The higher education conundrum continues

Tuition flexibility is at the crux of potential legislative solutions

By Marianne Goodland
THE COLORADO STATESMAN

The chatter over a bill granting tuition flexibility to the state’s public colleges and universities is getting louder at the capitol, but when a bill might be introduced is still up in the air.

In the past week, legislative leaders on both sides of the aisle have expressed support for allowing public colleges and universities more control over their tuition rates, to deal with what some have called “the cliff” in higher education funding. But part of that flexibility may mean a dramatic increase in the number of out-of-state students who enroll at the state’s top institutions and brings into question whether that increase may come at the expense of in-state students.

The higher education funding problem has been on legislators’ minds for several years. In 2008, legislators created a rainy day fund for higher ed, contained in Senate Bill 08-218, sponsored by Sen. Gail Schwartz, D-Snowmass Village and Senate Minority Leader Josh Penry, R-Grand Junction. SB 218, which was signed by Gov. Ritter at the end of May, 2008, set up two funds for higher education, paid for with federal mineral lease revenues.

One fund used annual federal mineral lease payments to pay for certificates of participation, used to finance higher education capital construction. The second, a “higher education maintenance and reserve fund,” used interest from one-time bonus payments from the leases to cover controlled maintenance projects in higher ed. The principal would go into a rainy-day fund to cover reductions in higher ed general fund support during a revenue shortfall, and also could be used as a back-up funding source for the certificates of participation. The latest fiscal note for SB 218, from July of 2008, said the rainy day fund could get $9.3 million in 2009-10, but that was before the drop in oil prices. And a January 2009 U.S. Department of Energy report said Colorado would likely see a decrease in severance tax revenues.

In 2007-08, the year before the recession hit, public colleges and universities got $629.9 million in general fund support through the College Opportunity Fund and fee-for-service contracts. The following year, that dropped to $535 million; in 2009-10 it dropped to $313 million, a more than 50 percent cut in just two years. Most of those cuts were backfilled with dollars from the American Recovery and Reinvestment Act and through higher tuition. However, the ARRA requires states to keep higher ed funding levels at no lower than what they were in 2005-06. In order to comply with that restriction, the state must put $231.3 million in general funds back into the higher ed budget for 2010-11. At the same time, however, the governor’s budget request had suggested reducing higher ed support from ARRA by $292.8 million, a net reduction to higher ed of about $61.5 million.

As a result, in the 2010-11 budget request, higher ed general fund support was slated to be $535 million, a combination of College Opportunity Fund stipends and fee-for-service contracts. Another $105 million was requested for need-based and work-study financial aid. Institutions would still get ARRA funds.

But all of that ARRA funding comes to an end in 2010-11, and the total general fund reduction from 2007-08 is now around $95 million. But those figures don’t show the true cut — between 2007-08 and 2010-11, institutions have had increased costs in salaries, risk management and utilities, and have also taken in more students.

Higher education funding doesn’t have the statutory or federal protection accorded to programs such as Medicaid or K-12, so legislators have gone to the “bank” of higher ed general fund support to cover budget cuts several times in the past decade. In 2000-01, general fund support for higher education was $746.7 million. In that same year, enrollment at the state colleges and universities was 200,443 students, by headcount. In 2008, the last year for which data is available from the Department of Higher Education, enrollment was 218,571.

During the 2009 session, the higher ed community got behind SB 295, which sought to allow colleges and universities to opt out of state fiscal rules and to set their own tuition rates without legislative oversight. The bill as amended also would have allowed CU-Boulder to exclude foreign students from its nonresident enrollment category, as long as the institution continues to admit freshman resident undergraduates at 2008 levels, on a five-year rolling average. The bill died on the last day of the session after opposition from Senate Democrats, including Schwartz, a former CU Regent.

The idea of excluding foreign students from out-of-state enrollment counts also was contained in this session’s SB 3, but with an important difference.

The bill’s summary, and an idea that is still being discussed by legislators, would change the way out-of-state enrollment is counted at an institution. Currently, state law (CRS 23-1-113.5) sets the ratio of instate to out-of-state students, under a legislative intent that “state-supported institutions of higher education operate primarily to serve and educate the people of Colorado.”

The ratio established in statute is that 55 percent of the incoming freshman class at every public college or university must be in-state residents. The total enrollment ratio, both graduate and under graduate, must be two-thirds instate students to one-third out-of-state. The ratio applies to each institution within a system, such as the multi-campus University of Colorado or Colorado State University.

The primary beneficiary of a change in how the ratio is applied to a system rather than an individual institution appears to be CU-Boulder, which has the state’s largest out-of-state student population. Enrollment figures for 2009 show the campus had 30,196 total students, by headcount. Of those students, 19,999 were Colorado residents, or 66 percent; 10,197 were nonresidents.

CU-Denver in fall 2009 had 14,119 total students, with 12,751 residents and 1,368 non-residents, a ratio of 90/10. CU-Colorado Springs had 8,493 students in fall 2009; 8,020 were residents, for a ratio of 94/6.

In order to achieve a 66.6 percent ratio systemwide, just based on current enrollment figures, the university could shift its enrollment of nonresident students by more than 5,000, and most of those nonresident students would head to UCB. In 2009-10, UCB charged $28,186 for undergraduate nonresident tuition and $7,932 for undergraduates at the College of Letters and Sciences, its largest college. If 5,143 fewer residents enrolled at UCB, and 5,143 more nonresidents enrolled at UCB, the difference would be $104 million. Annually. Admittedly, this is a very liberal estimate based on a total shift of all nonresident students to UCB and use of the lowest resident tuition at UCB. And in part because of the statutory requirements on ratios for resident freshmen enrollment, such a change wouldn’t happen overnight.

Legislators at the state capitol this week said they believed the difference would be about half of that, or about $50 million. Sen. John Morse, D-Colorado Springs, told The Statesman last month that this might be what’s necessary to save public higher education.

This week, Speaker of the House Terrance Carroll, D-Denver, told reporters that higher education is at a critical junction. “We have to make a decision — are we going to provide publicly-supported higher education?” Carroll did say he is not yet sold on the tuition flexibility idea that is currently being negotiated among higher ed officials and the state capitol.

House Majority Leader Paul Weissmann, D-Louisville, addressed the issue of increasing nonresident students at the expense of Colorado residents, acknowledging that the original idea, just to allow for more foreign students, had gone way beyond that. “We have to make sure we’re not bumping Colorado kids to make this work.” Carroll added that the state does not want to create an environment in public higher education based on the student’s ability to pay.

Senate Minority Leader Josh Penry, R-Grand Junction, is likely to be a Senate co-sponsor of the tuition flexibility bill. “Fixing higher education is one of the greatest challenges the legislature faces,” he told reporters this week. “But we have to find a way to give institutions a greater way to pay their bills without pricing students out of school.”

Penry also pointed to the example set by the University of Denver and other private schools. Those institutions, which charge tuition more in line with UCB’s out-of-state rates, “have figured out how to draw in underserved, minority, working class and low-income students” and how to provide sufficient financial aid to those students, he said

All options to generate revenue for higher education are on the table, Penry told The Statesman Monday. The more profitable divisions could subsidize the less profitable, Penry said, freeing up general fund dollars to assist institutions that don’t have the ability to generate out-of-state enrollment. Penry also said that CU had promised it would not enroll more out-of-state students at the exclusion of resident students; they would instead just increase enrollment in order to achieve that ratio shift.

“We have to look at that option,” Penry said. And increasing capacity is the only way it works.

There are other options, presented to the Joint Budget Committee last December by its higher ed staff analyst, Eric Kurtz, but they are options that are even less likely than the tuition flexibility bill.

Kurtz told the JBC the state could start shutting down colleges, or go the privatization route. Privatizing colleges is not a new idea; Sen. Dave Owen, R-Greeley, a member of the JBC during the budget crisis of the early 2000s, suggested in 2001 the state ought to privatize the Colorado School of Mines.

Kurtz’s idea in December was to shut down one or more of the rural community colleges, which have smaller enrollments and higher per-student costs. The biggest barrier, he wrote, and the one that usually stops the discussion cold, is which ones to close. For modeling purposes, Kurtz chose Northeastern Junior College in Sterling, stating that another community college, Ft. Morgan, is only 45 minutes away and students could go there instead. After a number of considerations are factored in, the state could save about $2.4 million. However, the savings don’t take into account the impact to the community, Kurtz said, such as that the college is the third-largest employer in the region.

Privatizing is another option, Kurtz wrote, and he chose CU-Boulder as the model. Under his definition, privatization would mean no state support for operating expenses, and because the state constructed much of the facilities at UCB, it could still demand performance results from the institution. To privatize UCB, for example, the campus would have to increase tuition by 18 percent. If the college increased its tuition by 22.5 percent and set aside 20 percent of that increase for financial aid, he wrote, as a privatized institution it would still be below the costs of many other major public research institutions in other states.

The timeline for legislative action on a new tuition flexibility bill is still up in the air. His previous effort, SB 3, was never heard by the Senate Education Committee. Morse told The Statesman last month he would probably scrap it. He joked this week that he is still working on a “perfect” bill and could not say when the new bill would be introduced.

Marianne@coloradostatesman.com