Economics and Education: A Need for Clarity

Troy Cornell

This essay was written for the JACC conference in Sacramento California for the Tom Pasqua Memorial Essay competition.

The economic crisis that we all are consumed by has become the greatest socio-economic leveler in human history. The instability of the economy has affected Russian oligarchs to the local pizza shop. It has become an international pandemic, a crisis that has manifested itself with greed and recklessness and has jeopardized the American dream. Talking about the economy has become routine in the lives of many.

With families struggling to cope with credit card bills, mortgage payments and college tuition, there is a need for answers as sure and real as this fiscal crisis. Knowledge at any given time is a great ally. Society has bequeathed upon itself a matter upon which it struggles to cope with, why this is, is simply a matter of understanding where the roots of this catastrophic tree emanated.

The eye of this economic storm can be traced back to two words: Subprime mortgage, a disaster waiting to happen and it did. Those who originally couldn’t qualify for a mortgage due to factors such as income, poor credit history or both in many cases, were suddenly granted this opportunity to acquire one. Due to a greater risk of default, the banks slap a higher interest rate on these types of mortgages and limit the number they have on their books.

These loans also were made to be adjustable rate loan meaning that the interest rate would increase steadily over time and thus increasing monthly payments. As the housing boom neared its end, equity was in short supply for many home owners and also disqualified them from having the luxury of refinancing their mortgages.

This essentially gave birth to widespread defaulting on these sub-prime mortgages. Fannie Mae and Freddy Mac, who had to be bailed out by the government, played a huge role in the secondary mortgage market. Both purchased original mortgages from banks and then sold them to other banks domestically
and internationally. Defaulting and foreclosures discouraged investment banks from purchasing these loans. The end of Freddy and Fannie ushered in a real credit crisis, the worst our country and planet has seen for some time.

Tough economic times have created inequity in just about every way possible.

California’s community college system has fallen victim to this crisis in a way most people would consider, counter intuitive. ?
Many of the nearly 1,200 Community Colleges across America that have served countless numbers of students over multiple generations are experiencing a huge influx of admissions not to mention an inability to cope with a skyrocketing application pool.

To compound matters, since the 2008-09 budget was enacted in late September 2008, the state’s financial health has experienced a rapid decline. Analysts believe that the current fiscal year could end with a $14.8 billion state deficit, which could possibly to rise to more than $40 billion by the end of 2009-10 if state leaders do not revisit and revise expenditure and revenue plans.

Addressing this fiscal crisis could result in spending cuts during the current year, which would further affect the colleges’ ability to serve students. Policymakers will likely consider raising student fees, a move that would backfill the state General Fund.

Augmented student fees will not provide additional funds with which colleges could offer more classes to students. Moreover, the severity of the state’s fiscal crisis may require the impending enactment of higher fees and overall net cuts that will lead to course reductions.

Consistently rising tuition fees at California’s four-year institutions are siphoning vast amounts of applicants into community colleges, most of which are already laden with freshly laid off adults seeking to strengthen their skills in preparation for the bloodbath that is the current job market and students who choose to attend community college because of the costliness of a four-year institution.

At Glendale Community College, enrollment is up 7 percent for the spring semester and it is likely to continue upward as the country’s economic situation continues its bleak descent. In a personal interview, GCC’s interim vice president of student services Ron Nakasone is finding that increases in the number of students coupled with a meager budget are two things that don’t add up the way the GCC needs them to.

“We’re faced with a situation where we’re not getting additional revenue for serving the students” said Nakasone. ?? California Community College funding is limited due to a growth cap. Exceeding the growth cap, (.6 percent for GCC this year) presents college administrators with a problem.

Although there is a two percent increase in growth, the school is not receiving additional funding to cope with the rise in students and thus creating a budgetary problem. “From a strictly fiscal point of view, we’re still struggling.not all of the enrollment is funded.” Nakasone said. If GCC were to receive that additional funding, $2 million would be generated in comparison to the half a million dollars in growth revenue the college has made simply off of student fees. To curb the effects of the recession on the school budget, many faculty and staff members have been offered attractive retirement packages as a way for the school to save money and provide the necessary cash flow to balance the budget.

“This has been the worst in my lifetime.” Said Dr. Ricardo Perez Vice President of Student Services. “There’s an issue of equity..We don’t get the dollars we need to provide a wide variety of services.”

What is clear is that a collective choice must be made. The students who attend our community colleges now are future doctors, lawyers, engineers and laid off adults seeking re-employment. California and its law makers cannot continue to hack away at an already thinning community college budget in order to manage the state’s budget deficit. The schools must be given the reassurance they need in order to serve their students.

Despite the deteriorating health of the economy, rest assured it will continue to get worse if our lawmakers choose take more and more away from our future. As President Obama so rightly put, “No one has lifetime employment. But community colleges provide lifetime employability.”