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Workforce Training in the Budget Crosshairs

April 4, 2008
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Related Topics: Career Development, Basic Skills Training, Employee Career Development
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The sky is not falling, according to Jose Millan, head of workforce training for the world’s largest educational career training institution. "But it’s very cloudy out," he says.

    By one economic measure—customer base—Millan shouldn’t be worried. Economists may be predicting tough times ahead for many sectors of the economy, but for higher education, recession means more customers, not fewer. In the California Community Colleges system, where Millan serves as vice chancellor of the economic and workforce development program, there are already more than 2.6 million students training in thousands of programs from air conditioning repair to astrophysics, and enrollment projections are off the charts.

    The numbers will likely grow. Whenever economic times gets rough, Millan knows, people head back to school in droves. Whether they’re teenagers looking for a career path or experienced workers downsized, displaced or simply trying to sharpen their skills to stay competitive, people look toward higher education as a haven for retraining, retooling and riding out fiscal storms.

    But the clouds that Millan sees massing on the horizon have to do with educational supply, and whether it can keep up with increased demand.

    The recessions that swell student populations also can bring painful budget cuts. Bad times equal lower tax revenue, which means less public spending. Most of the nation’s higher education systems are public institutions, with, on average, at least half their budgets coming from government sources. And for most states over the next fiscal year, the budget picture is bleak.

    "It’s going to be worse than 2001," analyst Jim McKenney predicts for higher education funding, referring to the recession that squeezed most economic sectors in the fallout of the September 11 terrorist attacks.

    McKenney, a vice president of economic development for Washington-based nonprofit the American Association of Community Colleges, is especially worried. Educators are used to the rise and fall of their funding, but for decades they’ve had a safety net from local property tax revenue, which generally stays on the rise. With the current home mortgage meltdown and real estate bubbles bursting all over the country, that safety net now seems to be collapsing too.

    Businesses also have good reason to be concerned about higher education’s headaches. The nation’s 4,100 colleges, technical training schools, universities and especially community colleges are where most of America’s job training happens.

    Higher education leaders are predicting tens of thousands of students will be shut out of their programs if recession and subsequent budget cuts force them to cut enrollment and raise tuition. That’s what happened in the 1991 recession, and again in 2001.

    At least 25 states are facing serious budget gaps for the next fiscal year, including some of the nation’s most populous ones—Virginia, New Jersey and Florida, according to the Center on Budget and Public Priorities. The Washington-based think tank estimates that there are more than $34 billion in gaps for education from just half the states counted so far.

    According to analysts from the State University of New York, tax revenues have dropped for the first time in four years. New York and most other states are still shaping their upcoming budgets and many legislative dramas and showdowns have yet to play out before final figures are known. But analysts say what is clear is that virtually every state will have to cut somewhere. And higher education—often considered a privilege, not a right—often presents a ripe, juicy target for cost-cutting.

    States are handling their financial problems differently. Despite facing huge deficits, Rhode Island politicians have pledged no new taxes and instead propose handling the red ink with major spending cuts, including a $17 million hit to higher education.

    In California, Gov. Arnold Schwarzenegger proposes cutting as much as $1.1 billion from the higher education system, the majority of it coming from community colleges.

    That state is home to the nation’s largest public university system, the California State Universities. It trains the bulk of California’s professionals, including teachers, nurses, technology workers and businesspeople.

    "As the public university that prepares the majority of California’s workforce, these budget cuts will have a direct impact on the state’s economy and on the key industries that our graduates enter," says CSU Chancellor Charles B. Reed.

    Educators argue that budget slashing is penny-wise and pound-foolish, and clogs the job-training pipeline.

    It will be hard to restrain legislative budget axes from occupational and technical training programs that require so much specialized equipment and hands-on laboratories, says California Community College executive Millan.

    "Occupational programs are the most expensive. Obviously it’s cheaper to have an English class than one in hybrid technologies."

    That’s the situation facing Marshall Gartenlaub, statewide director of the Centers for Applied Competitive Technologies, a program run by the California Community Colleges. He spends his professional life finding funding to train more students in how to handle new technologies. That includes robotics, engineering technology, maintenance and mechanized warehousing work, and covers workers in both blue-collar and white-collar jobs.

    The program that Gartenlaub oversees teaches more than 4,000 students per year in about 12 colleges and education centers statewide. To keep it running, he seeks both state and private funding through grants and business partnerships. But since the bulk of his funding comes from public sources, and with the governor proposing a 10 percent to 11 percent budget cut for education, he expects to lose space for an estimated 400 students next year. That would include students out of one of his most popular programs, which teaches high school and college instructors how to train their students in the use of robotics.

    While the latest budget rollback would be nowhere near as dramatic as the cuts his programs suffered in the 2001 recession, Gartenlaub says that’s small consolation.

    "You never get used to it," he says. "You always tighten your belt because you don’t know where or when you’re going to be kicked again."

    Applied technologies training is only one area that will take the hit. Already there are shortages of teachers, nurses and other health care professionals in many parts of the country, and that trend is expected to continue and spread to many other professions as baby boomers retire from the workplace over the next decade. The higher education leaders emphasize statistics like this one from the American Association of Community Colleges: The majority of jobs that will be created by 2014 will require some postsecondary education. They doubt whether there will there be enough desks at postsecondary schools to meet that demand.

    "A high school diploma used to mean more than it does today. The college diploma is supplanting that for basic skills," McKenney says. But to be job-ready takes more training. McKenney says he is a case in point. He got out of college and got nowhere in the marketplace until he went back to school for a teaching credential, His career path included more academic retooling along the way in order for him to become a policy analyst and executive.

    Constant budget cuts in higher education also make it harder for the working poor and displaced workers to get ahead, because what gets lost are programs designed to help them over the academic divide. When the price of college goes up, analysts say, so do the numbers of people that are shut out of higher education and the preparation it provides for higher-paying jobs and careers.

    During the 1991-92 recession, public investment in higher education dropped by more than 6 percent, while public college tuition jumped by more than 7 percent on average—a 13-point divide, according to a recent report by the College Board. In the 2001 financial crisis, the chasm between public investment and student cost grew even wider apart: Tuition on average jumped 11 percent at public colleges and universities, while government support of higher education dropped by 8 percent.

    In the California State University system between 2001 and 2005, officials raised tuition by more than 75 percent for CSU’s 410,000 students. At the same time, the state Legislature cut the system’s budget by a half-billion dollars one year alone.

    CSU Chancellor Reed worries that the budget ax is poised again at his and other systems just when the nation’s higher education institutions were starting to recover from the lingering budget woes of the early part of the decade.

    Nationwide, tuition increases slowed in 2007 because of increases in state operating support, thanks to better tax revenues in most states, analysts say. State tax appropriations for higher education increased by 14.4 percent over the last two years, according to the American Association of State Colleges and Universities.

    Prospective students looking to sharpen job skills still have choices in the growing for-profit education industry, which includes schools like University of Phoenix. There are also private colleges and technical training schools. And while private schools generally cost more, they also tend to suffer less of the yo-yo effect of the budget dramas in public institutions. Still, most of the 17.5 million students in post-high-school learning are in the classrooms of public institutions, where costs are lower and access more universal.

    Analysts say there are two bright lights on the horizon.

    First: High energy prices. They are one of the rising costs putting the financial squeeze on many businesses, as well as higher education institutions. But they also mean that oil-producing regions have pumped up tax coffers, and that could spare higher education there. Alaska Gov. Sarah Palin has called for increasing education spending, including vocational apprenticeship programs. Kansas, meanwhile, proposes a nearly 7 percent increase in post-high-school education spending next academic year.

    Second: Some policy makers are making the funding of workforce training a priority, a softening economy notwithstanding. Education analyst Daniel Hurley remains optimistic that policymakers are looking at the longer term this time around. He points to Virginia Gov. Tim Kaine, who is hoping to borrow the money, via bonds, to expand higher education next fiscal year. And before his resignation March 12, New York’s Democratic Gov. Eliot Spitzer had proposed raising education investment by spinning off part of the state lottery, despite a budget deficit looming at $4 billion.

    Hurley, of the nonprofit American Association of State Colleges and Universities, believes there is more serious focus on increasing American competitiveness in a global economy. The results can be seen in greater investment from both public and private sectors in technology training.

    "Higher education is going to take a hit, yes," Hurley predicts. "But there is a greater political awareness based on sound data that adult training and retraining are the key to long-term financial stability of the economy."

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