Another budget cut looms for higher ed

By Marianne Goodland

Just when the cutting appeared to be resolved, at least for now, the Joint Budget Committee this week raised the possibility that the state’s public colleges and universities might be in for another hit to their general fund support, possibly as much as $150 million.

The JBC met with officials from the state’s colleges and universities Tuesday in part to review the 2011-12 proposed budget and to get responses to questions posed by JBC legislators and staff in a November briefing. The college presidents and their trustees use the annual hearing to trot out their successes, and to discuss how they are doing more with less in state funding.

The proposed general fund budget for the colleges and universities is $555 million, $89.4 million less than the 2010-11 budget. That first cut is due to the end of federal stimulus dollars.

But the JBC’s senior member hinted that another cut may be on the way, due to a less-than-rosy picture in state revenues.

Leading off the day-long hearing was Rico Munn, executive director of the Department of Higher Education. He told the JBC and other legislators who attended the hearing that most of the governing boards had signed off on a budget allocation model that divvied up the $555 million in a fair and equitable way. The agreement came through a long process worked out by the Colorado Commission on Higher Education and the governing boards, he said. However, there will be a “temptation by individual institutions” to attempt to convince legislators to change the model to make it more beneficial to some institutions than others. Munn asked the JBC to resist those conversations, noting that moving one piece of the model to benefit one institution would have ramifications for the others and added that the JBC would not be able to find a more fair way to do it. The commission has tried to put the model together in a way that is predictable, understandable and one that protects the system, Munn said. “CCHE has done its best to be a good steward.”

The question of the CCHE’s authority, and a recommendation from the Higher Education Strategic Planning group to enhance that authority, was on the mind of Sen. Al White, R-Hayden.

The HESP recommended the CCHE’s responsibility and authority be enhanced, in order to advocate “a vision for higher education” and come up with an agenda responsive to the state’s demographics, labor market and economic development needs; and that the commission take the lead on policy issues such as access and ensuring students graduate from college.

In addition, during the process of coming up with the HESP plan, a request surfaced from the CCHE that commissioners be allowed to appoint the department’s executive director, authority that it had until 1993 when that authority went to the governor under legislative fiat. The HESP request evolved during the summer, into allowing the commission to submit three nominees to the governor and have him pick from that list, and finally, a compromise recommendation that became part of the final report — that the commission would have input into the governor’s choice for DHE director.

CCHE Vice-chair Hereford Percy told the JBC that the desire for the CCHE to have more authority came from a need for the CCHE to have more responsibility in determining statewide priorities. The colleges and universities are doing great work, Percy said, but they are not focused as a group on statewide priorities. In theory, the CCHE should be the coordinating board and needs “better capacity” to push those statewide priorities.

Percy said the best example of the free-for-all that exists under current policy is how the budget is determined. Once the CCHE comes up with an allocation, individual institutions undercut that decision by attempting to pick off parts of it, a common problem during the past decade that has irritated JBC members. “It becomes a free-for-all,” Percy said. One very public example of that free-for-all took place in 2007, when Colorado State University attempted to get the state Senate to change the university’s tuition-setting authority in the Long Appropriations Bill, after months of work on the budget by the JBC. Then Sen. Steve Johnson, R-Fort Collins, called the attempt a “mockery of the budget agreement” worked out by the JBC and the CCHE.

Percy later said that having the executive director responsible to the CCHE would provide structure that would help in implementing recommendations derived from the HESP.

JBC member Rep. Mark Ferrandino, D-Denver, affirmed the recommendation regarding the commission’s authority, saying the CCHE should be the policy driver for statewide higher ed policy. The institutions “compete with each other for what’s best for their own institution,” he said. “Giving CCHE that power is the right thing to do.”

This year, the first set of performance contracts mandated under SB 04-189, which set up the College Opportunity Fund vouchers, are expiring and results are due. The performance contracts asked institutions to set and achieve goals on access, especially for low-income and minority students; enrollment, transfer, retention and graduation rates; student satisfaction, including employment or enrollment in graduate programs; and assessment of academic quality through accreditation or those who employ the institution’s graduates. So have the institutions met their goals on the contracts? Ferrandino asked.

Munn said evaluation of the contracts included not only how the institutions had performed, but whether the state had kept up its end of the bargain, particularly on funding. “I don’t believe the state met its promises,” Munn told the JBC.

At the time the performance contracts went into effect, in 2005, the state’s general fund allocation for the governing boards (COF and fee-for-service) was $496.9 million. The COF voucher that year was worth $80 per hour, for a maximum of $2,400 for 30 credit hours per undergraduate student. The COF that year was estimated to cover 120,252 students. (The COF voucher reached a high of $89 per hour in 2007.) In 2010-11, the COF voucher was worth $62 per hour, or $1,860 for 30 hours for an estimated 143,804 students. While the total general fund allocation for the governing boards in 2010-11 is higher, at $535.2 million, COF funding has declined by $55 million during the five-year period, and institutions have made up those declines by increasing tuition, at a rate of between 2.5 percent and 9 percent per year.

The institutions’ performance was reviewed regarding the contracts, Munn said Tuesday. He reported institutions met or exceeded the goals set forth in the contracts, which he said meant that they either were doing a good job or the threshold for those goals was set too low. There’s no benefit when they exceed the goals, Munn said, but there’s no detriment when they don’t meet the contract, either.

And then there’s the possibility of yet another budget cut. Ferrandino said there are revenue forecasts coming that show the state has $97 million less revenue than the governor’s proposal, and “we have to find $97 million to cut.” Ferrandino asked that if that cut comes from higher ed, reducing its general fund appropriations to $400 million to $450 million, will the allocation model devised by the CCHE still work? Munn said he didn’t know if the model would hold up if the general fund appropriation dropped below $555 million.

JBC staff analyst Eric Kurtz raised the possibility that higher ed could sustain a cut of that size during the Nov. 17 briefing. The notion that cutting the general fund by 50 percent, or about $310 million, was not “far-fetched,” Kurtz said. Institutions were ordered to come up with plans on how they would handle a 50 percent cut in general fund, a request that came out of SB 10-003. Kurtz said institutions would have ways to reduce expenditures and increase revenue to handle such a cut, either through double-digit tuition increases and/or by laying off faculty and staff, but that such a cut would be politically difficult.

Another issue from the Nov. 17 briefing had to do with tuition rates set at the colleges and universities. Tuition increases for fall 2010 were capped at 9 percent, according to a footnote in the 2010 long bill, but Mesa State College increased tuition rates for its incoming freshmen by 16.8 percent, an apparent violation of the footnote. However, legislators seemed willing to give Mesa a pass on that violation. Rep. Cheri Gerou, R-Evergreen, said that she had learned from Mesa President Tim Foster that the higher increase did not drive down enrollment. Sen.-elect Kent Lambert, R-Colorado Springs, hinted that other institutions might be able to enact similar increases. If Mesa freshmen could afford so large an increase, perhaps that “lesson can be transferred to other institutions,” he said.

Munn said that the department agreed with JBC staff on the analysis of Mesa’s actions, but that Mesa’s interpretation of the footnote was that it applied only to continuing students, not freshmen. “It’s not an unreasonable understanding of the footnote,” he said.

When Foster met with the JBC later in the morning to discuss Mesa, he explained the freshmen tuition hike was actually tied to a change in the number of hours charged per full-time student, a change agreed to after consultation with student leaders. Those entering Mesa as full-time freshmen in fall 2010 would pay for 15 credit hours regardless of whether they were taking 15 hours or as many as 20. Continuing students would pay for 14 credit hours, even if they took as many as 20. The change is in line with similar plans enacted during the last several years by other institutions, such as CSU and the University of Colorado.

Sen. Pat Steadman, D-Denver, said he believed the footnote was clear — no tuition increases above 9 percent. “Explain how cleverly you interpreted this footnote that seems to violate legislative intent,” he said. Foster dodged the question, saying Mesa complied with the footnote with the “right pricing mechanism.” About 10 percent of the freshmen take the 15th hour, he said, and that brought in about $250,000, all of which went to financial aid. White said he believed that telling colleges how to price their business was a form of micromanaging, and while Ferrandino said he agreed with that, the footnote was clear and Mesa did not comply with it.

Legislators also heard how the economic downturn has affected the state’s largest system, the Colorado Community College system, which has seen unprecedented enrollment growth in the last four years. President Nancy McCallin told legislators that 35 percent of their students are unemployed and attend to upgrade job skills, double the number from two years ago. In terms of overall enrollment, however, McCallin said the increases have been dramatic since fiscal year 2007 — more than 40,000 new students have come onto the 13 community college campuses. In the last year alone, enrollment is up 10 percent, she said. All that has led to facilities full to overflowing; at the Community College of Denver, which is housed on the Auraria campus, offices have been converted to classroom space, classes are being held outside when weather permits, and the college spent more than $1 million on a dozen trailers for classroom use, adding to the dozen trailers already on that campus.