Governor Corbett’s decision to “cliff fund” the State System of Higher Education (PASSHE) for a second straight year, again failing to restore the $90 million cut in the 2011/2012 budget, goes against the Commonwealth’s moral duty to support public higher education. The act that chartered the creation of the State System – Act 188 of 1982 – states that it is the Commonwealth’s responsibility to provide a “high quality education at the lowest possible cost” to those attending a PASSHE institution. This obligation has increasingly become compromised in the context of shrinking state support.
According to a recently published Center on Budget and Policy Priorities report, states around the country have taken the ax to public higher education funding. Between 2008 and 2013, Pennsylvania cut higher education spending per-student by 29.9 percent, or $2,082 per student (inflation adjusted). The State System in Higher Education is included in this equation. At the fourteen PASSHE institutions, state spending per student was reduced by 29.6 percent or $1,632 per student during the same period, the trend is not comforting.
The Thirty Year Flip-Flop: Responsibility for Funding Higher Ed Shifted From State to Student
During PASSHE’s first official year of existence (1983-84), roughly 65 percent of its budget was supported by Commonwealth appropriations while a smaller 35 percent came from tuition and fees charged to students. Over the last 30 years, those numbers have flip-flopped. Fast forward to the 2008 recession and the percentage of support coming from the state had shrunk to 37 percent. By 2012-13, state support had shrunk to 26 percent. That means for the average in-state resident student is that tuition and fees have increasingly taken up a larger chunk of their family’s income. In 2001, tuition and fees at PASSHE universities took up 8.5 percent of the median family income in Pennsylvania; in 2012, they take up nearly 17 percent median family income.
To hold the Commonwealth to its promises and responsibility to provide a “high quality education at the lowest possible cost,” state government must stop balancing the budget, through cuts in education and safety net programs, on the backs of the collective citizenry and start exploring for more responsible funding revenues. Examples of these revenue streams include a severance tax on the Marcellus Shale, closing tax loopholes and ending corporate tax breaks.
Going back to the report published by the Center on Budget and Policy Priorities, the only two states that have continually invested in public higher education over the last fiveyears were North Dakota and Wyoming. During this time frame, these states have increased their spending per student by 16.5 percent and 7.5 percent, respectively. What is not reported in the article are the reasons why they have invested in higher education spending, but Kevin Keily from Inside Higher Ed points out that these two states have used their natural resources boom to fund public higher education. Unlike Pennsylvania, which has a 2.6 percent “fee” on the Marcellus Shale, Wyoming has a severance tax of 6 percent on natural gas and oil, and North Dakota has a 5 percent severance tax on oil extraction and a 6.5 percent tax on natural gas extraction.
What is unique about the Marcellus Shale is how the royalties are distributed. Unlike Wyoming or North Dakota, which puts their severance tax into their general funds, Pennsylvania distributes most of its revenues to the local municipality with little to no revenues going to the state’s general fund. Last fall, the Pennsylvania Budget and Policy Center released an analysis on the minimal revenues collected through Pennsylvania’s Marcellus Shale severance tax. Their findings stated if Pennsylvania had a severance tax comparable to West Virginia, which is around 6 percent, the state would have raised $378 million dollars, instead of the $200 million dollars the state collected through impact fees.
Other options for responsibly funding higher education without raising taxes on the citizens include closing the Delaware Loophole—which allows companies operating in Pennsylvania to register in Delaware to avoid certain taxes–and stopping the governor’s and General Assembly’s proposed tax cuts to large businesses. Delaware is a legal tax haven in the United States, and the state “offers an opportunity to game the system, and do it legally” according to David Brunori at George Washington Law School. According to a recent New York Times article, “more than 400 corporate subsidiaries linked to the Marcellus Shale” have registered in Delaware since the natural gas boom began four years ago. It is estimated that the Commonwealth has lost $400 million dollars a year since 2004 due to the Delaware Tax Loophole.
In Governor Corbett’s 2013 – 2014 budget, he proposed to cut the state’s corporate tax rate from 9.99 percent to 6.66 percent starting in 2015, which would then continue to phase out until 2025. According to Sharon Ward at the Pennsylvania Budget and Policy Center, this would cost the state $1 billion dollars a year. Other tax cuts that the General Assembly are taking up include House Bill 36, House Bill 1100, and Senate Bill 303, which would cost the state at least an extra $30 million a year in lost revenues.
Some states are beginning to reinvest in public higher education, Washington state being a notable example by proposing a $300 million increase in funding. Pennsylvania has a long way to go. To reverse Governor Corbett’s cliff funding of higher education and for the Commonwealth to provide a “high quality education at the lowest possible cost,” the Commonwealth should consider responsible common sense revenues that restore the promise to Pennsylvania students and their families.