The state budget spending cap is expected to slam down on Connecticut’s public colleges and universities next year, reducing course offerings and teaching posts while triggering further tuition and fees hikes.
As the emergency fund surpluses that kept higher education afloat during the worst of the coronavirus pandemic disappear, the cap is blocking advocates who wanted to replace that temporary aid with recurring state funding.
Faculty unions, students and legislators gearing up to protect the system will be bumping heads with Gov. Ned Lamont, who’s become the chief defender of fiscal guardrails. Those restraints are designed not only to keep government spending in line with taxpayers’ wallets but also to whittle down the enormous debt that threatened state government’s fiscal stability just one decade ago.
And the administration says Connecticut simply can’t maintain emergency funding levels indefinitely. All schools must adjust, and given the declining enrollment at many, the administration adds, it shouldn’t be as difficult as some argue.
“The students who are coming in now are going to lose so much,” said Xander Tyler, an economics senior at Central Connecticut State University. “They’re going to lose more competent and passionate faculty. They’re going to lose interest. They’re going to lose services.”
“We’re not getting close to [properly] serving the students who need us,” said Colena Sesanker, a philosophy professor at Gateway Community College in New Haven and political director of the Local 1973 of the Connecticut Congress of Community Colleges, commonly known as the 4 C’s. “We are the portion of the state budget that is most discretionary. What I find extremely strange is no one [among state policy makers] has even flinched.”
The Board of Regents for Higher Education, which oversees the 12 community colleges, four regional state universities and online Charter Oak College, is projecting a $140 million deficit next fiscal year, a gap equal to 11% of the entire system budget.
The University of Connecticut, the state’s flagship university, is facing a $70 million gap in 2024-25 for its main campus in Storrs and its satellite campuses.
Getting higher ed through the worst of the pandemic
Colleges and universities across the state watched enrollment drop as students initially fled campuses in 2020, and some were reluctant to live in dorms after that.
Lawmakers and Lamont responded by giving the Board of Regents’ system about $250 million last fiscal year from surplus and from federal pandemic grants.
This fiscal year, the funding from temporary sources is closer to $210 million. And according to the preliminary state budget for 2024-25, it’s about $76 million.
UConn is in a stronger fiscal position than the other higher education units. Its undergrad enrollment at Storrs and the regional campuses has bounced back beyond pre-pandemic levels after a modest dip in 2021. But it also needed and received extra funding, about $64 million in temporary funds, last fiscal year and $82 million this year. The preliminary 2024-25 budget would send UConn $31 million.
Lamont’s budget director, Jeffrey Beckham, said government has provided a “glide path” to wean all higher ed units off this money. In other words, the temporary funds are retreating gradually, but most of it has to go away.
“Everyone ought to be on notice,” Beckham said. “We’ve got to get them back to more historic, reasonably funded block grant levels.”
Lamont’s budget chief insists universities and colleges should have known this money was temporary and planned accordingly, using it only to cover one-time and emergency expenses.
But higher ed leaders — and some legislators — say that simply makes no sense.
Most state officials knew the temporary aid was going toward ongoing expenses, like wages and benefits, and with good reason, said former House Speaker Richard J. Balducci, who chairs the Board of Regents’ Finance & Infrastructure Committee.
So-called temporary aid comprised one-sixth of the entire Board of Regents’ system budget last fiscal year. How could anyone assume that wouldn’t be used on recurring expenses like salaries and financial aid? Balducci asked.
When Lamont and some legislators called last spring for significant reductions to higher education, it “was pretty much a shock to everyone,” he added.
And even as the governor and other officials were pushing colleges and universities to tighten their belts, they also were making that even task more difficult.
Lamont negotiated and legislators approved pay hikes and bonuses for unionized state employees that are complicating many agency budgets — including higher ed units.
Between 2022 and 2025, workers, annually, are getting a 2.5% general wage increase and step increases that typically add another 2 percentage points to any wage hike.
The package also awarded unionized workers $3,000 in bonuses in the spring and summer of 2022.
All higher ed units combined had to find an extra $52 million this fiscal year to cover those pay hikes.
And Lamont and lawmakers also changed how the state budgets cover the fringe benefits for many college and university workers. Starting this fiscal year, most of those costs now are covered through the comptroller’s office budget. At the same time, the state reduced its regular grants to higher ed units.
But higher ed lost more than it gained through this switch. UConn came up $60 million short for its Storrs and regional campuses and another $40 million for its Farmington-based health center.
The regional universities, community colleges and Charter Oak collectively lost $80 million.
Spending cap fits extra tight next year
Still, public colleges and universities aren’t the only ones with problems.
Over the last two years, Lamont and legislators have delivered one of the largest state tax cuts in modern history, focusing most of that relief on middle class households. The Democratic governor and legislative leaders from both parties repeatedly insisted that these cuts must remain in place, even if the national economic picture shifts.
“We’re very proud of the largest tax cut in the state’s history,” Beckham said. “We would not do anything to change that.”
And while the nation has been able to avoid a recession this year, state government’s short-term fiscal picture has shifted — not from excellent to horrible, but rather simply from excellent to good.
That makes all the difference, though, because the billions of dollars in annual revenue growth that made the recent tax cuts possible also generated the surpluses that helped provide temporary extra dollars to higher education.
A new report from state fiscal analysts Monday is expected to show that while Connecticut’s finances remain in balance, the huge surpluses generated between 2018 and 2023 are going away.
And then there’s the spending cap.
The governor and legislators approved a preliminary state budget last spring for the 2024-25 fiscal year, and they will consider adjustments to it once the regular 2024 legislative session convenes on Feb. 7.
But the $26 billion first draft is under the cap by the narrowest of margins, less than $12 million — or 1/22nd of 1% all planned spending.
Further complicating matters, the current state budget, though still in the black, is facing nearly $200 million in cost overruns in various accounts, including $120 million in Medicaid.
Beckham said he expects those added costs will continue next fiscal year, meaning there already isn’t enough room under the cap to accommodate them — let alone additional funds for higher education.
There is a mechanism for legally exceeding the cap. It requires the governor to declare a budget emergency and for 60% of both the House and Senate to agree. Connecticut hasn’t voted to legally exceeded the cap since 2007.
There are other ways around the cap. Carrying forward surplus from earlier years is one — but you need to have a healthy surplus to do that.
Another option is called a revenue intercept. This accounting mechanism targets dollars before they arrive in the General Fund and assigns them for specific purposes. Because the cap only applies to budgetary appropriations, these dollars then could be used for a specific purpose, such as higher education, without counting against the spending cap limit.
But Lamont has opposed such maneuvers, arguing they fly against the spirit of the cap.
Still, the General Assembly’s top leaders warned that while some efficiencies can be found, they won’t allow higher education to be financially gutted.
“I’ve never viewed the cap as something that should stop us from funding critical services,” said Senate President Pro Tem Martin M. Looney, D-New Haven. “Nobody should be a purist.”
“No one is looking to have a budget adopted that leaves UConn and higher ed unable to perform their functions,” added House Speaker Matt Ritter, D-Hartford.
Still, Lamont has a third reason to worry about the cap besides balancing the books and preserving tax relief.
Connecticut is one of the most indebted states, per capita, in the nation, entering this year with about $88 billion in unfunded retirement benefit obligations and bonded debt.
Much of that stemmed from more than seven decades of inadequate savings habits and annual spending that often grew faster than taxpayers’ income.
Some lawmakers sometimes lose sight of the big picture, the governor said last week. The cap is “certainly an important priority for a governor,” he said. “Sometimes for individual legislators, it’s not as much of a priority.”
Asking students for more, trimming programs
Faced with stern opposition and evaporating aid, higher education officials say they don’t have many options.
The Board of Regents voted last summer to raise community college tuition and fees. A full-time in-state student now pays $4,966, up 5.7% from the $4,700 charged last year.
And a tuition- and fee-hike schedule adopted last October raised the average cost this year for in-state students living on campus at the regional universities by 3%, from $13,795 to $14,210.
The regents also offered the system chancellor’s office to prepare a deficit mitigation plan to wipe away as much red ink as possible. That’s due to the full board on Wednesday.
Balducci said he believes the plan will focus on consolidation, trying to preserve as much as possible through efficiency.
Faculty union leaders fear the final picture will be grim.
“We frankly don't understand how [state lawmakers] are not owning the loss of services that have already taken place and the reduction in quality of services that have already taken place,” said Seth Freeman, president of the 4Cs. “We just have the view that Gov. Lamont and the legislators are completely failing our students across the state.”
Freeman added that the community college system already has been tightening its belt.
“We've been able to do more with less for years, but now I think we're doing less with less,” he added. “We're just reducing services now.”
UConn raised tuition this fall as part of a five-year plan, bumping the annual cost for a full-time, in-state student attending Storrs by $660 or 4%.
And the university’s Board of Trustees is expected to vote in December on a proposal to increase housing and dining fees by 2.75% next year.
If approved, the full cost for a full-time, in-state student living on the Storrs campus would be $35,424 next fall.
Jeffrey Geoghegan, UConn’s executive vice president for finance, said the university has no further plans to boost tuition beyond the existing schedule.
He didn’t offer specifics on how the university might deal with the potential loss of state funds.
“As there is no one answer to address the FY25 state budget, we continue to focus on the options available to us, always striving to put students first and be an economic driver for the state of Connecticut,” he said.
Should universities and colleges be able to save as enrollment drops?
Beckham and others argue higher education should be able to get by with less and not have to ask students to pay more.
The budget director noted enrollment at the community colleges in particular has been on the decline since 2012 and dropped about 14% in the five years before the pandemic.
And according to the Board of Regents, community college enrollment, counting full- and part-time, stood at 33,752 students, down 2.6% from two years ago.
The regional state universities, with 21,185 undergraduate students this fall, are down 4% from two years ago.
UConn experienced a slight dip in enrollment at Storrs and its regional campuses in 2021. But the 24,356 students attending this fall is up almost 2% from pre-pandemic levels.
Beckham said all higher ed units must meet “the needs of the market,” preserve those programs most in demand and make hard choices elsewhere.
And he’s not alone.
Minority Republicans in the state House and Senate pushed hard last spring to begin pulling back aid to higher education, also arguing that all systems — particularly those with declining enrollment — should be finding more savings.
And Sen. Cathy Osten, D-Sprague, co-chairwoman of the Appropriations Committee, said she expects her panel will be overwhelmed with demands for more funding early next year — and not just from higher education. Advocates for elder care and other Medicaid-supported programs, social services and elderly childhood development also are expected to make strong claims.
Osten added that it’s getting harder to justify maintaining funding for the community colleges in particular.
“We just don’t have students returning,” she said. “We need to figure that out.”
But others say it’s more complicated than that.
For the community colleges, enrolling more students generates more Pell grant scholarship funds, which, in turn, helps the state to operate a system that allows nearly all students to graduate from that system debt-free.
And if programs are eliminated, will enrollment decline further?
“When you lose students, these institutions are losing revenue,” said Rep. Greg Haddad, D-Mansfield, co-chairman of the legislature’s Higher Education and Employment Advancement Committee. “The institutions themselves are trying to right-size because of that lost tuition revenue, and to compound that by also reducing the state appropriation, I think, makes it a doubly hard revenue loss to deal with.”
Balducci said the Board of Regents will try to cut costs strategically but not at the expense of affordability or the ability to offer core programs. Many students attend community college and then the regional universities because there is no other affordable plan for them to secure a college degree.
And if lawmakers cut too deeply, “you’re going to hurt the future leaders of the state, the future jobs of the state.”
Tyler said they believe many of their fellow students at Central Connecticut State University chose it for its affordability. But during their 4 1/2 years there, they've seen the impact of cutbacks on faculty, courses and student resources.
“I'm pretty sure the school went over a year without staffing for the LGBTQ center. For me, that was a huge devastating loss,” Tyler said. “I also had built meaningful relationships with professors who really invested in my growth and my learning, and then they just disappeared. They were here one semester, the next I come back, and they're not there anymore.”