The City University of New York faces a financial crisis comparable with the one that rocked it in the 1990s. Now, as then, the catalyst is a massive shortfall in state and city budgets. Combined, the governments of New York State and New York City, other local governments, and transportation authorities project a $59 billion shortfall into 2022—one of the deepest budget holes in the country. CUNY’s only salvation is to reduce its dependence on state funding, just as the nation’s most successful public universities started doing long ago. But how to do that amid a pandemic is a major challenge.

Arguably the most diverse institution of higher education in the United States, if not the world, CUNY is vital to New York City’s long-term civic and economic health. Its undergraduate population reflects the racial distribution of the city’s public high school graduates—roughly 20 percent Asian, 26 percent black, 31 percent Hispanic, and 22 percent white. But those broad categories obscure the true racial, ethnic, and religious diversity of the student body. At City College, where I work, some 90 languages are spoken on campus.

For CUNY students, 44 percent of whom are first-generation college students and more than half of whom come from households earning less than $30,000 a year, the university is an upward-mobility machine. According to a study by Harvard economist Raj Chetty, four of the nation’s top five colleges, as rated on a “mobility index”—which measures student movement up the income ladder upon college completion—were CUNY schools. Using similar data and methods, a recent Brookings Institution report found that five of the top 10 colleges and universities in the country most successful in lifting low-income students into the middle class were part of CUNY. As the New York Times summarized these findings, CUNY “propelled almost six times as many low-income students into the middle class and beyond as all eight Ivy League campuses, plus Duke, M.I.T., Stanford and Chicago, combined.” If policymakers and philanthropists want to address the gap between haves and have-nots, CUNY is a place to start.

Many public universities export talent to other states, but CUNY students tend to remain in New York after completing their degrees. The university’s Office of Policy Research reports that over 80 percent of CUNY students remain in New York State and over 70 percent in New York City. New York thus enjoys the economic and civic benefits of a more highly educated workforce.

CUNY’s problem is financing. In the ongoing fiscal impasse between Washington and Albany, the state legislature granted Governor Andrew Cuomo the power to “adjust or reduce” state spending in the current fiscal year. Last year, CUNY’s budget totaled $4.7 billion. This year, Robert Mujica, Cuomo’s budget director, a CUNY alumnus who also sits on CUNY’s board of trustees, withheld 20 percent of the state’s contribution to the CUNY budget for the summer and fall of 2021. Likewise, New York City, which finances the community colleges, recently adopted a fiscal year 2021 budget that reduced funding by $46.3 million, or about 9 percent of the total operating budget of all the community colleges. And a 5.1 percent enrollment decline across the university means another $52 million in lost revenue. To cap it off, the university has spent approximately $75 million on emergency items related to the Covid-19 pandemic, though much of this will be reimbursed by the $237 million that CUNY has received from the CARES Act.

The pandemic has doubtless been bad for CUNY, but its financial problems didn’t begin there. Even before the coronavirus, CUNY faced the question of whether it could provide the same level of education with reduced state support and the low tuition rates that have prevailed for decades. Some campuses in the system were running deficits prior to the pandemic, so further cuts threaten to put them in a hole that they won’t be able to climb out of on their own.

CUNY is a highly centralized system, with senior administrators exercising enormous power and nearly all big decisions made at the top. Yet the central administration of the chancellor and various vice presidents, as well as the politically appointed board of trustees, is distant from the on-the-ground operations of the colleges. In my 12 years at City College, I cannot recall the chancellor ever coming to our Harlem campus, excluding graduation. And while many board members have extensive government and business experience, few have experience running universities. Consequently, the central authorities often miss what is occurring at the colleges, and they complicate matters with one-size-fits-all policies not suited to the differing circumstances of the various schools. Rather than encourage excellence, the central administration often fosters a lowest-common-denominator approach.

Many CUNY faculty and staff are unclear about what so many highly paid senior administrators in the system do, which breeds mistrust. The 2020 “executive compensation plan” expenses for CUNY central administration were $19.4 million—almost equal to the executive costs of Baruch, City College, and Hunter combined. Each college has its own president, provost, and deans, plus a layer of CUNY administrators above them, resulting in rampant duplication. In 2016, CUNY paid McKinsey $1.6 million for a report that proposed reducing operating expenses by $75 million. It’s not clear if anything came of it.

“Since 2008, tuition at New York’s public universities increased only $1,966—among the smaller increases in the country.”

Paradoxically, the current fiscal crisis, if it gets bad enough, may cause even more centralization. The chancellor and the board of trustees could invoke provision 5.19 of the Manual of General Policy, calling for “retrenchment,” which would allow them to initiate a process to fire full-time faculty, merge departments, and take other actions that would normally be barred by various rules and by union contracts. Other centralizing steps to increase efficiency might include turning over e-mail systems to Google, rather than requiring each college to retain IT staff to manage them. Payroll systems and other back-office functions might also be consolidated.

CUNY has seen direct state financial support shrink over the last 20 years. Adjusted for inflation, per-student state funding fell 17 percent between 2007 and 2016. Consequently, tuition, set by the state and identical at all colleges in the system, inched up $300 a year for the five years between 2012 and 2017. The issue remains as to whether it has increased fast enough to offset declining government appropriations. The catch here, of course, is that if tuition is raised too quickly or too high, without increasing state support for students, some of the social-mobility function may be lost, as college costs may rise beyond the means of poor families.

Still, CUNY remains remarkably affordable. Since 2008, tuition at New York’s public colleges and universities increased only $1,966—among the smaller increases in the country, according to the Center on Budget and Policy Priorities. Full tuition for in-state residents is $6,930 per year (which doesn’t include room and board) for the senior colleges and $18,600 for out-of-state residents. Average tuition and fees at CUNY and SUNY four-year colleges are among the nation’s lowest. According to the CBPP, as a percentage of median household income the net price of attending a four-year public university in New York is only 16 percent—among the lowest percentages in the United States. CUNY continues to make college affordable and accessible.

It’s notable, too, that only a small percentage of CUNY students pay full tuition. Some 58 percent of undergraduates qualify for enough federal and state financial aid to attend tuition-free. Most of this aid comes from New York State’s Tuition Assistance Program (TAP), a grant of up to $5,165 that doesn’t have to be paid back, and from the federal government through Pell Grants. Talented students can also qualify for the many scholarships available through private philanthropy on each campus—indeed, some college administrators privately say that there are more such scholarships than students who merit them. Nor do CUNY students take on much college debt; eight in ten graduate with no federal education loans. Many CUNY students struggle financially, not typically because of tuition but rather because of other costs—housing, transportation, books, food, and other expenses—many of which are higher in the Big Apple than elsewhere.

Many at CUNY persistently lament the decline of state appropriations and urge the state to reverse course, but such calls consistently fall on deaf ears, and it’s not hard to understand why. State budgets are under extraordinary pressure today.

Hardly a CUNY faculty meeting goes by without calls to “tax the rich” to increase public university funding. The Professional Staff Congress, the union that represents 25,000 faculty and staff across the university, lobbies for similar policies in Albany. But such demands have failed to convince state legislators because New York already taxes the rich extensively and has a narrow tax base that depends heavily on the volatile and mobile investment income of Wall Street. In 2018, according to the Independent Budget Office, just 4,412 out of 3.9 million New York City tax filers paid 24 percent of city income taxes and 31 percent of state income taxes paid by city residents. More broadly, the top-earning 1 percent of Gotham residents paid 43 percent of the city’s income tax and 52 percent of all state income taxes paid by city residents.

Consider, as well, that Florida has no income tax and that Connecticut’s top rate is 7.99 percent, compared with New York City’s 12.7 percent. Raising taxes even higher on top incomes would, as Governor Cuomo has argued, threaten the state’s competitiveness and push New York further from the principles of sound tax policy, which, as most experts argue, consists of a broad, stable tax base. Even if the liberal Democratic supermajority in Albany overrode Cuomo’s vetoes on higher taxes, it’s far from clear how much of the new revenue would go to higher education, given the state’s other pressing needs and the expansive agenda of New York progressives.

With dim prospects for greater state financing, CUNY is in an even tighter bind for having relied on it so extensively for so long. Few of the CUNY colleges have engaged in major fund-raising efforts to build large endowments—despite having a wonderful story to tell philanthropists about social mobility. Because CUNY contains so many colleges and institutions, some 24 separate endowment funds are in operation. Many of these are small relative to the size of the student body—John Jay College’s endowment totals only $7.8 million, leaving not much to draw upon in the current crunch. City College was once known as the “Harvard of the proletariat”; its $290 million endowment is the largest among the senior colleges and translates into about $22,230 per student for its roughly 13,000 students. One doesn’t need to compare that with Princeton University (endowment $25.9 billion, or $2.8 million per student) but only with the University of Delaware (endowment $1.46 billion, or $91,250 per student), with a student body only slightly larger than City College’s, to get a sense of proportion.

Founded in 1847, City College, shown here in 1910, was the first free public higher-education institution in the United States. (UNIVERSAL HISTORY ARCHIVE/UNIVERSAL IMAGES GROUP/GETTY IMAGES)
Founded in 1847, City College, shown here in 1910, was the first free public higher-education institution in the United States. (UNIVERSAL HISTORY ARCHIVE/UNIVERSAL IMAGES GROUP/GETTY IMAGES)

One of the few bright spots to date in an otherwise gloomy fiscal picture is student enrollment. In the fall 2020 semester, ten of the system’s 11 senior colleges slightly boosted enrollments, compared with the fall of 2019. Because CUNY is inexpensive, taking online courses makes sense in a way that it might not at an expensive private college.

Storm clouds lie ahead, though. Senior college enrollments have fallen somewhat for the spring 2021 semester, and enrollments in the community colleges fell significantly for the fall 2020 semester compared with 2019. That drop-off is now cascading throughout the system, as fewer students are in the pipeline to transfer to the senior colleges. Transfers from the community colleges typically account for nearly half of senior college graduates.

Future enrollments, so essential for the university’s financial stability, will hinge on how students are doing away from campus. The news isn’t encouraging. A survey of students across six CUNY campuses conducted by City College psychology professor Sarah Rudenstine found that, as of May 2020, 11 percent reported having a household member diagnosed with Covid-19, 26 percent reported losing their jobs, and 52 percent said that they were experiencing financial problems. Recall that for many CUNY students, family support may be limited or nonexistent. Many students relied on campus libraries and department lounges and even empty classrooms for study space and a free Internet connection. Without such options, life pressures may lead more students to drop out or take time off from college.

Enrollments point to the larger issue of CUNY’s low graduation rates, which the pandemic may worsen. The six-year graduation rate was 55 percent for full-time freshmen in 2010 and inched up slightly to 62 percent in 2013—which means that 38 percent of students are not graduating with a bachelor’s degree within six years. Few of these nongraduates are loaded down with student debt, but many have spent considerable time in classes without securing a degree. It’s worth debating whether the state is overspending on students who will not graduate. Some college exposure is beneficial even for those who don’t earn a degree, but past a certain point, students are wasting their time and the government its money.

The problem of attrition and student unpreparedness has roots in the New York City public school system. Many students graduating with a high school diploma lack the skills for college-level work, a situation unlikely to improve in the short run, given the Covid-19-related chaos currently reigning in the city’s public schools. Even as CUNY has tried to adjust its requirements and offer more student support, catching up in college is daunting. Some 60 percent of CUNY community college students must take at least one remedial education course. These courses cost money—typically a slice of students’ financial aid—but they do not count toward a student’s degree.

Consequently, community college graduation rates—usually measured as the three-year graduation rate—are low. In 2016, only about 22 percent of students graduated in three years, and that was up from only 13 percent in 2008. To address this deficiency, CUNY launched the Accelerated Study in Associate Programs (ASAP) in 2007, which provides tuition waivers, free textbooks, advisement, career counseling, tutoring, and free MetroCards for enrolled students. The program boosted three-year graduation rates by 18 percent, according to MDRC, a policy evaluation organization. While the ASAP initiative costs more per student, more students earn degrees, making it cost-effective. It remains the most promising effort to boost community college graduation rates.

To set itself up for success in the new education landscape, CUNY should enact bold new policies. One way out of the financial crunch is to cultivate a culture of fund-raising among its college presidents. Many other public universities come to New York City to raise money; CUNY should be reaping that local harvest.

CUNY can also capitalize on its recent experience with online instruction to offer more courses online in the future, giving students a broader menu of options. Students will have more flexibility for how and when they want to take courses. Offering more courses online will reduce demand for classroom space, which could allow enrollments to increase modestly without the concern that every student is going to take nearly all his classes in person. Online courses are no silver bullet, however, given the socioeconomic status of CUNY students, as research suggests that students from lower-income households perform poorly when everything is online.

“CUNY is essential to New York’s rebirth insofar as each campus is a key city institution, providing economic anchors.”

The need for greater flexibility in serving the student population may prompt discussion of changing some long-standing arrangements. Why retain the 15-week semester structure, running roughly from Labor Day to Christmas in the fall and the end of January to May in the spring? Expanding offerings in the winter term (January) and over the summer, or even offering courses on a monthly basis, might prove attractive to students, especially those who attend CUNY schools and often work more than 20 hours a week and care for family members.

Changing these structures would, of course, be difficult. Financial aid from the federal and state governments is tied to the current schedule. The union contract does not allow courses taught in the summer months to count as part of a faculty member’s annual workload. Professors, despite their progressive politics in nearly everything else, tend to be reluctant to change when it comes to their own institutions.

But the pandemic may at least start conversations about how CUNY can do more to aid students, especially its more nontraditional students, who are somewhat older and have jobs, families, and other major responsibilities. Ideas to advance such an agenda abound. Partnering with New York City businesses is one. Arizona State University created a partnership with Starbucks in 2014 to offer free tuition to employees who work an average of at least 20 hours a week. One could imagine many such partnerships in the Big Apple that would allow students to work to earn a living and pay for their college degree. For local businesses making pious statements about diversity in response to the Black Lives Matter movement, recruiting students from the diverse ranks of CUNY should be an obvious choice.

CUNY could also learn from the experience of for-profit colleges. While many of them notoriously exploit their students, they do offer important lessons. One is the old adage that it pays to advertise. The marketing done by the for-profit colleges is generally high-quality and successful. Two, the for-profit colleges tend to be strong on customer service, knocking down bureaucratic obstacles to student enrollment and tailoring course offerings to student demands. CUNY can learn from such practices.

CUNY is essential to New York’s rebirth post-pandemic insofar as each campus is a key city institution, providing economic anchors in every borough. A study by the research firm EMSI on the impact that City College has on the local economy found that the college effectively pays for itself in the economic activity that it generates. A study conducted for Queens College found similar results.

CUNY, then, remains central to New York’s future. But to sustain its historical mission as an upward-mobility machine, it needs to attract new private resources, confront its top-heavy bureaucracy, and consolidate or eliminate programs so that it can live within its means.

Top Photo: CUNY is an engine of opportunity for students of remarkably varied backgrounds. (SAM HODGSON/THE NEW YORK TIMES/REDUX)


City Journal is a publication of the Manhattan Institute for Policy Research (MI), a leading free-market think tank. Are you interested in supporting the magazine? As a 501(c)(3) nonprofit, donations in support of MI and City Journal are fully tax-deductible as provided by law (EIN #13-2912529).

Further Reading

Up Next