Higher education in the 1990s has been besieged by financial challenges and crises. Numerous observers of higher education have remarked on rising costs, declining direct aid, and declining government support (Horton and Anderson, 1994; Kennedy, 1995; Baum, 1995). Institutional responses to the crisis in funding have ranged from short-term reactions such as hiring freezes, targeted fundraising efforts, deferred maintenance, and delayed purchases of equipment, to long-term restructuring efforts such as incorporating new technologies in teaching and management, privatizing, outsourcing, and redefining mission (St. John, 1994; Zemsky and Massy, 1995).
The recent period of fiscal constraint and institutional responses to fman-cia1 shortfalls have had an impact in the classroom, the laboratory, and the clinic. A key question for higher education is whether the period of fiscal constraint and its inevitable impacts will continue into the future. A fuller understanding of the nature of the current fiscal environment and its impact is critical to those involved in the teaching, research, and service missions, not just those involved in financial and operational management.
The choice of an institutional response to fiscal constraints is based on two sets of factors. The first &t is composed of the internal or institutional context (financial resources. enrollment patterns, and other institutional variables). The second set consists of the external or environmental context (state mandates, societal attitudes, and assumptions about causal factors). If decision makers interpret the financial constraints of the 1990s as another cyclical reflection of a larger economic slump, then good times and business as usual are around the comer. Under tlus assumption, short-term incremental adjustments in planning and operations are appropriate responses. If, however, decision makers Nnv DlLEtnONI FOR HIGHER EDUCATION, no PI. Surnmcr 1996 O J o u y k Publuhcn