California has been hit hard financially by the coronavirus pandemic. In May, it was estimated that the state faced a deficit of $54.3 billion, noted as the worst gap in the state’s budget since the Great Recession.
For higher education institutions, this is a concern. Not only could K-12 schools and community colleges be losing out on $18 billion in state funding, universities are expected to have around $2 billion in funding pulled.
So what does the latest California education budget mean for universities and what options are open for higher education institutions to mitigate the damage?
California's Budget for Higher Education
In California, there are three publicly funded higher education institutions: The University of California, California State University and the California Community Colleges (which represents 115 colleges). In May, the state funds were revised to more adequately deal with the mounting financial pressures of COVID-19.
For the aforementioned university bodies, it has the following effects:
2020 Proposed State Funds*
University of California
California State University
Board of Governors of Community Colleges
* In thousands of dollars.
This revision means that, on average, Californian higher education institutions are losing 15.54% of their proposed budget for the 2020-21 year. These numbers don’t include federal funds, non-governmental costs funds and any reimbursements. This means that overall, cuts to these Californian institutions will be greater than stated here.
The Cal Grant, the state’s main financial aid program for higher education, will remain open for students, meaning that individuals who find themselves out of work still have the opportunity to go back to college.
As a result, higher education in the state could potentially see an increase in student intake, meaning an increased focus on supplying top-quality education. However, this is still yet to be seen and may also mean a further squeeze on state funds.
Due to these budgetary changes, California’s universities and community colleges have to get creative in their response. They need a solution that not only works to maintain or maximize student access, but also continues to promote equity within the student community.
Universities are having to consider an increasingly online curriculum (which would aid in providing larger numbers of potential students access) and awarding students academic credit for skills they have.
Another key potential change is pulling back allocations that have not yet been disbursed. In the Spring Fiscal Outlook by California’s Legislative Analyst’s Office (LAO), one proposed harm reduction to lower the deficit is to potentially eliminate funds provided in current budgets that have yet to be disbursed.
The LAO writes that the state could ‘revert unspent funds from state departments and other entities, like universities'. This would be a further financial blow to universities across the state, being an issue for their current financial health and not a future loss.
Budget cuts are affecting universities the world over. So how do Californian universities lower their costs without lay-offs or weakening their educational offering for students? A potential answer lies within Global Professional Employer Organization (PEO) services, global talent acquisition and satellite campuses.
How Can Californian Universities Lower Their Costs?
PEOs are organizations that provide employee management, specializing in managing overseas employees and dealing with the specific legislation that comes from a business employing workers in other territories. Essentially, they help to ease regulatory burden, onboard new hires, manage overseas and cross-border payroll and ensure correct taxation is in place - amongst many other things.
A direct way that universities can ease the financial burdens of COVID-19 is by opening themselves up to further income from foreign students. Evidently, travel restrictions, not only in the USA, but around the world, are in place - but Global PEOs can help with this.
By opening a satellite campus, a location in another country, universities can benefit from increased interest from foreign students. Not only is international travel restricted, but relocation is expensive.
With a satellite campus, foreign students can learn within your institution without the need for travel. Californian universities in particular can determine where their international students are coming from and work with a PEO to create a subsidiary there. This is even possible in other American states.
For foreign students who want to study at a Californian institution, but don’t want to have to learn remotely, this is also a benefit. Similarly, universities can benefit from lower salaries in countries that may have weaker currencies than the dollar and access a wider talent pool.
If a Californian university already has an international presence, a Global PEO service can help to save up to 70% of costs in that process and streamline any overseas employee management.
While this is good news for universities looking to lower costs in these turbulent times, you might have a few more questions. That’s why it’s always best to ask questions first and expand into new territories later.
Contact Our PEO Specialists Today
Universities globally are at an important crossroads financially. They need to find ways of saving money while continuing to provide the right education for students and contributing to internationally significant research projects.
To find out how you can help to create or enhance the global footprint of your university, while remaining financially agile, get in touch with one of our specialists. We’re experienced with helping businesses and organizations find agility and success within cross-border operations and have PEO capabilities in over 200 countries.
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