The Second Stimulus Package Lays the Groundwork for a Higher Ed Recovery That Illinois Can Build On

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While the $23 billion will provide some relief, the state must still adequately and equitably fund colleges, particularly more financially vulnerable institutions.

Mike Abrahamson, Policy Manager | January 6, 2021

There are many positive aspects of the federal stimulus package and budget, passed and signed over the holidays. The coupled bills offer helpful funding to public colleges and universities, but it's incomplete; and with no state and local funding included in the bill, Illinois must make equitable funding decisions as it remains in a budget crisis.

This legislation also includes long-sought changes to the Pell grant, among other higher education-related provisions. Overall, Illinois can build on this response to support college students and institutions through the COVID-19 crisis.

$23 billion in aid to colleges and students

The headline of the bill is the $23 billion to be distributed among colleges and universities, a boost from the $14 billion provided in the March CARES Act. However, this is still just a fraction of the $120 billion requested by many leading higher education advocacy organizations, who estimate that $73.8 billion alone is needed to address COVID-19 on campuses. Far more is needed to cover the increase in students' financial need this year, lost revenues from in-person events, and crucially, potential shortfalls in state appropriations.

The stimulus package not only provides aid to colleges and universities, it prioritizes equity in how it doles out these funds. The CARES Act had some equitable elements in its distribution, but Congress made further steps toward equity by more heavily weighting part-time students (who are more likely to be parents, essential workers, and students of color) in this stimulus package's formula.[1] It also concentrated more funding on public colleges and universities by discounting the private colleges wealthy enough to pay the endowment tax in its formula, and limits their usage of funds to expenses directly related to the pandemic.

Pell grant improvements

The budget bill included some much-needed improvements to the federal Pell grant program. It simplified the Federal Application for Financial Student Aid (FAFSA) form from 108 questions down to 36.[2] Technical changes to the "Student Aid Index," a renaming of the much-maligned term "Expected Family Contribution," will also qualify 550,000 additional students for aid, and 1.7 million more students will be eligible for the full award.[3] The award itself had a modest increase of $150, bringing the maximum grant up to about $6,500. This is still only about half of what Illinois university students end up paying for college, making the incoming Biden administration's promise to double Pell that much more important.

The bill includes incarcerated students and students convicted of a drug-related offense in Pell eligibility, reversing a provision of the 1994 crime bill. It also restores Pell eligibility for students who have been defrauded by their college. This is an important step toward aiding students who have been victimized by for-profit colleges, but Illinois can do more to hold these colleges accountable, and stop giving taxpayer money to these institutions by phasing out MAP grants at for-profit colleges.

Other elements included

The stimulus package also includes $1.3 billion in flexible Governors Emergency Education Relief (GEER) funds, about half of the $2.75 billion provided in the CARES Act. If the distribution method to states is the same, Governor Pritzker will be able to allocate about $50 million toward education as he sees fit. PCC advises the Governor's Office to similarly distribute about half toward higher education, and build on the equitable distribution of previous funding to not only include proportion and number of low-income students, but also consider the populations of Black and Latinx students that colleges enroll.

Finally, the bill gives a five-year extension for employers to be able to offer up to $5,250 in student loan relief tax-free to their employees. While this can help employers and some graduates, its benefits are limited and not likely to be very equitable. For this reason, PCC supports student loan forgiveness at the state and federal level that is more equitably targeted.

Concerning and disappointing elements

There are elements of this legislation that are concerning, however. More than $900 million is earmarked for for-profit colleges, which can be predatory, especially during economic crises (though they do receive less in this bill than in the CARES Act). It also does not explicitly state that undocumented students are eligible for funds, which was an omission from the CARES Act that allowed the Department of Education to inequitably exclude undocumented students from receiving emergency grants.

Further, this latest bill also does not offer loan forgiveness or continue the moratorium on federal loan payments, meaning that borrowers will have to continue making loan payments starting February 1. It also includes no aid for state or local governments, so appropriations to public colleges and universities will remain in jeopardy as the state suffers a $3.9 billion budget shortfall. Thus, while the $23 billion will provide some relief, the state must still adequately and equitably fund colleges, particularly more financially vulnerable institutions. This means instilling equity in distributing the GEER funding, as well as in any unavoidable budget cuts. For the Partnership's full playbook on instilling equity in this crisis, see PCC's recent blog post, as well as its Higher Education Appropriations: A Framework for Equity in Illinois report.

Update (1/19/2021): An earlier version of this blog post mentioned changes to the way that developmental education courses would count toward a student's financial aid clock. The American Association of Community Colleges, in talking with congressional staff, has corrected this finding and confirmed that there will be no changes to the Pell grant as it relates to developmental education.



[1] 37.5% is distributed based on the Full-Time Equivalent (FTE) of Pell-eligible students enrolled, 37.5% based on headcount of Pell students, 11.5% based on FTE of non-Pell-eligible students, and 11.5% based on the headcount of non-Pell-eligible students (source: page 1881 of the full-text bill)

[2] It also added a question that will allow the government to trace loan outcomes by race

[3] Students who make 275% of the federal poverty line are eligible for grants, and students closer to 200% of the federal poverty line (depending on family size) are eligible for the maximum award (Source: Center for American Progress)

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Without graduated income tax, Illinois state universities brace for ‘almost inevitable’ budget cuts ‘because there’s just nothing left'

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November 12, 2020

by ELYSSA CHERNEY - Chicago Tribune

In Gov. J.B. Pritzker's first remarks after voters rejected his administration's signature proposal for a graduated-rate income tax in Illinois, the first-term Democrat singled out higher education as one of the many state-supported areas that could lose funding as lawmakers try to balance the next budget.

With no new sources of revenue and an expected drop in gains from sales tax during the coronavirus pandemic, Pritzker warned that he is left with few favorable options.

Reducing discretionary funding for the state's 12 public universities and community colleges could make it harder for students to afford college if schools raise tuition to offset the losses, some experts said. And there could be less money to support a grant program for low-income college students who qualify for state assistance in a time when more applicants are expected to seek aid.

While Illinois universities are not expecting any budget changes for this fiscal year, which began July 1, some advocates and policy experts said the long-term implications for Illinois higher education could be severe if new sources of funding aren't found.

"Without new revenue, our fear is that we will continue to see the same trajectory that the state has been on in terms of lower enrollment, especially for Black students," said Kyle Westbrook, executive director of the Partnership for College Completion, a Chicago-based nonprofit.

Over the past two decades, Westbrook said, state appropriations for public universities have remained relatively flat but haven't kept pace with inflation, and a greater share of the funding is being directed to pensions for public university and community college employees.

On top of that, some schools are still reeling from the state's two-year budget impasse under former Republican Gov. Bruce Rauner, Westbrook said. Universities that rely more heavily on state dollars and serve a higher number of lower-income students were disproportionately affected by the funding delays.

"You could argue the situation was dire even before the budget impasse, but that created a crisis in the system as a whole," said Westbrook, who led education policy in former Chicago Mayor Rahm Emanuel's administration. "The failure of the (tax amendment) to pass is so catastrophic for higher ed in the state."

Adam Schuster, senior director of budget and tax research at the right-leaning Illinois Policy Institute, agreed that inflation-adjusted spending on higher education is significantly down. Funding has dropped by nearly 20% since 2010, when accounting for inflation, while spending on pensions has skyrocketed, he said.

But Schuster called for reform to the state pension system, a politically divisive issue, as opposed to changing Illinois' flat income tax rate of 4.95%.

"Estimated progressive income tax revenues were not earmarked for any particular purpose and would have failed to close the state's structural deficit," he said in an email. "Cuts to state spending on higher education stem from the unsustainable growth in contributions to the state pension systems."

Public universities contacted by the Tribune had little to say about the failed constitutional amendment. A spokesman for Illinois State University said the school "will have to wait and see what next year's budget cycle looks like." Meanwhile, a spokesman for the University of Illinois System did not offer comment beyond confirming that no changes to state appropriations were planned for this year.

"It would be premature for us to comment on the current budget cycle or future appropriations until the governor's office and the General Assembly share their plans," said Mike Hines, a spokesman for Northeastern Illinois University.

On Thursday, the University of Illinois Board of Trustees approved a request for an 8.3% increase in state funding next year as officials projected $270 million in costs related to the pandemic. The request is sent to the state Board of Higher Education, the governor and the legislature for consideration.

But Jennifer Delaney, associate professor of higher education at U. of I.'s Urbana-Champaign campus, painted a darker picture. Because higher education spending is the largest discretionary portion of Illinois' budget, it is often the most vulnerable when cuts are required, Delaney said.

Delaney, who also serves on the Illinois Board of Higher Education, said her research shows that higher education funding is more volatile than other spending categories and closely tied to economic conditions. She said the pandemic-related recession exacerbates the situation this year.

"It's almost inevitable that higher ed will be cut because there's just nothing left," Delaney said. "The hope of the (tax amendment) is that it would have brought new or additional revenues in, and without those, it's just not at all clear where the money will come from."

Pritzker's graduated-rate income tax proposal might have provided some relief, but it fell short of the thresholds needed to pass on Election Day. The administration estimated the measure would have generated $1.2 billion in the budget year that ends June 30 and $3.4 billion in future years.

The state remains on shaky financial footing, with the administration projecting a combined loss of $6.5 billion in revenue this year and next year. Pritzker also asked state departments to propose cuts of 5% this year and 10% next year and previously warned there could be a 15% cut to discretionary spending without the constitutional amendment.

In addition to potential cuts, Pritzker said he is considering raising income taxes by 1 percentage point across the board. The General Assembly would have to approve the rate hike.

Melissa Hahn, a spokeswoman for the Illinois Board of Higher Education, released a statement saying "we're still in the budget development process," but did not provide further comment.

During a spring session that was truncated because of the pandemic, the General Assembly passed a $43 billion state budget that held funding relatively steady for education. That was a disappointment for universities, which were hoping to receive a 5% bump in funding before the pandemic hit.

The Illinois Student Assistance Commission, a state entity that manages need-based grants for college students, was also in line to receive an additional $50 million but instead saw its funding frozen at last year's level.

Eric Zarnikow, ISAC's executive director, said he understands that budget challenges were created by the pandemic but hopes lawmakers will continue to prioritize his agency's grants, which are distributed through the Monetary Award Program. MAP saw funding increases in 2018 and 2020, bringing it to a historic high of approximately $451 million.

Zarnikow said he thinks budget constraints might be a long-term issue and that it would help if lawmakers in Washington stepped in.

"In Illinois, as well as across the country, education and particularly higher education has been really impacted by COVID-19," he said. "We think support from the federal government is really going to be important to meet the needs of the education community."

Chicago Tribune's Dan Petrella contributed.

Original article: https://www.chicagotribune.com/news/ct-ilinois-higher-education-graduated-income-tax-20201112-h3nurmlqlra7hkuuneqlr4eqwe-story.html

This article was also featured in the Journal Gazette & Times-Courier, Herald & Review, The Bloomington Pantagraph


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