TESTIMONY The California Assembly Higher Education Committee October 7, 2013 Presentation by: David Longanecker President, Western Interstate Commission for Higher Education (WICHE) FINANCING CALIFORNIA HIGHER EDUCATION The Case for Change The Case for Whopping Big Change Why & How
Why California Must Change First, Demand exceeds supply And, California s economy and social fabric need the State to meet demand
The Relationship Between Educational Attainment, Personal Income, 55 and the State New Economy Index (2010) High College Attainment, Low Personal Income High College Attainment, High Personal Income Percent of Adults 25 to 64 with College Degrees (2009) 48 41 34 27 ND HI NE OR IA KS UT MT ME SD DE NC WI US PA GA FL SC AZ MI OH ID NM MO IN TX AL TN OK KY NV MS LA AR WV CO MN NH VA RI WA IL CA AK MA CT NY MD NJ WY State New Economy Index 2010 Top Tier Middle Tier Bottom Tier Low College Attainment, Low Personal Income Low College Attainment, High Personal Income 20 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 Personal Income per Capita (2010) Source: U.S. Census Bureau, 2010 American Community Survey; Bureau of Economic Analysis; Kauffman Foundation
Percent of Adults with an Associate Degree or Higher by Age Group U.S. & Leading OECD Countries, 2010 70 60 65.0 56.7 56.5 56.8 25 to 34 35 to 44 45 to 54 55 to 64 50 40 30 20 46.9 26.7 12.8 49.6 45.8 29.0 46.8 42.2 48.2 42.3 29.8 21.5 47.3 41.0 33.4 27.3 46.4 42.5 39.1 33.8 46.0 40.6 35.2 30.0 44.4 39.5 34.8 29.6 44.2 41.4 27.9 25.3 44.2 48.8 44.4 44.6 43.8 39.4 30.9 25.6 42.9 33.8 21.7 18.3 42.3 43.4 40.0 41.0 10 0 4 Source: OECD, Education at a Glance 2012, U.S. Census Bureau, 2010 American Community Survey One-Year Public Use Microdata Sample File
70 Differences in College Attainment (Associate & Higher) Between Younger & Older Adults - U.S., 2009 60 Age 25-34 Age 45-54 50 Arkansas West Virginia Mississippi Wyoming Louisiana Idaho Oklahoma Texas Alabama Arizona Alaska Tennessee Kentucky Indiana Florida South Carolina Georgia Maine Michigan South Dakota Delaware Ohio Utah Oregon California North Carolina United States Missouri Montana Wisconsin Washington Colorado Hawaii Kansas Rhode Island Pennsylvania Virginia Nebraska Vermont Connecticut Iowa Illinois New Hampshire New Jersey Maryland New York Minnesota North Dakota Massachusetts DC 40 30 20 Nevada New Mexico slide 5 Source: U.S. Census Bureau, 2009 American Community Survey (ACS)
35 Percentage Gap in College Attainment between Whites and Underserved Minorities 25 to 64 Year Olds 31.9 31.8 30 25 20 15 10 29.2 28.1 27.8 27.1 27.0 26.2 25.1 25.1 24.9 24.9 24.7 24.4 23.6 23.0 22.7 22.7 22.0 21.6 21.5 20.5 20.4 19.6 19.5 18.9 18.9 18.8 18.5 18.5 18.4 17.1 16.2 15.1 15.0 14.6 14.4 14.0 14.0 12.9 12.5 12.4 12.4 12.3 12.1 11.2 11.2 9.0 8.9 5 4.0 3.4 0 California Colorado Connecticut New Mexico Nebraska Utah Massachusetts Rhode Island New York New Jersey Arizona Idaho Illinois Texas Minnesota Washington Kansas Oregon Wisconsin Iowa Alaska United States Virginia Nevada North Carolina South Carolina Maryland North Dakota Delaware South Dakota Pennsylvania Hawaii Wyoming New Hampshire Michigan Georgia Mississippi Montana Louisiana Indiana Alabama Ohio Florida Missouri Oklahoma Arkansas Tennessee Kentucky Maine West Virginia Vermont Sources: U.S. Census Bureau, American Community Survey
Why California Must Change First, Demand exceeds supply And, California s economy and social fabric need the State to meet demand PPI Projections 1 Million more credentialed citizens than being produced today More of the same won t get you there
Why California Must Change Second, changes within higher education and changes in composition of students can t be sustained with current funding approach. Funding built on a growth model isn t sustainable Students are more at-risk & serving them takes resources More of the same won t get you there
Why California Must Change Third, other legitimate demands for government funds are displacing higher education as a priority. Like it, or not, it s a fact And higher education does have an additional revenue source tuition And a reasonable case can be made for s/he who benefits should pay More of the same won t get you there
Why California Must Change Fourth, California isn t wealthy enough for the generosity it once provided to the public good. California is about average in every way Average in per capita income (7% above) Average in tax effort (4% above) Slightly above average in higher education support (7-14% above, depending on measure) But California appetite for public goods was built on an era of greater wealth
Why California Must Change Results: Education of Californians At risk Limiting enrolment reduces access Explicit Caps Implicit limits No classes in which to enroll Too few classes in which to enroll Productivity needs improvement Not so much student success in California
National Student Clearinghouse Information on Student Completion in Six Years Completion Not Enrolled or Completed Cal US Cal US Public 66% 61% 15% 23% Universities Private Colleges 77% 72% 14% 19% & Universities Community 28% 37% 42% 44% Colleges
National Student Clearinghouse Information on Student Completion in Six Years Completion Not Enrolled or Completed Cal US Cal US Public 66% 61% 15% 23% Universities Private Colleges 77% 72% 14% 19% & Universities Community 28% 37% 42% 44% Colleges
National Student Clearinghouse Information on Student Completion in Six Years Completion Not Enrolled or Completed Cal US Cal US Public 66% 61% 15% 23% Universities Private Colleges 77% 72% 14% 19% & Universities Community 28% 37% 42% 44% Colleges
Why California Must Change Results: Education of Californians At risk Enrolment caps reduce access Explicit Caps Implicit limits no classes in which to enroll Too few classes in which to enroll Productivity needs improvement Not so much student success in California More an issue of cost per unit of outcome (grads) Not CSU 2 nd best nationally, 23% above national average Somewhat UC on the national average, but 40% below top ranked state (Colorado) Community Colleges the issue -2 nd to last nationally
How To Change California: A New Path to Affordable Access & Success A New Philosophy From: Officially You come, we will pay & provide Actually -- We meant well; sorry bout that To: A design for shared responsibility Similar to Oregon and Minnesota But tailored to California
How To Change California: A New Path to Affordable Access & Success The Partners in A New Philosophy of Shared Responsibility The State of California The Student The Student s Family (Parents/Spouse) The Federal Government The Institution the student is attending
Partners Share Responsibility for Meeting the Cost of Attendance 5. The institution, via need-based aid, makes up the remaining difference. 4. The state grant award makes up the remaining difference, based on frugal budget. 3. The model accounts for the federal government s contribution (i.e., Pell grants, tuition tax credits). 2. The student s parents/spouse contribute their share. 1. Each student, as the principal beneficiary, is expected to contribute toward his/her own educational costs. Sources include: earnings, savings, borrowing, or scholarships. Institution (via need-based aid) State Government Federal Government Family Institutional Merit scholarship Student Private scholarship Cost of Attendance
Recognizing the Difference in Costs of Attendance Between Sectors Four-Year Sector Two-Year Sector State State Feds Cost of Attendance Feds Family Student The cost of choice linked to reasonable borrowing Earnings Links to reasonable work commitment ( minimum wage) Family Student Cost of Attendance 19
How To Change California: A New Path to Affordable Access & Success State Role With Respect to Institutions Revamp Approach to Appropriations Move from Pretend Enrolment Based Funding Which is actually funding on Immediate Expediency To Outcome Based Performance Funding Start Charging Real Fees/Tuition in the Community Colleges Necessary to provide adequate funding for both quality and access
Revenue Per FTE by Source, FY12 A Proxy for Instructional Costs $25,000 $20,000 $15,000 $10,000 $5,000 $0 California Community Colleges California State University University of California General Fund Net Tuition/Fees Local Property Tax Other Sources: California Legislative Analyst s Office, The 2013-14 Budget: Analysis of the Higher Education Budget, http://www.lao.ca.gov/analysis/2013/highered/higher-education-021213.pdf; NCES IPEDS Fall Enrollment (for UC FTE calculation); California Community College Chancellor s Office Datamart; California State University Fall Enrollment Summary
How To Change California: A New Path to Affordable Access & Success State Role With Respect to Institutions Revamp Approach to Appropriations Move from Pretend Enrolment Based Funding Which is actually funding on Immediate Expediency To Outcome Based Performance Funding Start Charging Real Fees/Tuition in the Community Colleges Necessary to provide adequate funding for both quality and access Key to marginal funding for enrolment growth Would garner increased federal funding to protect students from increased costs. Synchronize Appropriations, Tuition &
How To Change California: A New Path to Affordable Access & Success State Role in Assisting Students: Revamp Cal Grant Piggy Back on Pell Focus on most needy Pay As You Earn Build on Federal Income-based Repayment Program Provide State Financed Consumer Information Program Describing Shared Responsibility Providing Financial Finance Curriculum to Schools Guaranty Access to Loan Capital Subsidize desired activity when realized, not in advance
How To Change California: A New Path to Affordable Access & Success The Missing Partner in Shared Responsibility Up To This Point The Institutions The Proposal for Institutions State sustains current level of support But disbursed differently on desired outcomes (performance funding) Growth in enrollment paid for from marginal tuition revenue Two dilemmas: You need goals to ID desired outcomes, and state lacks goals You need an entity to plan and implement this, and you don t have one