Released this morning, the November state revenue forecast indicates that the state is short another $122 million below needed revenue for the current biennium. Dr. Arun Raha, Executive Director of the Economic Revenue and Forecast Council, wrote that uncertainty over Southern Europe’s debt crisis and potential political gridlock in Washington, D.C., produced largely expected economic results predicted in September’s dismal forecast. In essence, we still have a $2 billion budget problem and since September, it has grown by $122 million.
The Governor will use this forecast as her benchmark for budget reductions in the 2012 Supplemental budget (first supplemental budget of the 2011-13 biennium). All told, the Governor will need to cut over $2 billion from the current biennial budget in order to produce a balanced budget, which she is required to do before proposing any revenue increases to offset reductions.
This budget will be released this Monday, November 21. We will release a budget brief and blog detailing the impact of the Governor’s budget on the UW as soon as possible. While the Governor’s budget release is a critical first step of the special and regular legislative sessions, we are months away from a final legislative budget.
The past few weeks have brought a lot of bad news for the for-profit education sector. Federal and state scrutiny of practices, costs, and outcomes, combined with tightened regulations, high profile lawsuits, and student reaction to high prices in a bad economy, have taken their toll on the sector:
- A state investigation has been opened to determine whether for-profit institutions have been improperly compelling employees to support the candidate currently opposing Kentucky’s Attorney General, a man who also happens to be leading a 20 state joint investigation into the practices of for-profit institutions.
- Enrollments have plunged even more deeply than they did last year across the sector as a whole (14.1% on average), and most dramatically across the largest companies, including 47% at Kaplan, 41% at Apollo, and 26% at Corinthian Colleges.
- As a result of tightening regulations, bad press, and plunging enrollment, stock prices are going down.
- A journalist at the Atlantic is wondering if, in order to survive, these institutions should get out of the business of educating students and attempt to use their large infrastructure and resources as consultants to more traditional institutions that are needing to scale their online education operations, and increase their ability to serve the non-traditional student population.
To read related OPBlog posts, see:
If the US House and Senate approve the debt deal that the Obama Administration and Congressional leaders seem to have worked out over the weekend, the Pell Grant Program will remain intact. Although PELL had been targeted for significant cuts, the deal leaves the current maximum grant at $5,550, and retains the in-school interest subsidy for graduate student loans.
Note that future cuts are still possible, especially if the number of eligible students continues to grow, increasing significantly the cost of the program. But, for now, the bipartisan support to leave the program largely untouched is encouraging. Make sure to follow frequent updates on the debt deal, federal budget negotiations and other relevant federal activity on the UW Office of Federal Relations blog.
As the for-profit higher education industry continues to fight federal regulation, states are starting to pay more attention to the fast growing sector. The National Conference of State Legislatures (NCSL) reports that, as of May, twenty states have introduced at least 34 bills aimed at regulating or supporting for-profit higher education. NCSL reports that eight of these bills have already passed, six have failed or been vetoed, and twenty remain in play. They provide a summary of each piece of legislation, as well as a webpage that centralizes information on this topic from various sources.
Meanwhile, Senator Harkin continues to investigate the sector, and a 10 state joint investigation into the practices of for-profit institutions remains ongoing. It appears that one result of all this scrutiny is that the industry has been pressured to begin to take preemptive action toward restructuring and increased transparency.
For previous OPBlog posts on this topic see:
When Congress renewed the Higher Education Opportunity Act in 2008 it contained some significant revisions, including new mandates to increase transparency around the issue of college cost and affordability. As a result, all institutions were required to develop and publish some form of a ‘net cost calculator’ that could help a prospective student get a sense of what the student and their family might have to pay to attend the institution once their basic financial circumstances were taken into account. At the UW, we refer to this as our Financial Aid Estimator Service.
In addition, the US Department of Education was charged with collecting, analyzing and reporting specified information about sticker price, net cost, cost increases and more via an easily accessible public website. Just last week, the Department published that website. Most of this information was already publicly available via the National Center for Education Statistics (NCES), but the new site focuses on enhancing understanding and navigability for citizens.
The creation of this website is a step forward for citizens seeking more coherent information on college pricing, but the site and data have some already clear weaknesses that will hopefully be addressed.
Days after the Department of Education released its finalized Gainful Employment rule, Senator Tom Harkin held his fifth Senate hearing investigating the practices of the for-profit higher education industry. Senator Harkin focused the hearing on the high levels of student borrowing and outsized loan default rates for students at for-profit institutions. Previous hearings and reports have revealed that:
- Less than 10% of postsecondary students are enrolled in for-profits, yet they receive 23% of federal aid, and account for 44% of all loan defaults.
- 95% of all students at for-profits borrow money to attend, compared to less than a quarter of community college students, 64% of students at public four year institutions, and 72% at private four year institutions.
Additionally, Harkin grilled Department of Education Under Secretary Martha Kanter on whether the softened gainful employment rule released by the Department would do enough to help reign in exploitative practices of the for-profit higher education industry, noting that stock prices in the industry increased significantly upon publication of the revised rule whereas previous iterations had sent prices down. Kanter, who was attending in place of Secretary Arne Duncan, defended the regulation as a step forward.
Harkin concluded that while the Department of Education regulations were ‘better than nothing’, he continues to believe that Congressional action via legislation may be necessary.
No Republican members of the committee were present, and no further hearings on the topic are scheduled at this time.
For previous OPBlog posts on this topic see:
After much debate, public comment, intense lobbying, a lawsuit, and the threat of political action to block them, expansive new US Department of Education higher education regulations are set to go into effect on July 1st. While the Department has made revisions to and provided implementation guidance for most of the new rules, it had several times delayed finalizing the most controversial regulation, known as Gainful Employment, which was formally published on June 2nd.
The rule establishes thresholds for loan repayment rates and debt to income ratios for graduates of for-profit and non-degree career oriented programs, with the ability to cut off federal financial aid funding for entities that do not meet the standards, among other penalties. The final rule was significantly revised from earlier versions, including a delayed implementation year, altered criteria and formulas making it more difficult to find an institution in violation of the rule, and a host of other changes that are widely seen as having softened the rule in response to the pressure applied by the for-profit industry and its political supporters.
Although the gainful employment rule is limited in scope and does not currently apply to degree programs at traditional institutions, as we have previously stated, and both The Chronicle and Inside Higher Education are reporting, the regulation is a watershed moment with important implications for federal regulation of higher education into the future.
It was speculated that Republican gains in Congress last November could stall the Senate’s aggressive investigation of the for-profit higher education industry and sweeping new Department of Education regulations that are set to go into effect July 1. While bipartisan action in the House did attempt to block some of the regulations, particularly the controversial gainful employment rule, they survived the final 2011 budget deal.
Meanwhile, as federal efforts to better regulate this run-away industry, which enrolls 10 percent of total students, eats up 24 percent of federal aid and accounts for 45 percent of student loan defaults while making billions of dollars of profit annually, continues, several states, including Florida and Illinois, have launched their own investigations. Today, it has been reported that Attorneys General from at least 10 states will embark on a joint investigation of the industry.
Adding to pressure facing the industry is widespread media coverage, including investigative efforts from the New York Times, ABC News, and Frontline, among others. Even Stephen Colbert has addressed the topic.
While the for profit higher education industry lobbying effort is massive (likely paid for with the federal student aid dollars that, on average, make up over 90 percent of the annual operating budgets for these institutions), mounting scrutiny has already had effect as some of the industry’s largest actors have begun ‘maturing’ some of their practices ahead of anticipated regulations.
For past OPBlog posts on this continuing story see:
US Secretary of Education Arne Duncan joined Governor Chris Gregoire and legislative leadership today for an education roundtable. Duncan congratulated state lawmakers on discussing the issue of education reform, even through tough budget times. He further drew attention to the grave problems troubling education in the United States—a 25% national dropout rate, poor STEM education, the large number of students taking remedial courses, and gaping budget gaps, which challenge the adequate funding of education.
Of particular interest, Duncan commented on the current system of education governance in Washington, claiming: “Washington has eight different agencies with different strategic plans working in Washington and it’s very difficult for me to understand how having different agencies handling education…will transform education.”
Governor Gregoire has bills in both chambers to consolidate education governance into one Department of Education headed by the Governor. The plan would also consolidate many existing state education agencies into four primary education divisions: Early Years Division, K-12 Division, Community College and Technical Education Division, and the University Programs Division. All units would report to a new Department of Education Secretary.
Secretary Duncan reiterated President Obama’s commitment to investing in education despite the economic downturn, and gave examples of strategic programs and innovations the administration is working towards:
-Investing in Early Learning programs like Head Start, which studies have shown to improve achievement especially for disadvantaged students who do not have many educational opportunities at home
-Continuing the Race to the Top program which rewards schools for outstanding innovation and improvement in education (if approved by Congress)
Lastly, Governor Gregoire distributed a document describing how much it costs taxpayers when students “fall through the cracks” of the education system– by dropping out, taking remedial courses, or repeating grades–a number her advisers estimate at around $ 100 million a year. Though the problems facing education in Washington state and in the nation are indeed grave, it was encouraging to see lawmakers pause during a critical week to discuss education. As Secretary Duncan asserted, “our children cannot wait for the economy to bounce back”—education must remain a priority, despite the dire budget situation.
The Government Accountability Office (GAO) released a report and recommendations, DOD Education Benefits: Increased Oversight of Tuition Assistance Program is Needed, ahead of another Senate hearing focused on the conduct of for-profit colleges, this time held by Senator Tom Carper.
The GAO report focused on the DOD Military Tuition Assistance Program, which provides tuition benefits for active duty soldiers. In 2009, the program provided $517 million in tuition assistance to over 375,000 service members of which for-profit institutions received a disproportionate amount. The report addressed two primary points:
- DOD oversight of schools receiving Tuition Assistance Program funds
- The extent to which DOD coordinates with accrediting agencies and the U.S. Department of Education in its oversight activities
The Senators discussed the gaps in oversight exposed by the report, and also discussed the fact that Tuition Assistance Program revenue is not included in the calculation to determine whether at least 10 percent of annual revenue comes from non-federal sources, which is required for an institution to be eligible to receive federal student aid. This is a rule that Senator Tom Harkin has specifically mentioned as a target for reform in earlier hearings he has held on for-profit institutions.
Meanwhile, the association that represents for-profit colleges is suing the US Department of Education in an attempt to block new federal regulations, and House Republicans included an amendment to block the controversial gainful employment rule from moving forward in their recently passed budget.
For past OPBlog posts on this continuing story see:
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