Tuition flexibility bill for higher ed is on its way

By Marianne Goodland

A looming $1.7 billion budget shortfall for 2011-12 has prompted legislators and public college and university presidents to work out what they hope is enough financial flexibility to keep the state’s higher ed institutions open. The new bill, to be heard in the Senate Education Committee on April 28, represents a fundamental shift in who pays for public higher education in Colorado.

Senate Bill 3 was introduced on the first day of the 2010 legislative session. But the bill introduced in January bears little resemblance to the one rolled out on April 21 and it is still a work in progress, according to its senate sponsors, Senate Majority Leader John Morse, D-Colorado Springs, and Senate Minority Leader Josh Penry, R-Grand Junction.

Morse and Penry spent last Wednesday meeting with college and university presidents and students over the new version of SB 3; they met later in the day with the press to explain the bill.

SB 3 comes more than a month after a short-term recommendation on the same issue came from a taskforce on higher education flexibility authorized by Gov. Bill Ritter. Ritter’s spokesman, Evan Dreyer, told The Colorado Statesman Wednesday that the bill needs to mesh with the recommendations of the task force in order to get the governor’s approval.

Morse said Wednesday that the state would have to cut about $600 million from K-12 and higher education in 2011-12, likely about a 50/50 split. The $300 million in general funds that could be taken from higher education will represent more than half of the general funds the institutions currently receive from the state. “Higher education will need flexibility to make up” the $300 million cut that is coming in 2011-12, Morse said Wednesday.

The strike-below amendment that could become SB 3 next week asks institutions to submit plans by November 10 and on November 10 of each succeeding year on how they would deal with general fund cuts of 25 percent, 50 percent, 75 percent and 100 percent, and in better years how they would invest and spend general fund increases of 10 percent, 20 percent and 30 percent. The plans would go to the Colorado Commission on Higher Education, which in turn would submit a system wide plan on how to address reductions in general fund support to the Joint Budget Committee by December 10.

Morse said that although institutions would have to submit plans showing how they would deal with as much as a 100 percent cut in general fund support it did not mean institutions would be privatized or shut down.

Institutions would be expected to deal with the cuts in three ways: through increasing federal or private philanthropic funding, by improving efficiency of operations, or by raising tuition.

Initially, colleges and universities will be allowed to raise resident tuition rates by 9 percent annually, unless there is a substantial decline in state support, as is anticipated for 2011-12.

In order to gain the authority to raise tuition by more than 9 percent, institutions would have to show how they would increase access to Colorado residents; improve student success, including employment after graduation; improve quality of services and instruction, and how they would improve efficiency of operations.

Institutions that fail to meet the performance goals would face stiff penalties in tuition setting authority. An institution that falls short by 5 percent on its performance goals would have to rollback tuition rates and in the following academic year would see its tuition rates frozen.

One way in which some institutions can increase their bottom line is by admitting more nonresident students and the higher tuition they bring. The amended bill would strike out statutory language dating back to 1993 that capped nonresident enrollment at one-third of an institution’s total enrollment. Morse explained that as long as the institution admits 100 percent of the Colorado residents who meet admissions criteria, “we won’t worry about who else you admit.”

The bill says that while it is the intent of the General Assembly that state-supported institutions are primarily to serve and educate the people of Colorado, the Legislature also recognizes “the necessity of and benefit in serving nonresident students.” Hence, institutions can admit as many nonresident students “as they have the capacity to serve,” as long as they admit 100 percent of the resident applicants who meet the admissions criteria.

The primary beneficiary of such a policy appears to be the University of Colorado, which currently enrolls more than 58,800 students, 77 percent of them residents. A shift of about 5,000 in the university’s nonresident students across all three general campuses based on current enrollment could mean anywhere from $50 million to $100 million more in tuition revenue annually.

In part to address diversity needs, some institutions have taken advantage of an admissions window, which allows them to admit students who don’t meet admissions criteria. The bill says only that they should continue to admit resident students who don’t meet the admissions criteria but doesn’t say just how many that ought to be. Current state law caps the window at 20 percent of enrollment, and CCHE policy has been to set that 20 percent as a statewide limit rather than by individual institution.

The bill, as well as its sponsors, anticipates that state-supported colleges and universities will increasingly turn to non-state sources for support, such as federal dollars and private philanthropy.

Many state institutions have foundations that draw in millions of dollars in donations for endowments. Those endowments are generally dedicated to targeted purposes by the donors. Morse said it was up to the institutions to determine how to use those donations, and that he did not expect the federal government to come up with very much to backfill the cuts.

Morse said he believed the bill would come close to matching up with the recommendations submitted by the governor’s task force, although he admitted there was still some “tension” with the governor’s representatives over control by the executive branch, most notably the CCHE. Morse said the bill was drafted instead to give the Legislature a lot of input into the plans put forth by the schools and the CCHE. “This plan puts meat on the bones” on the recommendations of the strategic planning group, he said.

“We’re working with the governor,” Penry said. “This is the start of negotiations, not the end.”

The bill also may represent the beginning of a fundamental shift in who pays for college and how much, and who gets general fund support from the state.

Under the current funding model, every resident undergraduate student, regardless of financial need or family income, gets the same per-credit-hour general fund subsidy through the college opportunity fund stipend. Most of the state’s general fund-supported financial aid goes to those most in need, generally, to students whose family incomes meets federal Pell Grant eligibility requirements.

According to Penry, the state eventually will move to a pricing model that more closely resembles the ones used by private colleges and universities. In those models, students who come from affluent families receive no aid and pay the total cost of their education. Students whose family income meets Pell eligibility requirements get federal and institutional aid that covers much of their costs, and students in the middle receive some financial aid and must rely on loans or other sources of funding to cover their educational costs.

Under the new state model, and as explained by Penry and Morse, the state will move to a “means-tested” college opportunity fund stipend, where the most affluent students will pay for more of their educational costs and receive less of the state subsidy provided by the COF stipend. Penry said students at the other end of the income scale already get enough Pell money to cover their educational costs, so that could leave more of the state’s dwindling general fund support available to help middle-class students with their educational costs.

“By backing out of the general fund subsidy, colleges will rise and fall based on their ability to attract students” and it will force them to be sensitive to pricing, Penry said. “This is an opportunity for higher education to prove that it deserves this flexibility.”

The amended version of SB 3 also could allow institutions to opt out of certain state fiscal rules, such as in how they pay expenses, collect debts or handle motor vehicles.

The sponsors hope SB 3 will also resolve some of the long-standing turf wars that have been waged by the state’s colleges and universities against each other for dwindling general fund support during the past decade and last two recessions. “This bill forces them to come to terms” with financial realities and how they will work with each other, Morse said. “A crisis is a horrible thing to waste” and this forces institution officials to think about how the whole system works rather than just their own institution, he said.

In the waning days of the 2009 session, lawmakers introduced a bill that would have granted tuition flexibility as well as unplugging certain state regulations. That bill, SB 09-295, came out on April 22 but ran into major roadblocks from the Ritter administration, particularly over the issue of tuition flexibility and allowing institutions to opt out of state fiscal rules. Critics said the bill, which was 51 pages, was too substantial to be rushed through the process, and it died on the last day of the 2009 session. Responding to questions over the last-minute nature of SB 3, a 40-page bill, Penry joked that “consistency is overrated.”

“July 1, 2011 is Showtime,” Morse said, referring to the day that federal subsidies from the American Recovery and Reinvestment Act will be gone and something else has to take its place. Those federal dollars have kept higher education from dropping below 2005-06 funding levels, but unless the Obama administration acts to do otherwise the last dollars will be gone on June 30, 2011.