Falling over a cliff: That’s how Daniel J. Hurley, PhD, describes the prospects of state-funded universities as the nation’s budget woes continue.

That’s because most state governments are facing financial crises, thanks to the recession and the fact that many never fully recovered from the recession that hit in the early 2000s, says Hurley, director of state relations and policy analysis at the American Association of State Colleges and Universities. Relief efforts have helped buffer the impact, but many states have already used up most of the federal stimulus money earmarked for higher education. And state revenues show no signs of recovery. Says Hurley, “When it comes to public financing for higher education, 2011 will probably be the most unsettling year on record.”

While the recession is sending most states reeling, it’s also driving more students back to school, says Hurley. In combination, the two trends can mean bad news for students at state-funded universities. For graduate students, the result is often more competition for grad school slots, less funding for research and travel and dismal job prospects for those seeking academic jobs in the near future. Other common consequences include tuition hikes, larger classes, faculty shortages and the elimination of course sections and even entire departments or schools.

There have been emotional costs, too, with students, faculty and staff suffering from anxiety and low morale. “While universities really try to protect the academic core,” says Hurley, “they are well past the point of being able to spare the academic side of the enterprise from funding reductions.”

But not all states are suffering. In fact, some have not only weathered the economic downturn but hope to take advantage of other states’ woes by making themselves magnets for top-notch students.

The bad news

Most states have been hit hard by the recession. According to a 2009 study by the Pew Center on the States, the worst off states are California and neighboring Arizona, Nevada and Oregon; Florida; a Midwestern cluster made up of Illinois, Michigan and Wisconsin; and New Jersey and Rhode Island in the Northeast.

California’s plight is by far the worst. The Pew report reveals that state revenues dropped by almost a sixth between the first quarters of 2008 and 2009. In July 2009, the state’s legislators managed to plug a $45.5 billion hole in the following year’s budget, but faced another $1.1 billion gap just three months later. The state’s higher education system is suffering as a result. The impact is being felt most directly at the lower levels of higher education — community college students and undergrads.

That’s certainly true at San Diego State University, says psychology department chair Georg E. Matt, PhD. Across the board, Matt says, the university has reacted to funding cuts with what he calls “some serious enrollment management.” The department expects a 5 percent drop in undergraduates as a result. (The number of graduate students will remain constant, says Matt, only because the department admitted fewer graduate students last year for unrelated reasons.)

Staffing cuts in the department are even more dramatic. In the last two years, the department’s tenure-track positions have dropped from 44 to 36. The number of nontenured lecturers has dropped by half or more. The result has been fewer, larger classes.

“Rather than offering three sections with 50 students each, we’re now offering one section that serves 120 students,” says Matt. “We’ve also taken out course offerings that weren’t required for the major, even if they were popular with students.”

The upside? “We’ve tried to use this emergency to motivate us to become more modern in our instructional technology and do as much as we did before with fewer resources,” says Matt. Faced with much larger classes, for example, many more professors now use such tools as Blackboard to communicate with students and create discussion boards that are then monitored by graduate teaching assistants.

While the impact of budget cuts is more muted at the graduate level, it’s still being felt, says Richard Ivry, PhD, acting chair of the psychology department at the University of California at Berkeley.

For one thing, the department has cut the number of graduate students it admits by about 20 percent. “We made a conscious effort to reduce the number of students admitted this year to make sure we’re in a position to continue to fund all students for five years,” says Ivry, adding that the university has also largely spared graduate teaching assistantships from the budget cuts.

The number of faculty members is also down, about three-quarters of what it should be given the number of majors the department has, Ivry estimates. “The campus has gone from hiring maybe 80 to 100 professors a year to 10 to 20,” he says, adding that his department is increasingly relying on visiting instructors. “It will take many years to get back to full strength.” At least this year, he says, the department is recruiting one new member — for the first time in two years.

Last year brought a 30 percent increase in tuition for undergraduates and graduates, prompting student protests. The university has also cut university grant programs and the graduate student travel funds that previously allowed many students to attend APA’s Annual Convention and similar events.

While these trends are unfortunate, Ivry points out that the state only covers 15 percent to 20 percent of the university’s budget, with most funds coming from tuition and fees, grants, corporate and foundation support, and donations from alumni and others.

“We’re not that dependent on the state,” he says. “We may be called a state school, but it’s barely true anymore.”

The good news

State budgets aren’t uniformly bad. Thanks to strong agricultural and energy production revenues, North Dakota, Montana and Wyoming have largely escaped financial trouble, for example.

A good financial situation doesn’t necessarily translate into gains for higher education, but it can protect against losses, says Paul D. Rokke, PhD, psychology department chair at North Dakota State University in Fargo.

“Despite the fact that our state continues to have a good surplus, our legislature has always been relatively conservative,” he says. “Instead of pumping up our budget for lots of new buildings and extras, they’re putting away money for a rainy day.”

That conservative streak has meant that tuition has gone up about 4 percent a year for the past couple of years, despite the surplus. On the plus side, the school is still such a bargain that it’s attracting increasing numbers of undergrads from out of state. A few years back, says Rokke, the number of incoming freshmen from Minnesota outstripped North Dakotans for the first time.

“We’re holding steady,” he says. “We’re very fortunate compared to many colleagues around the country.”

Texas is another state in a good position, says psychology department chair Susan S. Hendrick, PhD, of Texas Tech University in Lubbock.

Although the university has had budget cuts and tuition and fee increases, the state has increased funding to enhance the research capacity of several universities, including Texas Tech. “This is an attempt to establish more Tier 1 research universities in Texas,” says Hendrick.

In the meantime, Hendrick and her colleagues are trying to grow the psychology department by submitting more grant proposals and lobbying the administration for more funding for doctoral students.

The number of people applying to the program has increased over the last few years, says Hendrick, who adds that stipends and scholarship funding have stayed steady. But the department hasn’t been able to accept all the students it would like to because the funding’s just not there. Instead, says Hendrick, “We’ve been able to be even more selective.”

But even in hard-hit states like California, there’s hope.

“We believe that we’ve reached the bottom and that next year will be the last year we have to deal with a budget situation so draconian,” says Matt. “We’re in this tunnel, but we see the light at the end.”

Rebecca A. Clay is a writer in Washington, D.C.