SHEEO 2004 Annual Meeting

1

SHEEO 2004 Annual Meeting

The States and The States and Higher Education:Higher Education:

What is the future What is the future of this relationship?of this relationship?

2

Presenters

Katharine C. Lyall, PresidentUniversity of Wisconsin System

Kathleen R. Sell, fmr. Assoc. Vice PresidentUniversity of Wisconsin System

David W. Breneman, DeanCurry School of Education, Univ. of Virginia

3

Setting the stage

Roderick G. W. Chu, ChancellorOhio Board of Regents

4

ACCORDING TO SHEF

State support has grown

5

BUT HIGHER EDUCATION HAS BEEN RECEIVING A

Declining share of state resourcesState Support for Higher Education

4%

5%

6%

7%

8%

9%

1973

1978

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

% o

f T

ax R

even

ues

fo

r H

igh

er E

du

cati

on

U.S. Average

Ohio

Source: Research Associates, Washington, DC

6

IN OHIO

Others have claimed priority

State of OhioShare of Total State Budget for Selected State Agencies

FY 1975 - FY 2001

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1975

1976

1977

1978

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

K-12 Education

Human Services

Higher Education

All Other

Corrections

7Source: U.S. Census Bureau, 2000

WE’RE REGOGNIZING THE CONNECTION BETWEEN

Income and Education

Per

cent

of

natio

nal a

vera

ge

80%

90%

100%

110%

120%

1940 1950 1960 1970 1980 1990 2000

U.S. Average

Ohio Per Capita Income

Bachelor’sDegree Attainment

AssociateDegree Attainment

Income and Education

$30.7 billion in total income lost by Ohioans last year

$1.5 billion in state revenuelost by Ohio last year

8

WILL THESE TRENDS CONTINUE IN LIGHT OF

Higher education’s changed role?

“It was once the role of Governments

to provide for the purposes of universities.

It is now the role of universities

to provide for the purpose of Governments.”

Sir Howard NewbyHigher Education Funding Council for England

9

Preview of a new study

Katharine C. Lyall, PresidentUniversity of Wisconsin System

Kathleen R. Sell, fmr. Assoc. Vice PresidentUniversity of Wisconsin System

10

We Aren’t in Kansas Anymore

Preparing for Change

Katharine C. LyallKathleen R. Sell

11

The Issue

States are struggling to support public higher education as:

Enrollment demand grow

Competing budget claims grow

State budgets become structurally obsolete

12

State experiences differ, but national trends show:

Shifting state priorities Declining tax effort for

HE/$1000 income Rising student share of cost Consumer demand for

convenience, access, and quality

13

The Likely Effects of Higher Education Budget Cuts are also significant policy issues:

Increased drive for autonomy Donor unwillingness to

substitute for state Disguised policy shifts

14

Disguised policy shifts include:

Movement of star faculty and best students to private Higher Education

Declining share of low income and perhaps minority students in four-year publics

Shifting students from 4 year to 2 year institutions--will negatively affect per capita income over time

15

Disguised policy shifts include:

Medicaid and tax cuts are replacing higher education as a priority, without discussion

Intergenerational shifts (lower tax burdens now traded for higher tuition now, perhaps less college access, and higher tax burdens later for our current and future students)

16

The Perfect Storm: 9 Elements

Fundamental assumptions are changing:

1. Growing consensus that the benefits of higher education are private or personal.

17

2. Despite economic rebound, states remain in structural budget trouble

• Revenues based on declining economic sectors (mfg., agriculture, minerals)

• Loss of sales tax revenue to the internet • Long-term effects: tax cuts, loss carryovers

outdated exemptions, TABOR • Double revenue whammy of phased in tax

cuts in the 1990s and the recession’s effects on state funds’ interest earnings

• Low if any rainy day funds

Changing assumptions …

18

3. The growing demand for more spending on prisons, Medicaid, K-12 education.

4. Increasingly, politicians on both sides of the aisle appear to favor tax cuts


19

5. State tax policies are not appropriately designed for the realities of the 21st century:

• They don’t keep up with the shift of commerce to the Internet;

• Reductions in state personnel have increased tax collection problems;

• We are losing tax code progressivity, • And there are other tax policy and tax

structure problems.


20

6. Higher education as residual item: 2.5 decades of budget cuts, jerk & fit budgeting.

7. Governors and legislators state that higher education is a prime area to cut because “it has other revenue sources.”

8. Higher education is moving to more costly production functions: higher productivity at higher cost.

9. We’ve differentiated revenue sources; these aren’t fungible; “a buck is NOT a buck.”


21

The Case Against “No Growth”

(or “At Inflation”) Funding for the Changing

Higher Ed Industry

22

By SHEEO measures (HECA), state appropriations per student to higher education have not kept up with inflation (7.3% below 1991 levels).

These numbers are before 2004 budget cuts.

91-03: 74% of states cut SPS (SHEEO).

03-05: further cuts, 23 states.

While revenues are improving, states face increased Medicaid costs and continued write-offs of stock losses for years to come.

The Case …

23

This is not “rebounding consistently.”

In fact, continuing the 1978-2004 higher ed funding trend, 7 states get to zero state higher ed funding by 2030, and 20 get there by 2050, including California, Washington and Oregon (Mortenson).

The Case …

24

As noted, 37 of 50 states have declined in support per student (HECA measure)

10 states are 20% - 42.6% below, and 24 are at 10% or more below.

Even considering net tuition, total education funding per FTE has fallen in 2002 and 2003 (and will in 2004, perhaps in 2005).

Should we be content with this? No, because:

25

Five states already rely on net tuition for 50% or more of their total educational revenue, and 15 states for 40% or more (gross tuition would presumably increase the number of states).

Should we be content with this? No, because:

26

0

2

4

6

8

10

12

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Fiscal Year

App

ropr

iatio

ns p

er $

1,00

0 P

erso

nal I

ncom

e

Source: Thomas G. Mortenson

State Tax Appropriations to Higher Education (per $1,000 personal income) FY 1962 to FY 2004

27

Tax effort must be looked at over time, and reflects both state circumstances and actual priorities. The latter seem especially salient, because:

By 2003, only 2 states (Kentucky and New Mexico) had higher effort than in 1978. Forty-eight had cuts of 4.6% - 54.7%.

The average cut in state higher ed. funds per $1000 income FY78-FY04 is 35.6%.

Re: Tax Appropriation Effort per $1000 income

28

Trend data from Mortenson show that today’s level of effort per personal income returns higher ed appropriations to 1968 levels.

Effort has declined by more than 30% since the high year of 1978.

Re: Tax Appropriation Effort per $1000 income

29

Growing Number of States Give Absolute Cuts to University Appropriations

30

15.3% 17.7%

36.1% 29.8%

48.6%52.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990-91 2000-01

Gifts, Grants, Contracts Financial Aid, Auxiliaries/Fees for Service

Appropriations

TuitionSource: Travis Reindl, American Association of State College and Universities

Public Higher Ed Funding Sources Changing Quickly

31

THE PINCERS

Source: RAND, Breaking the Social Contract, Figure 11

32

But….

Many advise us not to use the “P” word (privatization).

33

Critical Consequences w/oA Public Debate Reductions in state funding commitment

to public higher education have not been accompanied by a public debate.

Far-reaching decisions about the sources of funding for public higher education, with their necessarily long-term impact, need to be debated, with broad public input.

De facto privatization IS happening.

34

What are our real options?

Curl up into the fetal position and wait Argue for higher education’s “fair share”

of any revenue growth, and be happy … until the next cut

Engage public in open discussion: seek common goals

Redefine what a “new public purpose university” can be/do.

35

Possible Paths

36

Empiricism versus Denial: Privatization Already Underway Univ. of Colorado Enterprise Status and

Voucher System University of Virginia Darden School of Business spins off

to private status South Carolina Governor offers

privatization or re-centralization Hybrid Universities, Deregulation, and

Tuition Deregulation with Limits

37

The Forks in the Road

38

If States Remain Minority Stakeholders:Alternative Strategies to Consider

1. Maintain Public Universities by Raising Private Endowment Levels (flagships)

2. Downsize Along with Other Functions of State Government

3. Renewed State Compact for Higher Education Funding

4. Charter Status in state constitutions

39

If States Remain Minority Stakeholders:Alternative Strategies to Consider

5. Cornell & Virginia Model: Public University with Some Private Divisions

6. Variations: The Hybrid University, Enterprise & Exemplary Status

7. Private Divisions

40

Seamless Education Models with Majority State Ownership:

Alternative Models to Consider Guaranteed PK-14 Education:

A Recognition of Market Demand State PK-16 Funding Formula Education as Airline:

State Purchase and Demand Pricing State Voucher Approach

41

The New Public Purpose

University

42

The New Public Purpose U.

We must provide the vision, sell it to others

Public will accept our vision, but pay only for parts of it

Statewide systems are needed to forge statewide solutions, address and balance regional needs

43

A Statewide Public Purpose U. Must:

Be competitive in the larger higher education market

Aggressively seek productivity and use savings

Ensure equitable access Emphasize quality —

manage enrollments

44

A Statewide Public Purpose U. Must: Allocate public foci by institution, region —

nimbly adjusting as situations change Provide different percent of state support

by institution (more to institutions less able to fundraise and raise tuition)

Help the state become a focused consumer of higher education

Stabilize support for the core instructional mission

45

A Statewide Public Purpose U. Must:

Pursue management flexibility Have a governing board

representing major stakeholders (taxpayers, students, alumni, donors) in a manner more proportionate to their investment

46

Just the Facts, Ma’am

47

The all-things-to-all-people public The all-things-to-all-people public university is not going to persist. university is not going to persist.

But this can be seen as an opportunity, rather than solely as a crisis.

48

QUESTIONS FOR HIGHER EDUCATION

LEADERS TO PONDER

49

How to speak about changes and opportunities constructively?

How to help states address long-term fiscal restructuring?

Questions …

50

The Response

David W. Breneman, DeanCurry School of Education, Univ. of Virginia

51

U.Va. Academic Division Budget Percent Funded from State Appropriations

0%

5%

10%

15%

20%

25%

30%

35%

40%

84-85

85-86

86-87

87-88

88-89

89-90

90-91

91-92

92-93

93-94

94-95

95-96

96-97

97-98

98-99

99-00

00-01

01-02

02-03

03-04

Source: Budget Office (University of Virginia)

52

U.Va. Academic Division BudgetPercent Funded from State Appropriations,

Tuition & Fees, and Endowment Income & Gifts

0%

5%

10%

15%

20%

25%

30%

35%

40%

84-85

85-86

86-87

87-88

88-89

89-90

90-91

91-92

92-93

93-94

94-95

95-96

96-97

97-98

98-99

99-00

00-01

01-02

02-03

03-04

State Appropriations

Tuition & Fees

Endowment Inc. & Gifts


Note: Other sources of Academic Division revenue in 2003-04 include research grants (27.3%), student & user fees (15%), and other (2.6%).

Rev. 1.13.04

53

State Appropriations to U.Va. Inflation-Adjusted General Fund Appropriations

for Educational and General Programs (E&G)

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

88-89

89-90

90-91

91-92

92-93

93-94

94-95

95-96

96-97

97-98

98-99

99-00

00-01

01-02

02-03

03-04

$Mill

ions

Source: State Council of Higher Education for Virginia (SCHEV)

34.1% decrease since 2000-01

Rev. 1.13.04

54

State Appropriations to U.Va. Inflation-Adjusted General Fund Support per

In-State FTE Student for E&G Programs

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04

Source: State Council of Higher Education for Virginia (SCHEV)

34.9% decrease since 2000-01

Rev. 1.13.04

55

Undergraduate Tuition ComparisonTuition & Fees at Top 14 Universities Where Virginia Applicants Declining U.Va.

Admission Enroll, 2002-2003

Rank University Tuition & Fees

1 William & Mary* $ 5,092

2 Virginia Tech* $ 3,936

3 Duke University $27,844

4 University of North Carolina – Chapel Hill* $15,140

5 Georgetown University $26,853

6 University of Richmond $23,730

6 Massachusetts Institute of Technology $28,230

7 Cornell University $27,394

8 James Madison University* $ 4,288

8 Princeton University $27,680

9 Carnegie-Mellon University $27,120

10 Northwestern University $27,228

11 Johns Hopkins University $27,390

12 University of Maryland – College Park* $14,434

Private Average $27,052

Public Average $ 8,578

University of Virginia $ 5,169

56

Undergraduate In-State Tuition 1995-96 Tuition Inflated Using CPI vs. Actual Tuition

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04

1995-1996 CPIInflated Tuition

Actual Tuition


Note: Includes tuition and E&G fees. Does not include non-E&G fees. 1998-99 increase represents $45 E&G technology fee.

‘94-’96: Tuition Price Caps

‘96-’99: Tuition Freeze

‘99-’00: Tuition Rollback

‘00-’02: Tuition Freeze

Rev. 1.13.04

57

Undergraduate Tuition ComparisonTuition & Fees at Top 14 Universities Where All Applicants Declining U.Va. Admission

Enroll, 2002-2003

Rank University Tuition & Fees

1 William & Mary* $ 5,092

2 Duke University $27,844

3 University of North Carolina – Chapel Hill* $15,140

4 Virginia Tech* $ 3,936

5 University of Pennsylvania $27,988

6 Cornell University $27,394

7 Princeton University $27,230

8 University of Maryland – College Park* $14,434

9 Georgetown University $27,028

10 Brown University $28,480

11 Northwestern University $27,207

11 Yale University $27,130

11 MIT $28,230

11 Dartmouth College $27,771

Private Average $27,630

Public Average $ 9,651

University of Virginia $ 5,169

58

One more question from the chair:

Are we facing an era of discontinuous change?

59

SHEEO’s 50th ANNIVERSARY SUGGESTS WE Consider a longer-view perspective

“Millennials will fully possess the youth culture roughly between the years 2002 and 2007. … Through the Oh-Ohs, whatever institutions the first Millennials newly occupy--from college to pop culture, from armed forces to union halls and voting booths--will receive the same media glare, parental obsession, and political intrusion that high schools felt in the late 1990s.”

Neil Howe and William Strauss

Millennials Rising

60

IN THE CYCLING OF GENERATIONS

Will Millennials drive spending?

State of OhioShare of Total State Budget for Selected State Agencies

FY 1975 - FY 2001

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1975

1976

1977

1978

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

K-12 Education

Human Services

Higher Education

All Other

Corrections

MILLENNIALSGENERATION X

Millennials displace Gen X in schools

61

SHEEO 2004 Annual Meeting

The States and The States and Higher Education:Higher Education:

What is the future What is the future of this relationship?of this relationship?

SHEEO 2004 Annual Meeting

Documents

Transcript of SHEEO 2004 Annual Meeting