Conditions set on tuition flexibility bill

By Marianne Goodland

The Senate Education Committee this week took up SB 10-003, the tuition and fiscal rules flexibility bill for higher education that has been awaiting action since the first day of the 2010 session.

Last week, SB 3 sponsor Senate Majority Leader John Morse, D-Colorado Springs, introduced a strike-below amendment, L004, that he said would replace the original bill. That amendment would ask institutions to submit plans by November 10 and on the same date 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. Institutions would be limited to an undergraduate tuition increase of 9 percent per year, unless there were substantial reductions in state general fund support. In that situation, 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. The first-strike below also allowed for exemptions from state fiscal rules.

Last week, Morse said the bill was still a work in progress, and Evan Dreyer, spokesman for Gov. Bill Ritter, said the bill needed to mesh with recommendations from a governor-appointed strategic taskforce on higher education funding.

So when SB 3 got to the Senate Education Committee this week, what was debated was a brand-new strike-below amendment that was substantially different from the strike-below of a week ago.

The new strike-below, L005, begins with a lengthy legislative declaration regarding the state’s fiscal situation, noting impending “drastic cut…especially in funding for higher education.” The declaration also charges the CCHE, in conjunction with the governor’s taskforce, with rewriting the state’s master plan for higher education, with a due date to the General Assembly of December 15. The revised master plan must address the workforce and economic development needs and how higher education would meet those needs, challenges on accessibility and affordability for Colorado students who desire to go to college, the current state funding crisis and its impact on higher education. The bill now requires a revised master plan instead of just a system-wide plan on budget reductions.

The new strike-below keeps intact the requirements regarding the 9 percent undergraduate tuition increases. However, it caps the amount of time the CCHE could approve tuition increases above 9 percent to two years and make conditional another two years approval based on a governing board’s success in implementing financial and accountability measures.

One of the provisions under the first strike-below that got a lot of attention was its request that institutions submit plans on how they would deal with general fund cuts of 25-, 50-, 75- or 100 percent; and how they would invest overall state funding increases of 10-, 20- or 30 percent. That language revised to ask only that they report on how they would deal with a 50 percent general fund cut.

The first strike-below also granted institutions unlimited ability to enroll nonresident students, both foreign students and out-of-state students who are U.S. residents. The amendment noted in its original language the “necessity and benefit” of serving those students. Current law limits the percentage of enrollment of nonresident students to 45 percent of incoming freshmen and 35 percent for overall enrollment, by institution. The entire statutory section on resident admissions was stricken out in the first amendment. In L005, that language has been replaced. The 55 percent requirement for incoming resident students is back in, by institution, as is the two-thirds requirement for overall resident student enrollment. In addition, enrollment of foreign students is limited to 12 percent of total student enrollment.

However, the L005 strike-below says the limitations shall not apply to the University of Colorado, which was likely the institution to benefit most from unlimited nonresident enrollment. The amendment says that in order for CU to gain additional nonresident enrollment, it must annually report information demonstrating that qualified in-state students are not denied admissions and “that the increase in enrollment of foreign students is a result of increased capacity at the institution.” The unlimited increase in nonresident students is restricted to foreign students and does not include or allow for unlimited enrollment of out-of-state U.S. residents.

The coming financial cliff, cutting $300 million in general fund support for higher education, may mean that what the bill seeks may not be entirely achievable, according to the chair of the Senate Education Committee. During testimony Wednesday, Sen. Bob Bacon, D-Fort Collins, said the General Assembly “cannot let the public believe we are creating a system that is affordable and accessible in the best sense,” given the coming financial cliff. As a result, “what we like to do and need to do is not fully achievable. All of these directives are a ‘do the best you can’,” he said, “knowing we are in a circumstance we would prefer not to be in.”

Morse told the education committee Wednesday that the original SB 3 introduced in January was a placeholder for what was now before them. The state general fund budget for 2011-12 is projected to be $1.7 billion short, Morse explained. Several things will make up $1.1 billion out of that, but that still leaves a $600 million general fund budget shortfall, and half of that will have to come from higher education. “The time to solve a cash crisis is not in the middle of the cash crisis,” and Morse said he and Senate Minority Leader Josh Penry, R-Grand Junction, co-sponsor of SB 3, were trying to position the state for a plan to deal with 2011-12. If the state cuts $300 million from higher education, more than half of what the institutions now get in general fund support, “how will they operate so they don’t lose quality and provide services to the low- and middle-income students who can’t afford to pay more than they’re already paying.”

“I appreciate the bi-partisan effort to address number one fiscal challenge facing Colorado,” said Penry, who listed three options for dealing with the crisis: do nothing, “which I refer to wither on the vine, lose entire colleges or they whittle away necessary programs;” tax increases, which he said would be a tough sell to the public, or innovation, “which is what this bill represents,” by giving colleges and universities broader authority to manage their funds and financial aid, maximize access, and make sure they remain world class.

Penry said that if institutions went too far on tuition increases, students will “vote with their feet.”

Sen. Evie Hudak, D-Arvada, said she would not support the bill unless there is an “absolute guarantee” that institutions will remain accessible and affordable for low- and middle-income students, and the language in the newest strike-below isn’t a sufficient guarantee. Penry responded with a reminder of the outrage over 19 and 20 percent tuition increases at CU a few years ago. “The real check on tuition is the political outrage machine is a school overplays its hand,” Penry said, adding that he told the college presidents that if they do that, legislation to roll back the authority “will follow in short order.”

That wasn’t a sufficient explanation for Hudak, who said she preferred to see that in writing in the bill.

Sen. Keith King, R-Colorado Springs, said the amendment appeared to fundamentally change how higher education is funded, and that it appeared to do away with the college opportunity fund stipend and fee-for-service provisions already in state law from SB 04-189. While the amendment doesn’t strike the language regarding the stipend or fee-for-service funding, Penry and Morse explained the policy shift is to maximize those dollars for low- and middle-income students rather than those with the highest income levels.

Several college and university presidents testified in favor of the newest strike-below, favoring its provisions regarding tuition and fiscal flexibility. CU President Bruce Benson addressed the amendment’s language regarding additional enrollment of foreign students, noting that 4 percent of its current enrollment is foreign students. Enrolling more foreign students “would not come at the expense of Colorado students;” CU already guarantees admission to all qualified Coloradans and that would not change, he said.

Tuition flexibility would allow universities to appropriately price an education in the wake of declining state funding but “we would not price education out of the market,” he said.

King questioned the foreign enrollment language, asking whether it would drive away from CU Colorado freshmen who come in through the admissions window. The window, which is set in state law, allows for up to 20 percent admission of incoming freshmen, which often includes minorities, who don’t qualify academically for admission. The window would still be used in the same proportion, which is currently about 8 percent, according to a CU budget official.

CCHE Chairman Jim Polsfut told the committee that the CCHE takes its responsibility on approval of tuition increases above 9 percent very seriously and will review those plans, which must be four-year plans under the amendment, very carefully. “We understand that provision and are ready to execute it should the bill pass,” he said.

Rico Munn, executive director of the Department of Higher Education, said the state has a very good system of higher education, but the ability of his “successor in ten years to say the same is dependent on how we start to address [the financial] challenges today.”

Addressing the ability of the CCHE to address tuition and other funding issues affecting the entire system, Munn said he believed they would be able to spend more time working on those issues and in more depth and complexity than could the General Assembly with its limited 120-day session.

But tuition flexibility was not favored by students and others who testified Wednesday. Frank Watrous of the Bell Policy Center said he believed the four-year timeframe for tuition increase was a good check-and-balance in the process. But “we are troubled that 9 percent is an acceptable step for governing boards,” he said, noting that not long ago, it was seen as the ceiling, not the floor, for tuition increases. The bill also does not address the need for more financial aid in a high-tuition, high-financial aid model that the state is headed for, he said, and with those and other concerns, the Bell Policy Center is unable to support SB 3 in its current strike-below amendment form.

Andrew Bateman, representing Associated Students of Colorado, said there were a lot of portions of the bill his organization was excited to see, such as increased flexibility in purchasing and operational efficiency and increased attention to residency status. “We do not oppose raising tuition,” and are open to discussions on increasing tuition, he said. But, over the last 10 years, four-year institutions have increased tuition and fees 123 percent, and “that’s with oversight. You can imagine what it will look like without oversight.” And at CU-Boulder, it’s been more than 154 percent; at CU-Denver more than 174 percent, he said. In addition, the high-tuition high-aid model only works “if you ensure the high-aid portion, and this bill does not do that,” Bateman said. A high-tuition high-aid model sounds admirable, but students will fall through the cracks.

“We believe there needs to be legislative oversight” over tuition setting, Bateman said, and it should be done by people who are accountable to the voters. The CCHE is not accountable to the voters and neither are the governing boards, except for the CU Board of Regents, Bateman said. “There is nothing gained by taking this conversation out of the public eye and putting it into the boardrooms.” That view also was shared by Matt Strauch, representing students at Colorado State University.

Last year, a bill that also sought to grant tuition flexibility to higher ed institutions died on the last day of the session, after vigorous opposition from several Democrats. The bill, SB 09-295, also didn’t have the governor’s approval, in large part because of objections from State Controller David McDermott, who expressed strong opposition to language exempting higher ed institutions from fiscal rules.

More than one-third of the newest strike-below bill deals with freeing higher ed institutions from state fiscal rules and from the oversight of the state controller, and this week McDermott again objected to those provisions. McDermott said that despite repeat requests to the institutions, they have never informed him about exactly what their objections were to the fiscal rules.

Sen. Pat Steadman, D-Denver, took up the issue of the fiscal rules during the April 28 hearing, stating that while he supports cutting “red tape,” the strike-below is written to allow governing boards to write and adopt their own fiscal rules, and then the governing boards get to determine if that is an adequate safeguard, which Steadman said was a “fox guarding the henhouse” kind of institution. He also raised concerns about the amendment’s language regarding employment compensation for higher ed employees who leave the institution with less than five years of service, asking what kind of mischief that would create, and language dealing with the Public Employees’ Retirement Association. That language clarifies the law created by SB 10-001, which allowed higher ed institutions to hire up to 10 PERA retirees per year for 140 hours each per year. The amendment language clarified it to allow 10 employees per institution rather than by governing board.

Sen. Rollie Heath, D-Boulder, noted that the language on fiscal rules came out of an interim summer commission on fiscal stability and that the language had the unanimous approval of the commission.

In his testimony in opposition to the fiscal rules language, McDermott noted that under Colorado statutes the state controller is responsible for managing the finances and financial affairs of the state. “That can be viewed as the underlying statute that grants me the authority to do the rest of what I do. The fiscal rules are the way I carry that out.”

McDermott pointed out that a number of individual provisions in the amendment are problematic for him, and went through a section by section analysis of the problems. Those included federal reporting requirements on federal grants and exemptions from commitment vouchers for vendors or contractors, which he said institutions violate repeatedly. In addition, the amendment grants an exemption on the $2,500 limit on petty cash, and McDermott said he did not think was a good idea for an office dealing with public funds to make cash available above that amount, which could result in fraud.

“The request for flexibility, given the flexibility we have provided to higher education, is really a simple reduction in basic accountability that is driven by the [statutes] and played out in fiscal rules,” McDermott said. Under the amendment, “I will lose my ability to do central reporting, should [institutions] decide they don’t want to cooperate, and that’s very dangerous.”

Morse acknowledged that the state controller’s oversight is being removed, but “it’s up to the legislative process to say [whether] we get additional benefit from the state controller” because institutions have their own controls. “We’re in a crisis here, institutions have systems in place and they still need to make sure the controller gets every bit of information to do his reports,” Morse said.

Munn told The Colorado Statesman he had not been in contact with the controller over the language on fiscal rules and that it was up to the institutions to communicate with the controller on their issues.

As of press time, three amendments to the newest strike-below had been written and Morse indicated more were likely. The bill was scheduled for discussion of amendments and action late Thursday afternoon (April 29) in the Senate Education Committee.