Universities in the US have seen widespread budget cuts due to the effects of the COVID-19 pandemic. For example, in California, there’s been a $1.7 billion cut to higher education services in an effort to close a $54.3 billion sized hole in the state’s budget.
So how are US universities adapting to these education budget cut issues? In some cases, they’re choosing to work with Global Professional Employer Organizations (PEO), such as Global Expansion, to cut costs while retaining staff, students and research opportunities.
The State of University Budgets
During the first half of 2020, it was predicted that states would have to implement large cuts to their higher education spending as the pandemic began to worsen. Reflecting on the earlier budget cuts, Thomas Harnisch, Vice President for government relations at the State Higher Education Executive Officers Association, said:
Higher education is often considered the balancing wheel of state budgets… if history is any indication, higher education is going to be at the front lines of the economic fallout from coronavirus.
While colleges and universities alike have always faced financial challenges, the effects of COVID-19 have been a tough additional blow. Like California, university governors or budget leaders are announcing huge cuts affecting higher education statewide. For example:
There’s a potential for an $8.2 billion cut to the City University of New York system.
In Colorado, it was announced that the state would implement a $3.1 billion cut to higher education initiatives. This would, unfortunately, deny the state any possibility to pursue a proposed 7% increase in education spending, alongside hopes to forgive the student debt of working teachers.
Oregon’s Higher Education Coordinating Commission announced it would be implementing an 8.5% cut over a two-year budget cycle, resulting in a $71 million loss for public universities.
Louisiana colleges have already lost $97 million due to the pandemic.
Ohio Governor, Mike DeWine, announced the state would be cutting $110 million from its higher education budget.
As you can see, the situation is difficult. Similarly, universities experienced a 13.4% loss in endowment value during the first quarter of 2020. If the history that Harnisch mentioned is correct, then the higher education environment could face further financial issues in the future. So how are education professionals preparing for this possible future? What solutions are there for universities?
Changes for Universities
In March, a $14 billion stimulus package was put together for higher education. There’s currently an ongoing call for a $500 billion aid package from the federal government in order to meet budgetary shortfalls currently being experienced across the US.
Larry Hogan, the Republican Governor of Maryland and Andrew Cuomo, the Democratic Governor of New York, who are the chair and vice-chair of the National Governors Association respectively, wrote:
To stabilize state budgets and to make sure states have the resources to battle the virus and provide the services the American people rely on, Congress must provide immediate fiscal assistance directly to all states. We must be allowed to use any state stabilization funds for replacement of lost revenue, and these funds should not be tied to only COVID-19 related expenses.
While at the time of writing this is yet to be ratified, universities are having to resort to other practices to balance the books. This is proving difficult. As US cases rise, universities are moving to fully online course options which is motivating students to ask for discounts.
In an article by the Council of Foreign Relations, they write “More than 80 percent [of students] said they would want a tuition discount if instruction is entirely remote.”
Schools, colleges and universities across the country have been forced to lay off staff, with almost fifty thousand employees having been laid off, furloughed or given no contract renewals.
Alongside direct aid, universities are looking for ways in which they can save money, while still attracting both students, staff and research opportunities. In some cases, universities and other higher education institutions are looking to PEOs to do this. So how can a PEO such as Global Expansion help?
Global PEO and Higher Education
Global PEOs are key providers of international expansion support. In many cases, they help businesses expand into and operate within a new territory (sometimes nationally, sometimes internationally) quickly and compliantly.
Yet, one understated part of this is their benefits for universities. In the age of COVID-19, universities are looking for how they can retain and attract both students and staff, while offering well-developed, world-leading curriculums and research projects. Evidently, all of these have been affected by coronavirus. Travel restrictions and financial implications have affected student numbers, staff recruitment and international collaboration.
So how exactly does a Global PEO work to support those functions?
In terms of recruitment, universities are always looking for new education professionals to grow their ranks and their curriculum offerings. Sometimes, one specific hire can turn a great department into a world-leading one, so for universities, employing overseas talent is crucial.
During the coronavirus pandemic, there are obvious issues regarding international travel. In specific cases, a PEO can get around this by helping a university set up a satellite campus in a specific host country - compliant with all the local laws and regulations. This means that, not only does a university expand their footprint, they benefit from overseas students and talent while circumnavigating any issues of expatriation or current travel restrictions.
A Global PEO can act as an employer of record within that country, managing payroll and deducting local tax at source, rather than a university having to manage it from overseas. This can help to ease the financial burden on universities who may find a local currency is friendlier to their overheads than a home one.
Research projects are important for many reasons. Increasing the credibility of the university, advancing a specific subject or securing crucial funding - all reasons are equally worthwhile.
In the wake of the coronavirus, with budgets being cut and international travel and collaboration greatly restricted, it’s worth knowing how to continue pursuing research. By setting up a new entity within another country, you can hire employees and researchers to continue this work without the need for international travel.
This helps to reduce any risk associated with COVID-19, as well as securing overseas talent within research projects.
An overseas entity managed by a Global PEO, such as Global Expansion, can act as a representative or even a satellite campus for a university. Travel and relocation for students is costly. Some gifted students may not have the funds to live abroad, so by setting up a foreign entity, they can study under your university within their own country.
Students may not want to study online classes when studying abroad, so a physical entity is a fantastic compromise for them. This means more international students (who are attracted to the university but potentially unable to live or travel abroad) can still become a student - resulting in more revenue.
We realize this is a difficult time for both students and educational professionals. While we don’t claim to be the one solution for dealing with current financial issues, our work is helping many high profile universities to be more adaptive during these difficult times.
We work to help our clients in the higher education sector expand their organizations, gaining traction and respect in global markets worldwide. Not only that, but all of our work also helps these institutions to remain cost-effective, competitive and complaint.
To see how PEO can enhance the work of universities and support them through more international success, download our guide.
Ensuring Continued Global Success for Higher Education
In this guide, discover the state of global higher education and how it’s been affected by the COVID-19 pandemic. By analyzing university budgets, travel restrictions and other challenges for universities, we’ve explored how PEO can help provide solutions.
To find out more, simply click the link below for your free copy.