The funding of higher education

Filed under: Opinion |

Editor’s note: In December, the University of Denver announced the formation of the Colorado Economic Futures Panel to analyze the state’s fiscal situation and provide a platform for informed discussion and possible solutions. Sixteen business and civic leaders from across the state comprise the panel, including Dick Celeste, president of Colorado College. This is part of a series of columns that the panel plans to submit before completing the first phase of its work.

Colorado boasts one of the most highly educated populations in the country, based upon the percentage of adults with college degrees. But the Colorado Economic Futures Panel has found that asset and the economic and social benefits it promises, may be in jeopardy.

With the combination of reduced state revenues due to the recession, increases in K-12 spending under Amendment 23 and higher caseloads for Medicaid, state support of higher education has been squeezed. The state has had little choice but to drastically reduce its share of higher education funding. So far, tuition has remained low – but unless state aid improves, Colorado students may be paying more to go to get their degrees.

Most of the money for Colorado higher education comes from state taxes and student tuition and fees. The state’s share of that is in rapid decline – its contribution to colleges and universities declined from $618 million in fiscal year 2002 to $491million in 2005, almost a 21 percent decrease. State support per resident student at all state colleges and universities was $5,365 in 2002 and is projected to be $3,511 in 2005.

At first glance, it appears that increased tuition made up for the loss. Revenues from tuition and fees rose from $603 million in 2002 to an estimated $832 million in FY 2005, an increase of 38 percent. Some of that increase, though, resulted from a 19 percent increase in resident enrollment. When you account for increased enrollment, state support plus tuition for all students, including out-of-state, support actually dropped by 8.7 percent per student.

Under the Taxpayers Bill of Rights, the voter-approved limitation on state and local governments, tuition revenue counts against the overall state spending limit. As “excess” revenue must be returned to voters in years of surpluses or total spending reduced to meet the limit, tuition revenue has been closely monitored since the passage of TABOR. As a result, tuition increases before the recent recession were mostly held to the rate of inflation. Institutions felt the double whammy of reductions in state support and relatively low tuition increases.

Another area of prime importance to consider is the condition of the physical facilities of public universities and colleges. Capital construction and controlled maintenance has suffered since 2003. In 2002 the state spent almost $78 million on construction and maintenance. In the next two years it spent a total of $7.4 million and that is expected to be $4.2 million this year. The longer we delay needed construction and maintenance, the more expensive it will be.

The bottom line is that institutions of higher learning in Colorado will continue to suffer funding shortfalls under the present system. If you ask the business community, a strong system of higher education is at the top of the list for economic development and the creation of jobs. How we treat higher education affects us all.

So what are the alternatives?

Changing the way we fund higher education is complicated and may involve changing the manner in which the various limits on the state conflict with one another. While the ultimate solutions may be complex, there are at least two steps that can be taken in the short run.

First, given the decreased state support, it is apparent that tuition increases are needed to cover costs at colleges and universities. Each governing board should have the responsibility and authority to control its tuition. With the requirement of TABOR to include tuition in determining TABOR limits, this becomes a problem. For that reason, removing higher education from TABOR may be necessary.

It seems to me that governing boards should have the final say on tuition. Each board knows what tuition its students can afford and certainly would not price the cost so high as to discourage enrollment. I believe that governing boards are dedicated to success. They spend countless hours on a pro bono basis and accept the responsibility for making the right decision. Let’s give them a chance

A second step in finding a solution to the higher education funding problem is the creation of a new funding system, the College Opportunity Fund, which will begin this fall. Current state funding will be given in the form of stipends for resident undergraduate students. Additional moneys for graduate education will be developed through contracts between the state and the institution. Under the new system, since the stipends are under the control of the student rather than the state, they may not be considered state funds for purposes of the TABOR limits. Theoretically, this will allow most institutions to seek what TABOR calls “enterprise” status, which can be granted when they receive less than 10 percent of their total revenue from state and local government. Enterprises are not subject to the limits of TABOR.

A strong and thriving system of higher education will be significant to the future development of this state. Global competition will demand a population with knowledge-based skills that combine the best of arts, sciences and technology. While Colorado’s spectacular location was a prime mover for the development of the state in the last century, its ability to encourage the intellectual advancement of its citizens will determine its fate in the next.

Richard “Dick” L. Robinson is co-CEO of Robinson Dairy.