Connecticut’s public university system is about to hit a major financial wall, according to local media. There’s much we can learn from this.
Let’s start with the basics. The state’s public postsecondary system can no longer offer the services it currently does without a major financial boost from Hartford, according to its leaders:
The regents’ administration estimates the system — which includes the state universities, the community colleges and the online Charter Oak College — will need nearly $593 million in state operating grants and fringe benefit support in the next fiscal year, and almost $639 million the year after that.
The $593 million request represents a 3.3 percent increase above current state funding for the system, while the $639 million recommended for the 2020-21 fiscal year is 11.3 percent above present state assistance.
To be clear: that’s not extra money to add new services. That’s more funding to keep doing what they’re already doing.
Why is this happening? For one, rising costs in two particular areas, as the “system has been forced to absorb an increasing share of employee pension and retirement health care costs.” For another, “public colleges and universities have been subject to frequent budget cuts over the last decade as Connecticut’s recovery from the last recession has lagged that of the nation.”
Actually, those two problems are pretty commonplace across the US. Our health care finances are still horrendous, even after the Affordable Care Act, and states have cut per-student spending for a generation, as Chris Newfield has shown.
There’s an additional, less commonplace reason: ” public colleges and universities — like most state agencies and departments — also must provide most of its unionized employees with 5.5 percent pay hikes in each of the next two fiscal years.”
So Connecticut’s public institutions are being squeezed in an economic vice. How can the state help them? Not easily:
Overall state finances, unless adjusted, are projected to run $2 billion or 10 percent in deficit in the first fiscal year after the November elections. And the potential gap grows to $2.6 billion or 13 percent in the second year. The single-biggest cost drivers behind those deficits are surging retirement benefit costs.
I have been telling audiences and clients about this issue for a decade. State governments may value higher education, but they also see higher ed funding as competing with other key interests. One of those interests is funding pensions and retirees’ health care. Remember what I mentioned above about our medical system and its financial challenges? American health care is significantly more expensive than it should be.
I and others have also been telling people about the importance of demographics, and those forces kick in hard at this point. As our populations age, the proportion of resources needed to support seniors will only increase, unless we improve the health care funding system (which seems unlikely now). Connecticut’s median age passed 40 nearly a decade ago, and it’s still rising.
Did the state invest too much in sophisticated financial instruments that Wall Street hawked, but which didn’t deliver? That’s happened elsewhere; I don’t know about Hartford’s experience. If so, such a bad experience could worsen the crisis.
Jeff Selingo drew this article to my attention on Twitter, and his observation there adds another layer to the story:
The generational war to come. https://t.co/lEuvAln22q
— Jeff Selingo (@jselingo) August 14, 2018
Inter-generational political tension could certainly follow from this. It’s not hard to imagine some politicians urging the legislature and taxpayers to protect seniors, as they’ve put their lives into service and deserve the benefits they were promised; it’s fair to ask younger people to sacrifice for this goal now, and in so doing they’ll preserve the system for their own future. Other politicians can call for pension and medical cuts, arguing that it’s foolish and cruel to load younger generations with debt burdens simply because Hartford couldn’t do practical financial planning.
This could quickly spill over into Boomer versus Millennial culture wars (leaving out GenX, naturally), with stereotypes flung in all directions. “Boomers are too entitled!” “Kids today are too lazy!” “Millennials ruined Connecticut’s budget!” And so on.
There’s also the reliable left-right divide over unions, which can add to the political struggle.
I’ve focused on these features of state spending, but others are in play to make the politics even more complicated. Higher education and pensions compete with law enforcement, responses to the opioid crisis, and state infrastructure support (especially challenging for a north country state like Connecticut, where winter can devastate roads and bridges).
When we consider the future of higher education, such stories are crucial for our understanding. They bring together trends that aren’t very sexy, like demographics, state budgets, and state politics. These trends nonetheless are reshaping higher education as we know it. Connecticut’s story might be one told in many other states.