The impact of failing national banks is trickling down to college students.

Higher education funding has taken a hit that started with banks lending too much money, Economics Department Chair William Davis said.

Some banks failed because they gave too many mortgage loans that borrowers couldn’t pay back.

Davis said banks are cautious about lending, which causes people to spend carefully.

When people buy less, demand for goods decreases and businesses lay off workers, he said. State revenues decrease when people save money.

Revenue decreases created state budget shortfalls, Davis said. Those states had to cut appropriations to government agencies, including state universities.

William Zumeta, a professor of public affairs and education at the University of Washington, who researches higher education funding, said some universities might cap enrollment to keep tuition raises minimal.

An enrollment cap could hurt graduation rates and cause fewer class sessions to be offered, he said.

Zumeta said he thinks a long term trend will be for students to go to community college for the first one or two years of college with plans to transfer. But a lot of them may not actually transfer.

Nearly all state budgets have been affected by the recession, Zumeta said.

President Gary Ransdell said Kentucky won’t hit the low that other states have because the state’s economy wasn’t up as much as other states.

“What goes up pretty high usually takes a pretty big dive when the pendulum swings,” he said.

But Ransdell said he’s expecting more budget cuts next year.

Legislators cut 3 percent last year and 2 percent this year from Kentucky’s higher education appropriation.

John Hayek, interim vice president for finance at the Council on Postsecondary Education, said higher education funding is typically cut because universities have tuition as a source of revenue while primary and secondary education only get state money, he said.

Jay Blanton, spokesman for the governor, said the state’s budget shortfall was too large to leave any area untouched.

The budget fell short about $456 million this year.

Blanton said Kentucky Gov. Steve Beshear showed higher education is a priority by cutting 2 percent when most other agencies got 4 percent cuts.

Kentucky could use federal stimulus bill money for education, Blanton said. State officials will decide how to use the money in the next several weeks.

Western’s proposed budget cut for 2009 will take 4 percent from most divisions at Western.

It will shave about $9,800 from the Campus Activities Board budget, said Brad Wheeler, budget and resources manager for Student Affairs.

He said the cut will impact the programs CAB hosts, which might take away a program that could impact individual students.

Campus Services and Facilities will take an about $332,000 cut, Wheeler said. That could affect the repairs the division can do on campus as well as quality of student life.

“Collectively the impact will be minimal, he said. “And that’s what we’re trying to do.”

Zumeta said states that had successful housing markets are hurting the most from the economic downturn.

“The mighty have fallen,” he said. “Those that got the furthest up have fallen.”

Florida’s economy is based on population growth and a flourishing housing market, said Bill Edmonds, director of communications for the State University System of Florida Board of Governors.

Tax revenue went down about 25 percent during the recession, he said.

“When all that stops it’s hard,” Edmonds said. “That’s the kind of economy that can stop on a dime.”

Florida legislators cut about $173.5 million from their higher education appropriation in 2008, he said.

Edmonds said Florida universities have laid off employees, cut back on operations and eliminated some degree programs because of the cuts.

Though many states are struggling economically, some are looking for different ways to spare universities.

Kathy Love, public information officer for the Missouri Department of Higher Education said Missouri Gov. Jay Nixon decided not to cut higher education funding this year so universities wouldn’t raise tuition.

Missouri cut about 17 percent in 2002, so state officials are working to get funding back up, she said.

Scott Holste, spokesman for Nixon, said Nixon wants to keep education affordable in Missouri.

“We’ve got to have a well-trained work force, and higher education is key for that,” he said.

Other state agencies will get more cuts because the higher education appropriation will be the same, Holste said.

Tennessee expects money from the national stimulus bill to make up for the 15 percent expected cut to higher education, said Richard Rhoda, executive director of the Tennessee Higher Education Commission.

The state was hit hard by the recession because of dependence on sales tax revenue, Zumeta said. Revenue decreases because people are making and buying less.

Universities are planning what they’ll cut when stimulus money runs out, Rhoda said.