Office of Planning and Budgeting

report released today by Demos, a New York public policy think tank, attempts to identify the reasons why tuition prices at public four-year institutions have increased over the last decade. The findings reinforce the understanding that declining state support, rather than “administrative bloat,” is the primary cause of tuition increases. Although administrative spending did increase marginally, the authors attribute the slight change to rising health care costs[1]  and to new support services required over the past decade – such as those to support growing technology needs.

The report analyzed data from the Delta Cost Project and examined research institutions separately from institutions that primarily award bachelor’s and master’s degrees.

Between 2001 and 2011, state funding per student fell by $3,081 at research universities and, simultaneously, tuition per student increased “in near lockstep,” by $3,628. Consequently, the majority of funding formerly provided by the state is now borne by students and their families.

The Causes of Rising Tuition at Public Research Universities

(taken from Figure 6 in the report)

Causes of rising tuition - research universities

As seen in the figure above, of the tuition hikes at public research universities:

  • 79 percent is attributable to declining state appropriations,
  • 9 percent is due to higher instruction costs (largely the result of rising health insurance premiums)
  • 6 percent is due to more construction costs, and
  • 6 percent is due to increased administrative spending.

With regards to “administrative bloat” – which some still view as a key driver of tuition increases – the report finds that “the number of executives and administrators has actually slightly decreased relative to the size of the student body” and the average number of total employees per 1,000 students has remained relatively constant over the last decade.

Instead, public institutions are employing more part-time faculty and professional staff (e.g. employees who work in admissions, human resources, information technology, etc.). “All of these things are necessary to support the growing university,” said Robbie Hiltonsmith, the report’s author.  Hiltonsmith also noted that when state funding for higher education declines, colleges can either raise tuition to make up for the forgone revenue or look for ways to trim expenses.  “If there isn’t a lot of fat to cut, then their only option is to raise tuition or lose quality of education.”

[1] On average, the amount spent by public universities to provide health insurance to staff and faculty rose by nearly $2,700 per employee between 2001 and 2011, a 40 percent increase.

State Higher education Executive Officer (SHEEO) announced its annual release of State Higher Education Finance (SHEF) report for FY14, which provides a comprehensive review of state and local funding, tuition revenue, and enrollment trends for public higher education.

National trends and Current status of state funding for higher education

On average, state and local support per full time equivalent (FTE) student was $6,552, a slight increase from $6,215 in 2013. Net tuition collections per FTE student is at $5,777, a 2.7 percent increase from 2013. Two rather interesting findings were highlighted in the report:

  • State and local support was 57.3 percent in 2014 as a share of per-student total educational revenue available to public institutions of higher education.
  • The explosive enrollment growth at public institutions from 2008 through 2011 tapered off in 2012 and is continuing in the downward trend. In 2014 enrollment fell another 1.3 percent from 2013.

Washington State compared to U.S Average

As a reminder, the SHEEO SHEF report combines community and technical college and college/university enrollment, state appropriations and tuition revenue for purposes of this report. In it, they found that enrollment (FTE) increased by 3.5 percent from 2009 to 2014, which is close to U.S. average (3.9 percent). They also found that public higher education in Washington improved in a number of other dimensions; including:

  • 15.3 percent increase in educational appropriations per FTE since 2013, higher than the U.S. average of 5.4 percent;
  • 3.7 percent increase in net tuition revenue per FTE from total educational revenue, higher than the U.S. average of 2.7 percent; and,
  • Total educational revenue per FTE increased by 9.4 percent, which was higher than the U.S. average of 4.1 percent.

However, two years of per-student funding increases might have meant that national average was on the path to exceeding pre-recession funding levels, which was not the case. Educational appropriations per student in FY14 remained 18.9 percent below 2008 pre-recession levels.

Read the full report for more data, analysis and methodological details.

On Thursday, the House passed its operating budget proposal (Engrossed Substitute HB 1106) off the floor, with several amendments.

The original tuition and compensation proposals from the House Chair budget remain unaltered, however there some key changes compared to the original bill:

  • Funding for computer science and engineering is reduced by $3.75 million, bringing the biennial total to $4.25 million, rather than $8 million.
  • An additional $1.9 million is provided for the Family Medicine Residency Network, bringing the biennial total to $4.9 million.
  • New funding of $300,000 is provided for the UW’s Latino Health Center over the biennium.
  • New funding of $400,000 is provided for the Climate Impacts Group in the College of the Environment over the biennium.

Please see our OBP brief for more information about the original House proposal.

The Senate is expected to vote on its operating budget on Monday.

 

On Tuesday, Leadership in the Senate Ways & Means Committee released its operating budget proposal, Proposed Substitute Senate Bill 5077 which makes significant changes to the Governor’s proposal and differs significantly from the House proposal.  Under the Senate proposal, the UW would receive $674.39 million of Near General Fund State across the biennium.

Here are some of the key points from the Senate Budget proposal:

  • Tuition affordability program – The Senate budget reduces the operating fee portion of resident undergraduate tuition to 18 percent of the state’s average wage in FY16 and 14 percent of the state’s average wage in FY17 onwards. It provides $96 million over the biennium to offset the reduction in operating fees, which we believe falls short by $1.2 million in FY16 and $2.8 million in FY17.
  • WWAMI – The Senate budget provides $1.25 million per year for continued operations of the WWAMI program.
  • O&M Funding – Like the House budget, the Senate provides $1.762 million over the biennium to cover the operation and maintenance costs of UW Bothell Discovery Hall.
  • STEM Investments – The Senate proposal  provides $2 million per year to increase bachelor’s degrees in Science, Technology, engineering and Math fields.
  • Compensation Increase – The Senate bill rejects state-funded contracts with classified staff. Instead, the Senate Chair budget would fund wage increases at $1,000 per employee and require that the University either renegotiate contracts to match this funding level or locally fund the difference in perpetuity. The Senate budget provides funds for faculty and staff wage increases at $1,000 per employee and allows the UW to deviate from this assumption with local funds.

The Senate capital budget is expected to be released next week .  For more information, please see the OPB Brief.

 

Leadership in the House Appropriations Committee released their 2015-17 operating budget proposal on Friday – Proposed Substitute House Bill 1106 . The proposal provides $3.48 billion of Near General Fund State for higher education which is a slight increase over the total higher education appropriations in the Governor’s budget.

On the operating side, the UW would receive $595.6 million of Near General Fund State across the biennium – $95 million more than we received in 2013-15.

Here are some of the key points from the House operating budget proposal:

  • Tuition freeze for resident undergraduate students over the biennium.
  • $50 million in biennial funding to offset tuition freeze and fund compensation increases.
  • $8 million in FY17 to support Computer Science engineering enrollment.
  • $3 million in FY17 for additional medical residencies in Washington State.
  • $4.68 million transfer from WSU to the UW in both FY16 and FY17 to support the WWAMI program.
  • $1.7 million over the biennium to cover operation and maintenance costs for UW Bothell Discovery Hall.
  • $1 million for an ungulate predation study — $600,000 of which would pass through to another state agency.
  • No funding for Climates Impacts Group, although the Governor’s funding had provided$1 million provided for this purpose.

Overall, the UW fared well in the House operating budget compared to the Governor budget.

On the capital side, the UW would receive $41.156 million in new funding from the State Building Construction Account. This is significantly less than the Governor’s proposed budget of $86.2 million, with less funding for the CSE Expansion ($6.033 million of the $40 million requested) and no funding to support the completion of the phased renovation of Lewis Hall. It does however propose a greater amount of funding for the Burke Museum ($26 million), but is still less than the Burke’s requested $46 million.

The Senate will release its proposed operating and capital budgets in the coming weeks.  For an analysis and summary of the operating and capital budgets, please review the OPB Brief.

 

The Governor released operating and capital budgets yesterday morning. Though the UW fared well in the capital budget, we believe the operating budget, as currently proposed, presents challenges. Please note that the Governor’s budgets will be taken up by the Legislature in January; we are many months away from a final legislative compromise. As usual, we will be sending out budget briefing documents throughout legislative session to keep you updated.

For an analysis and summary of the operating and capital budgets, please review the OPB brief.

On Monday, Kaplan University launched “Open College” which is intended to help adult students earn a Bachelor of Science degree in Professional Studies by offering credit for a combination of competency-based course assessments, experiential learning, and external exams (AP, IB, CLEP, DSSTs, etc.). Open College will include free online courses and mentoring to help prospective students identify and organize prior experience that could qualify for college credit. Once students enroll and have their prior skills assessed for credit, they will pay a subscription fee of $195 per month, an assessment fee of $100 per each of the remaining 35 “course equivalents” needed to earn a degree, and a $371-per-credit fee for a final six-credit capstone course.

According to The Chronicle:

“A student entering with no credits who pursued the program for 48 straight months could earn a bachelor’s degree for about $15,000. Students who earned credits based on their prior experience would end up paying less than that. Officials expect that such students would typically enroll with about 60 credits, take 24 to 30 months to complete a degree, and pay about $9,500.”

Kaplan’s administration sees Open College as the newest candidate in the hunt to create a $10,000 bachelor’s degree and as a new, flexible way for adults to advance their career.  While Open College’s structure and pricing may work well for some students, a few things should be considered before rushing to enroll in Open College.

First, students at Open College will receive little, if any, financial aid.  Open College’s website says it will not participate in federal student aid programs; it also gives no indication that students will be eligible for state financial aid or that it will offer any form of institutional aid. Therefore, although comparisons are difficult and potentially problematic, it’s worth noting that in 2013-14, resident students at public four-year institutions paid an average of $3,120 in annual net tuition and fees (published tuition and fees less grant and aid scholarship from federal, state or institutional sources).[1] If we assume, as Kaplan did, that a student entering with no credits would take 48 months to earn a degree and that tuition and fees would not increase during those four years, then a resident student who enters a public four-year with no previous credits would pay roughly $12,480 in tuition and fees to earn a four-year degree, compared to a similar student at Open College who would pay $15,000. Of course, this total does not consider the cost of rent or room and board, which can be very expensive; but neither does Open College’s estimate, even though a student earning a degree through their program would presumably still be spending money to eat and live while earning a degree.

Second, employer doubts about the quality of an online degree may impact graduates’ employability. According to the results of two surveys released last fall, only 41 percent of hiring managers believe that online programs are of the same quality as traditional, in-person programs.

On Thursday, the American Association of State Colleges and Universities (AASCU) released a policy brief examining the potential consequences of Pay It Forward (PIF) (please see our previous blogs for background information).  The AASCU brief summarizes other, similar approaches to paying for college and analyses PIF as a potential state approach to financing public higher education.  

The report describes the following “13 Realities of PIF College Financing Proposals”:

  1. Most students could pay more, not less, for college.
  2. Considerable uncertainty would be introduced into campus budgeting and planning efforts.
  3. The majority of college costs are not covered.
  4. Students from sectors with the heaviest student debt burdens would be ineligible to participate.
  5. The class divides in public higher education, and more broadly, in American society, could intensify.
  6. Costs borne by students pursuing privately financed degrees and higher-paying careers would increase dramatically.
  7. PIF is duplicative—there are existing public and private programs that calibrate student debt to earnings.
  8. PIF’s start-up costs would be enormous.
  9. Payment collection would be costly and challenging.
  10. Campus and state leaders would have strong incentives to promote programs leading to high-paying occupations, to the possible detriment of the liberal and applied arts, humanities, and public service careers.
  11. Underlying college cost drivers would not be addressed.
  12. Support for state and institutional student financial aid could dissipate.
  13. Support for maintaining existing state investment in public higher education would erode, creating a pathway to privatization.

In addition, the authors discuss “The Unknowns of ‘Pay It Forward’”:

  1. How will institutional financing gaps be addressed?
  2. How would payments be collected?
  3. Who would control PIF funds?
  4. How would PIF’s structure and revenue generation differ from campus to campus?
  5. How would PIF complement or conflict with federal higher education programs?
  6. How would transfer students be integrated into PIF?
  7. What would be the consequences for noncompleters?
  8. How would college savings change under PIF?
  9. How would PIF affect campus philanthropic campaigns?

The report’s conclusion reads, “Creating a lifelong tax and privatizing public higher education through pay it forward is not the solution to addressing college affordability.”  

I recommend that readers review AASCU’s full report.

On Thursday, the American Association of State Colleges and Universities (AASCU) released its most State Outlook.  According to the report, state operating support for public  four-year colleges and universities is 3.6 percent higher for FY 2015 than it was for FY 2014. Of the 49 states that have passed a budget thus far, support for higher education increased in 43 states and decreased in only 6 states. Of those 6 states that reduced funding, all were under 3 percent: Alaska, Delaware, Kentucky, Missouri, Washington (0.8 percent decrease) and West Virginia.

There was a relatively small amount of variation between states in terms of their year-to-year funding changes. For FY 2015, the spread between the state with the largest gain and that with the largest cut was only a 24 percent—this is compared to 57 percent, 25 percent and 46 percent, respectively, in FYs 2012, 2013 and 2014. The report notes that this decreased volatility likely indicates “a continued post-recession stabilization of states’ budgets.”

Charitable contributions to U.S. colleges and universities increased 9 percent in 2013, to $33.8 billion—the highest recorded in the history of the Council for Aid to Education (CAE) Voluntary Support of Education (VSE) survey. In addition, college and university endowments grew by an average of 11.7 percent in FY 2013, according to a January 2014 study released by the National Association of College and University Business Officers and the Commonfund Institute.  This represents a significant improvement over the -0.3 percent return in FY 2012.

The report also describes ten highlights/trends from states’ 2014 legislative sessions, those being:

  1. State initiatives linking student access to economic and workforce development goals.
  2. Tuition freezes or increase caps in exchange for state reinvestment—this occurred in Washington and another example is discussed in our previous post.
  3. Performance-based funding systems that attempt to align institutional outcomes with state needs and priorities.
  4. Governor emphasis on efforts to advance state educational attainment goals.
  5. Interest in policies related to vocational and technical education, including allowing community colleges to grant certain four-year degrees (as described in our previous post).
  6. Efforts to develop a common set of expectations for what K-12 students should know in mathematics and language arts.
  7. STEM-related initiatives, including additional funding for STEM scholarships in Washington.
  8. Financial support for the renovating and/or constructing of new campus facilities—unfortunately, Washington’s legislature did not pass a capital budget.
  9. Bills allowing individuals to carry guns on public college and university campuses—as of March 2014, seven states had passed such legislation.
  10. Legislation that extends in-state tuition or, as occurred in Washington, state financial aid to undocumented students.

Other noteworthy policy topics described in the report include:

  • Student financial aid programs—some states broadened their programs while others limited them;
  • Online and competency-based education reciprocity agreements;
  • “Pay It Forward” Funding Schemes; and
  • Consumer protection as it pertains to student recruitment, advertising and financial aid at for-profit colleges.

Posted by Corrin Sullivan, Intern at the Office of Planning & Budget and Educational Policy student through the month of July 2014. My focus is on higher education access and policy. I look forward to sharing newsworthy events in the higher ed world with you.

Let’s start with a quick summary of two articles from this past week in higher ed news.

Selected California Community Colleges May Soon Offer a Baccalaureate Degree

The California State Assembly Committee on Higher Education approved Senate Bill 850 (SB850) this past week, which launches a pilot program offering fifteen community colleges the opportunity to offer a four-year degree program as soon as January 1, 2015. The Community College Board of Governors and chancellor, in consultation with the California State University (CSU) and University of California (UC) systems, will consider a variety of colleges and select fifteen districts based on four-year degree proposals that meet a variety of criteria; most notably, degrees not available at any of California’s four-year schools and that address the state’s unmet workforce needs. Although the UC system has yet to comment on SB850, California’s Community College Chancellor, Brice Harris, commends the Assembly Committee’s approval of legislation stating that it has the potential to broaden higher educational access and offer more job training opportunities for Californians.

North Dakota Board of Higher Education Unanimously Approves Budget Requesting System-Wide Tuition Freeze

The North Dakota Board of Higher Education recently approved its biennium budget request, which asks for an approximate 14 percent increase in funding in exchange for freezing tuition rates among its eleven colleges and universities for the coming biennium (2015-17). Based on a new funding formula instituted in the 2013 legislative session that relies largely on credit-hour completion, the budget’s $774 base request reflects a $94 million dollar increase from the previous year’s request. The $94 million dollar increase includes a $49 million dollar request to cover operating costs associated with additional credits taken at the state’s colleges and universities. In addition to the $94 million base increase, the board has also requested $9.5 million dollars to cover sums “students would have to cover without a freeze,” compounded with several smaller requests to meet institutional equipment and staffing needs. The Board states that they will freeze tuition rates at all colleges and universities from 2015 through 2017 if and only if, the legislature agrees to fully fund the base budget and increase employee salaries and benefits. Noting affordability as an issue in declining student enrollment numbers, the freeze aims to decrease tuition so that rates are competitive with the state’s regional counterparts.

While the Board has frozen tuition rates at the state’s two-year schools for four of the past six years, this request to freeze tuition for all North Dakota higher education institutions is unprecedented. The budget is before Governor Jack Dalrymple, pending recommendations, prior to advancing to the state’s legislature.

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