgets. You can download that here, or view the complete budget bill as enacted by the General Assembly here.

ABOUT THE PRICHARD COMMITTEE

Since 1983, the Prichard Committee has worked to study priority issues, inform the public and policy makers about best practices and engage citizens, business leaders, families, students, and other stakeholders in a shared mission to move Kentucky to the top tier of all states for education excellence and equity for all children, from their earliest years through postsecondary education.