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Reach a Consensus on Needed Financial Resources

To the extent possible, reach a consensus on the financial resources necessary to reach the state goal, including effective and efficient spending of current resources and new investments, focused on student outcomes, to expand the capacity of the system to serve more students

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States are striving to support student success and increase postsecondary attainment rates at a time when resources for public higher education are limited. Public postsecondary institutions have three main sources of revenue: tuition paid by students; financial aid, such as federal and state student loans and grants; and appropriations from states and localities to support institutional operating expenses. State leaders can develop a comprehensive financial vision and plan that makes the most efficient use of resources to increase the capacity of the higher education system and improve student outcomes.

Recent reports about state higher education finance document decreasing reliance on state appropriations and an increasing burden on students to finance their postsecondary education. According to the State Higher Education Executive Officers’ 2014 State Higher Education Finance report, state and local funding for higher education reached an all-time high of $88.7 billion in 2008 before the Great Recession hit in late 2008. During the recession, state and local funding decreased, and in 2014, it remained 18.9 percent lower than its 2008 peak. To offset lost appropriations, many systems and institutions increased tuition. The rate of increase in tuition was slower in 2014 than the previous four years, but still increased 2.7 percent between 2013 and 2014. As a result, constant dollar total educational revenue per full-time equivalent student has remained relatively flat, increasing 1.7 percent between 2009 and 2014, but with students bearing a greater share of the costs. The student share of public higher education revenues (net tuition as a share of total public higher education revenues) increased from 35.8 percent in 2008 to 47.7 percent in 2013 before dropping slightly to 47.1 percent in 2014.

Postsecondary enrollments increased 3.9 percent between 2009 and 2014. Even so, Lumina Foundation’s 2015 A Stronger Nation Through Higher Education report estimates that achieving Goal 2025 will require 19.8 million more graduates than the country is currently on track to produce. Reaching the goal will require accelerating the rate of increases in attainment and closing the gaps in attainment among various populations. The Stronger Nation report calls for action on several fronts—increasing enrollment, persistence and completion rates, particularly among racial and ethnic minorities and students from low-income families.

Lumina Foundation has set a target of increasing enrollment from 19.2 million in 2014 to 26.8 million by 2025. Lumina’s targets call for doubling Hispanic enrollments and significantly increasing African American and Native American enrollments. Another population that can help drive increased completion and attainment is the subset of adults who have earned some college credits but have not completed a postsecondary degree or high quality certificate program. Stronger Nation finds that more than 36 million American adults between the ages of 25 and 64 (nearly 22 percent of the working age population) fall into this category. Helping 15 percent of this population over the completion bar would produce nearly 5.5 million additional graduates. Furthermore, developing strategies for identifying and tracking the completion of non-degree credentials can help boost attainment rates as well. Many of these populations will require greater levels of student support and would benefit most from lower cost pathways, alternatives to traditional delivery models and student aid oriented toward supporting student success.

State leaders can look to a variety of strategies that balance tuition policy, student aid policy and operating appropriations to institutions with strategies for reducing costs, increasing efficiency and creating new models of operation and instruction. Policy actions on tuition, student aid and state/local appropriations to institutions can be evaluated collectively, reoriented toward supporting improved student outcomes and shaped to effectively serve more students, particularly those who have been underserved in the traditional postsecondary system. State leaders can start by engaging in a robust, bipartisan effort to develop a long-term financial plan for how to reach the state’s attainment goal. Such a plan can address not only the level of investment needed but also how the state will allocate resources differently to expand the capacity of the system and maximize student success to increase the overall education level of the population. State leaders can also look for specific strategies to support underrepresented student populations–racial and ethnic minorities, adults, and low-income students. Many existing state plans reflect the consensus of the public, higher education leaders, state policymakers and external stakeholders, such as employers.  A financial plan can provide an overall vision that reimagines the business side of university and college operations as well as instructional delivery and learning.

State Examples

Each of the following state examples is a policy solution crafted in response to the unique circumstances of the state in which it was formed. As a private foundation, Lumina does not support or oppose any legislation. Lumina provides educational information, nonpartisan research and analysis to advance Goal 2025.

No state or statewide system has developed the type of comprehensive, long-term financing plan needed to educate a much larger share of its population without commensurately more resources. However, the following initiatives illustrate how states are changing postsecondary finance policies to boost attainment.

Colorado

In 2014, Colorado lawmakers enacted two bills that had significant impacts on higher education finance. The first, SB14-001, included a $60 million (11 percent) increase in state appropriations for higher education and a requirement that tuition increases be capped at 6 percent in FY 2014-2015 and FY 2015-2016. The second bill, HB 14-1319, eliminated the existing funding structure and charged the Colorado Commission on Higher Education with developing a new formula that includes performance measures. Each institution’s allocation includes a role and mission funding component and a performance component. Role and mission factors include the size, location (rural or urban), and selectivity of the institution as well as adjustments for low enrollment, high-cost programs, the provision of support services for Pell-eligible, first generation and other underserved student populations, remediation and graduate programs. The Commission can add two additional role and mission factors. Performance measures will include completion, retention and up to four additional metrics established by the Commission that reflect and support policy goals within the master plan. The four metrics can include workforce placement, closing the achievement gap, limiting student loan debt and controlling institutional administrative costs. HB 14-1319 also charged the Commission with developing ongoing tuition policies that ensure accessible and affordable higher education for Colorado residents. The Commission must submit the policy changes to the legislature by November 1, 2015.

Maine

In 2014, the Maine legislature called for the creation of a Maine Commission to Study College Affordability and College Completion and required the Commission to submit a final report.  The final report provides a summary of the Commission’s findings and recommendations as well as an overview of the process, hearings and testimony.  The commission was particularly concerned about the existence of an affordability gap (or unmet financial need), especially for students from families with annual incomes of less than $60,000. The commission’s recommendations include increasing state appropriations to fully fund Fiscal Year 2016-2017 budget requests from the University of Maine System and the Maine Community College System, reconstituting the Maine State Grant program to create a tiered grant based on different levels of family income and expected contribution, ensuring the academic readiness of students entering college for the first time and developing open education resources, as well as other more cost effective classroom materials. In May 2015, the University System of Maine Board of Trustees voted to freeze tuition for the fourth year in a row. In June 2015, the New England Board for Higher Education and the Finance Authority of Maine released the preliminary findings of an impact study of the state grant program. The brief documents a 58 percent increase in financially needy students between 2003 and 2013. During the same period, the amount of dollars available for the grant program grew by 31 percent.

Maryland

The 2013 University System of Maryland (USM) report on its Effectiveness and Efficiency (E&E) Initiative indicates that the initiative yielded $356 million in savings during its first 10 years. At the same time, the system increased faculty classroom contact hours at undergraduate research universities by 20 percent; achieved all-time high community college transfer rates; reduced time to degree across the system to a historic low, averaging less than 4.5 years; and added 5,000 students in 2008-09, despite the absence of additional funding for enrollment growth.

USM Board of Regents developed the E&E initiative in 2003 when faced with significant cuts in state funding, rising energy and health care costs, large tuition increases and increased enrollment demand. The goal was to optimize resources, reduce costs and expand the system’s capacity to serve more students without damaging quality. The initiative has reduced costs and expanded capacity by centralizing services, such as internal audit, construction management and real property development; employing collective purchasing strategies; and implementing cost-effective energy management strategies. In the academic realm, USM has established early-college access, dual admission and course redesign initiatives.

Tennessee

In 2010, Tennessee lawmakers enacted the Complete College Tennessee Act (CCTA), which established the goal of 55 percent of Tennesseans holding college degrees or certificates by 2025. CCTA also tied 100 percent of each institution’s state appropriation to progress on a set of performance metrics that emphasize student progression and completion and institutional efficiency. In January 2013, Governor Bill Haslam announced the “Drive to 55” initiative to support efforts to reach the 55 percent attainment goal. Since then, the governor has met with various leaders and stakeholder groups to build bipartisan policymaker support as well as widespread public support for the state attainment goal and related initiatives. He is also supporting specific initiatives aimed at building system capacity and using resources more efficiently and effectively. For example, in 2013, the governor signed legislation that provides for statewide online, competency-based learning opportunities through a partnership with Western Governors University (WGU) to establish WGU Tennessee.

Washington

The Washington State budget for the 2013-2015 biennium (see page 249) and the 2014 supplemental budget (see page 188) froze tuition at current rates, temporarily suspended the tuition setting authority awarded to institutions during the recession and increased state support for higher education for the first time since before the recession in 2008. Washington had been among the states with the largest tuition increases and sharpest drops in state appropriations, placing a significantly increasing cost burden on students and their families. More recently, state lawmakers passed a budget bill for 2015-2017 that cuts tuition by 15 to 20 percent at four-year institutions and 5 percent at two-year institutions. Increased state appropriations for institutional aid will offset the lost revenue. Future changes in tuition will be tied to changes in median family income.

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