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Tuesday, February 28, 2006 All States Will Face Budget Shortfalls by 2013, Hurting Spending on Higher Education, Report Says By ANNE K. WALTERS Despite improvements in state budgets this year and a rosier economic outlook, states face strained budgets over the long term that will hamper spending on higher education, according to a report released on Monday. The analysis -- prepared by Dennis Jones, president of the National Center for Higher Education Management Systems, and released by the National Center for Public Policy and Higher Education -- is based on projections of revenues and expenditures through 2013. The report concludes that all 50 states will face budget deficits by 2013 and will not be able to support spending increases, causing state appropriations for higher education to suffer. Although the budget shortfalls will affect every state, Southern states will be hit hardest. The shortfalls will stem from increased demand for state dollars, declining support from the federal government, and a pattern of tax revenues' growing more slowly than the economy. Across the nation, state revenues will be, on average, 5.7 percent lower than what would be needed to maintain the current level of state services. Higher education will also face more competition for state dollars. The demand for other social services, especially "the rapidly escalating costs of Medicaid," will outpace the demand for higher education in all but four states. "Continuing support for these other services will place enormous pressure on higher-education budgets," the report says. Additionally, cuts in the federal budget could result in fewer state and local grants, making the average state budget shortfall larger than previously predicted, the report says. Increased state spending on elementary and secondary education and on higher education could result in even larger deficits for states. However, if the federal government does not cut grants to the states, or if states are able to slow sales-tax losses to Internet commerce and to stem rising Medicaid costs, the average expected deficit could be lower than the report predicts. "For most states, it is difficult to see a future for higher education that recreates the prosperity of the late 1990s," the analysis concludes. "Colleges and universities -- and the students who enroll in them -- are more likely to face continued financial strain." http://www.highereducation.org/reports/pa_shortfalls/State_Shortfalls.pdf