New Mexico faces something of a catch-22 when it comes to improving the educational levels of its workforce. The state’s workforce has lower-than-average levels of education, which has led to a higher-than-average percentage of low-wage jobs. Given our lower wage levels, our workers are less able to afford to get more post-secondary education. Hence, our state is less able to attract high-wage jobs.
New Mexico’s state government has long worked to make a post-secondary education readily available, and the state has an extensive system of universities, branch campuses, and community colleges to show for it. New Mexico has also kept tuition rates relatively low. That these measures have not translated into a well-educated workforce should be an issue of serious concern for policy-makers. When pursuing the answer, however, they must consider that the problem of workforce education begins long before New Mexicans reach working age.
In 1996, the state created a lottery scholarship for high school graduates. The scholarship covers a student’s tuition at a New Mexico university providing the student graduates from a New Mexico high school, begins college the following semester, and maintains a certain grade point average. The lottery scholarship was a great success in that it increased enrollment of new students. However, the state found that many of these students were academically unprepared for the rigors of college curriculum and many schools had to expand their remedial course programs. New Mexico’s high schools were not preparing their students for a post-secondary education even though they’d put a mechanism in place to pay for one.
If New Mexico’s young adults are not prepared to pursue a post-secondary education when fresh out of high school, it is not likely that those New Mexicans already in the workforce are any better prepared. They are also no longer eligible for the lottery scholarship and are more likely to have greater financial obligations—such as a family to support and rent or mortgage—than they did in their teens. For the high percentage of New Mexicans who do not graduate from high school, the odds of improving their economic situations as adults are even worse.
It is unlikely, however, that the lottery scholarship will be expanded to include non-traditional students. In fact, recent tuition increases have begun depleting the lottery scholarship fund. Even with no further tuition increases, the fund will be on the verge of depletion at the present rate of expenditure by the end of FY14.
It is clear that in addressing the issue of workforce education and college affordability in New Mexico, policy-makers need to look at a multi-faceted approach.
New Mexico’s Workforce
The problem of post-secondary education and its affordability in New Mexico is easily put into perspective with U.S. Census data extracted by the Working Poor Families Project: in 2009, New Mexico had 1.23 million people aged 18 to 64—the age group most likely to be active in the workforce. Of that population, more than a half-million (533,960 people) had no post-secondary education. With a rate of people with no post-secondary education at 43.4 percent—a percentage well above the national average—New Mexico ranked 35th in the nation, meaning only 15 states were doing worse.
When looking just at the percent of New Mexico adults aged 18 to 64 who were without a high school diploma or a GED (16.4 percent) New Mexico ranked even lower at 46th. Another 27 percent of adults had only a high school diploma, and about 30 percent had an associate’s degree or higher, ranking the state 39th by this measure. Given these rankings, it’s no wonder we have a difficult time recruiting high-wage industries to the state.
Language fluency and literacy are also problematic. A little more than 10 percent of New Mexico adults speak English “less than very well,” which is a definite barrier to advancing in the labor force in an English-speaking country. About 43 percent of adults function at the “basic” or “below basic” level of literacy. Another telling statistic is that only 34 percent of young adults aged 18 to 24 are enrolled in a post-secondary institution. New Mexico ranks 48th by this measure.
Education, Job Growth, and Unemployment Rates
The level of education in each state affects more than that state’s economic development. It also has a direct impact on economic outcomes such as the unemployment rate and employment growth. There is a strong inverse relationship between the level of education and the unemployment rate—the lower the education level, the higher the unemployment rate. In 2009, the unemployment rate for people with less than a high school education (13.7 percent) was more than triple the rate for those with a graduate or a professional degree (3.4 percent) in a field like law or medicine. Filling out the middle, the unemployment rate was 9.3 percent for those with a high school diploma or GED, 7.3 percent for those with some college, 6.1 percent for those with an associate’s degree, and 4.2 percent for those with a bachelor’s degree.
Job growth is inversely related to educational levels for the next several years, as job demand is shifting to jobs requiring a post-secondary education. Over the 2008 to 2018 period, the demand for jobs requiring post-secondary credentials will outpace jobs requiring only a high school diploma by almost 30 percent. Table I shows that New Mexico will add 43,000 jobs requiring non-secondary and secondary education. Sectors requiring workers with post-secondary preparation, including associate’s degrees, will add 58,000 jobs.
Table II shows that the number of high school graduates in the labor force pipeline will begin to decline over the 2010 to 2020 period, even as overall population—and one expects, employment—continues to rise. This shortage will put pressure on employers to increase wages. An emerging scarcity of workers should lead state policy-makers and the education system to better prepare the workers we have for the workforce. With a growing shortage of workers, productivity will also need to increase. Increased productivity will result from employers shifting to more “capital intensive” ways of producing goods and services—using machinery instead of workers—as workers become more expensive and valuable.
The condition of the labor market in New Mexico has been slack in the current recession, with supply outpacing demand, giving employers a bargaining advantage over workers on wages and benefits. The tightening of the labor market over time will give employees more of an edge. Non-traditional higher education students will become more prevalent as the labor market tightens and the need for higher productivity brings about more investment in the human capital (i.e. education and training) of an aging work force.
Higher Education and the Recession
Despite the disappointing education level of our workforce, New Mexico makes an impressive investment in higher education compared to the national average. In fact, New Mexico ranks 11th among the 50 states in terms of expenditures per full-time equivalent (FTE) student, spending 18 percent more per FTE than the national average. In FY10, New Mexico spent $7,589 per FTE, while the national average was $6,454. The only states spending more per FTE than New Mexico were Alaska, Connecticut, Idaho, Illinois, Mississippi, Nevada, New York, North Carolina, Oklahoma, Texas, and Wyoming. Almost all of these states are far wealthier than New Mexico and, with the exception of Mississippi, all of these states have higher per capita income than New Mexico.
As could be expected, higher education enrollment has risen rapidly during the current economic downturn. This results from students staying in school longer and workers returning to school to improve their employability. In New Mexico, however, enrollment far outpaced national growth rates. According to the State Higher Education Executive Officers (SHEEO) annual report, State Higher Education Finance, FY 2010, New Mexico higher education enrollment on a FTE basis rose by nearly one-quarter between FY05 and FY10 (from 79,219 students in FY05 to 89,450 in FY09, and 98,710 in FY10). Between FY09 and FY10 alone, there was a 10.4 percent increase in enrollment. In the country as a whole, FTE enrollment was up 14.9 percent between FY05 and FY10 and just 6.3 percent between FY09 and FY10.
However, just as the recession led to an increase in higher education enrollment, it also necessitated a decrease in the state’s investment on an FTE basis. Educational appropriations per FTE dropped 20 percent between FY05 and FY10 (from $9,481 to $7,589 in constant 2010 dollars). As with enrollment growth, the decline in appropriations accelerated between FY09 and FY10. State funding dropped more than 10 percent (from $8,472 to $7,589) in just two years. The national average decline in appropriations by FTE was 7.2 percent over the five year period and 3.1 percent between FY09 and FY10 (from $6,662 in FY05 to $6,591 in FY09, and $6,454 in FY10).
Even as state expenditures by FTE were dwindling, overall higher education expenditures in New Mexico rose slightly (3.1 percent or by $83.1 million) between FY09 and FY12, from $2.709 billion to $2.79 billion. Higher education spending in New Mexico was shielded from the full force of the recession during these years because of an increase in federal funding and tuition hikes.
Higher Education Expenditures and Revenues
The most useful way of viewing expenditures in post-secondary education is by looking at total budgeted higher education expenditures from all sources of funds. Expenditures from all funds include the state general fund, revenues from tuition and other fees and charges, and federal funds.
Overall, total state general fund revenues fell by one-fifth as the recession descended on New Mexico (from $6 billion in FY08 to $4.8 billion in FY09). In response, state general fund revenues directed to higher education dropped drastically—17.3 percent—between FY09 and FY12, a fall of $126 million (see Table III). Higher education revenues coming from ‘other state funds’— which includes tuition—rose from $1.307 billion to $1.364 billion (or 4.4 percent) as state policy-makers chose to shift the cost to students by raising tuition.
Through the federal Recovery Act (or ARRA), the contribution of the federal government rose steeply—about 20 percent—from FY09 to FY12 (from $545.2 million to $652.3 million for an increase of $107.1 million). The federal government’s contribution slowed between FY11 and FY12, but still rose by 6 percent in the current budget year. The recession has taken a severe toll on the higher education budget in New Mexico. If the federal government’s increase funding had not been so large, the state would have been faced with an even more unpalatable choice of cutting spending or increasing student costs.
Appendix A of the FY10 SHEEO report presents a table showing state support for higher education for fiscal years 2006, 2009, 2010, and 2011. The last two years are atypical because of the money from the federal Recovery Act of 2009 that flowed to higher education to replace state funds. The FY06 expenditures are presented as a benchmark to assess the long-term trend in expenditures for higher education. In FY06, New Mexico spent $837.1 million in state money on higher education. In FY09, before Recovery Act money started coming, New Mexico budgeted $994 million on higher education.
The Digest of Education Statistics provides a breakout of higher education revenues by source. According to this source, higher education in New Mexico received $3.064 billion in total revenues in FY09 (see Table IV). Of that amount, $1.778 billion (or 58 percent) was operating revenue, $208 million (or about 7 percent) came from tuition, and federal grants and contracts accounted for $413.2 million (or 13 percent) of total revenues.
Affordability: Tuition and Financial Aid
Perhaps because New Mexico spends generously on higher education on an FTE basis, tuition at higher education institutions is lower than the national average. New Mexico costs in FY10 were only 40 percent of the national average, even though it had risen by 34.5 percent in the preceding five years. Tuition per FTE in New Mexico rose 40 percent between FY05 to FY09 (from $1,300 to $1,851), then declined 5.5 percent in FY10 (to $1,749). Compared to the national average, New Mexico still has modest tuition costs for students. New Mexico, however, is a very low-income state (as measured by per capita income) so it seems reasonable that tuition costs should be low.
In New Mexico’s Title IV institutions, there were 14,639 people—about 83 percent of the student population—receiving financial aid. The average amount received was $4,448 (see Table V). Of that number, 8,514 (or 48 percent) were receiving federal grants with an average amount of $3,831.
A Title IV institution is defined as: “an institution that has a written agreement with the