Facing The Future: State Funding Of Community Colleges
Facing the Future:State Funding of Community Collegesby George Lorenzowith editorial support fromJohn E. Roueche, George Boggs, and Margaretta B. Mathispublished byNational American University’s Roueche Graduate CenterMarch 2018
Facing the Future: State Funding of Community CollegesTable of ContentsForeword. 1Complex Picture of Governance and Finance. 2The Basics of State Budgets. 3SHEEO’s State of State Funding. 3How to Possibly Stabilize Funding. 6Year-to-Year Stability of Funding. 6Balance Appropriations for Institutions and Student Aid. 6Tuition-Free Community College. 7Allocation of Funds across Public Institutions. 8Looming Federal Cuts. 8Over a Decade of Woes. 8Strategic Movements. 9Outcomes-Based Funding. 10OBF FAQS. 10The OBF Conundrum. 11Growing Criticism and Concern. 14Change is Necessary. 14The Slow Growth of Charitable Foundations at Community Colleges. 15Rise of Community College Entrepreneurship as State Funds Decrease. 16Less Reliance on State Funding Brings Transformation. 16GTCC’s Story. 17In Conclusion. 18End Notes. 21
Facing the Future: State Funding of Community CollegesWFOREWORDith the aging baby boomer population comes the well-documented enrollmentdecline in many of our two- and four-year institutions of higher education. Therapid decrease in this major revenue source is compounded by the dramatic impact of state “disinvestments” (i.e., funding cuts) of community and technical college budgets across the United States.Nimble institutions recognize the importance of being adept at life-saving entrepreneurialand partnering opportunities to offset these exigencies. In Rising to the Challenge: LessonsLearned from Guilford Technical Community College, Roueche and Roueche (Eds., 2012)conclude we are “. . . living in the future we create” (p. 107). However, such creativity isonly possible when college leaders successfully foster innovative solutions. “ Practicesthrive in a culture that consistently raises the bar for high performance and achievementstandards” (p. 109). Leaders are apt to put their own careers at risk to position their respective institutions to sustain the current political and funding dynamics. “Creative leaders take risks that others may not” (Roueche, Richardson, Neal, & Roueche, 2008, p. 246).We commend George Lorenzo for his in-depth research and analysis, and his ambitiousand successful quest to identify common challenges and viable solutions. Recognizing that“one size does not fit all,” Lorenzo explores the variations in financing patterns and trends,while examining local innovations to share with the field.Serving as both a community college budget primer, and an advanced compilation of funding policies and supports, Lorenzo takes the reader through a compendium of the fiscal constraints, promising but conflicting practices, preventive measures, and creative strategiesto offset the slippery slope of state funding models. As community college leaders considermission, vision, values, and goals, Lorenzo’s Facing the Future: State Funding ofCommunity Colleges offers a “must read” for CEOs, boards, and executive teams to helpnavigate the pot-holed terrain. Never could collaborating, partnering, and innovating bemore critical. Entrepreneurial enterprise will rise to a new standard in positioning community colleges for the ride ahead.John E. Roueche, Ph.D., PresidentRoueche Graduate CenterMargaretta B. Mathis, Ph.D., Senior Vice PresidentRoueche Graduate Center1
WFacing the Future: State Funding of Community Collegese hear a lot about community collegesfrustrated by state funding cuts thatcause lasting and detrimental effectson their progress and sustainability, but gettinga clear and full understanding about state funding on a national level is a difficult undertaking.It is challenging to produce a complete,easy-to-understand, condensed synthesis thatoutlines all the details relative to state funding ofcommunity colleges on a national level. There aresimply too many variations among all 50 statesregarding how constantly fluctuating state fundsare managed, allocated, and dispersed.The NCHEMS brief delineates a variety ofcommunity college governance models at bothstate and local levels. It outlines how “state-level structures vary as widely as the origins andgoverning arrangements for community colleges.” 1 Nevada, for instance, is a state amongseveral other similar states that has developedconsolidated governing boards for four-year andtwo-year institutions. Other community collegeshave more limited state oversight committeesand boards, developed under their own uniquesystems, such as colleges that evolved throughlocal issues, and colleges that have evolved frombranch campuses linked to state universities.Other states have seen the proliferation of two ormore of such governance structures, “resulting inhighly fragmented networks.” At the local level,forms of governance in some states have locallyelected boards, while others have boards that areappointed. Still other states do not have any localgoverning boards.Because of such vast differences among community colleges, the notion of providing one-size-fitsall solutions that community college leaders canshadow for effectively dealing with state fundingdisinvestment is next to impossible. However,there are a good number of single institution andcollaborative practices across the communitycollege landscape that may help bring some relieffrom state disinvestment.This report attempts to describe, in layman’sterms without being overly reductionist, whatmost community colleges across the country arefacing in terms of state funding practices fraughtwith a wide variety of complex, economic hurtlesthat need to be overcome. In addition, this reportprovides an overview of the scholarly literatureon this topic.Complex Pictureof Governance and FinanceFor a succinct picture of how state fundingpractices are governed at public two-yearinstitutions across the country, and aninformative starting point into this topic, see“Community College Systems Across the 50States,” published on January 28, 2014 by theNational Center for Higher Education Management Systems (NCHEMS) for the Nevada Legislative Committee to Conduct an Interim StudyConcerning Community Colleges.2In addition, there are wide variations in financing patterns and other trending influences incommunity college governance, depending onthe state. Another section of the NCHEMS briefaddresses “mission distinction between community colleges and universities,” noting that differing missions is a perennial issue with tensionsextending through numerous community collegechallenges, including open access, affordability,faculty reward systems, links with K-12, adulteducation practices, transfer, career readiness,dual credit policies, assessment policies, andmore.2
Facing the Future: State Funding of Community CollegesThe Basics of State BudgetsIn 2013, the Center of Budget and Policy Priorities (CBPP) published a two-page “PolicyBasics” report titled “The ABCs of StateBudgets.” This document is another good startingpoint for getting an understanding of how statefunding works at community colleges. It beginswith a brief overview of state budget calendars,which are typically based on fiscal years, fromJuly through June of the following year, exceptfor several states such as New York (FY startsApril 1); Texas (starts September 1); and Alabama, the District of Columbia, and Michigan(start October 1). State budgets are funded primarily through both general sales taxes and corporate and individual income taxes. Some states,however, have no personal state income taxes,such as Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Other states do not have anysales taxes, such as Alaska, Delaware, Montana,New Hampshire, and Oregon. In addition to revenues allocated for educational purposes, fromK through 20, state funds go toward many otherimportant issues, such as health care and benefits, transportation, corrections, pensions, assistance to low-income families and the disabled,economic development, environmental protection,law enforcement, parks and recreation, and aidto local governments.3The Great Recession of 2007-08 “was theworst downturn for states in 70 years,”bringing damage to state budgets thatmany states are still feeling ten yearslater.-The rise of untaxed ecommerce has hadan overall negative effect on state salestaxes.The federal government, which, on average, provides one-quarter of all statefunds, enacted deep spending cuts in2011, resulting in the lowest levels of federal funding to schools in 40 years.-Some states have pushed for even largercuts “that would further undermine staterevenues, with potentially dramatic consequences for public services.”4Another Policy Brief by CBPP, published in 2017,shows, on a national-average level, where statefunds are allocated overall, citing the NationalAssociation of State Budget Officers State Expenditure Report for FY 2015. Higher education(covering two-year, four-year, and vocationaleducation institutions) is 13 percent of the totalof state spending budgets, accounting for about 156 billion in FY 2015.5For the latest segmented national data on twoyear institutions relative to total postsecondaryrevenues by source, see “The Condition of Education 2015,” published by the U.S. Departmentof Education, National Center for EducationStatistics.6 Government grants, contracts, andappropriations (total federal, state, and local allocations, including Pell grants) in 2012-13, totaled71 percent of total revenue sources at two-year,public institutions.7SHEEO’s State of State FundingFUnder a section headlined “States Face Historic Challenges,” the CBPP Policy Brief lists “anumber of disturbing problems that make theirrevenue systems weak and vulnerable.” Theseinclude:--or a deeper analysis of what’s happeningfrom a numbers/economics standpoint inall 50 states, see the most recent annual State Higher Education Executive Officers(SHEEO) association’s report on higher education enrollment and funding data for 2016, whichdetails “state and local support, tuition revenue,and enrollment trends for the most recently completed fiscal year.”One of the first attention-grabbing statisticsinside this report shows how 17 states reducedfunding support per student last year while3
Facing the Future: State Funding of Community Colleges33 states either increased or maintained theirsupport. However, a closer look at total state andlocal appropriations on a national scale revealsan overall 1.8 percent reduction in state andlocal funds for public colleges and universities in2016. How can that be the case when considering that almost twice as many states increasedor maintained their support compared to thosestates that did the opposite? The simple answer:Illinois.State and local support per student averaged 6,954, down from the 2015 level of 7,082. This decrease was due entirely tothe precipitous drop in support in Illinois,which has the fourth largest student enrollment in the country. Without Illinois,public support would have increased by3.2 percent, which is still smaller than theoverall increase of 5.2 percent per studentseen between 2014 and 2015.8state budgets. Just five states offeredmore public support per student in 2016than in 2008. Institutions are still collecting more dollars per full-time enrollmentthanks to higher tuition revenue, however. In 2008, educational appropriationsper full-time-equivalent student averaged 8,380, while net tuition was 4,644. In2016, educational appropriations per student were 6,954 and tuition was 6,305.9There are significantly complex, multi-facetedquestions and answers to explore when lookingdeep into the details of state funding for community colleges. The more complex questionsand answers take on parameters that frequently paint an unfavorable and worrisome pictureconcerning the future economic sustainabilityof our nation’s two-year institutions, despite theaforenoted increases in actual dollar amounts in33 states.Secondly, enrollments with accompanying tuitiondollars are an obvious major source of revenue(more than 50 percent of total educational revenue in half of all states, according to SHEEO),but enrollments have been declining in recentyears at community colleges. Data from theNational Student Clearinghouse Research Center’s Spring report on Spring 2017 enrollmentestimates reveal a 4.8 percent drop in community college enrollments in Spring 2015, a 3.3percent drop in Spring 2016, and an estimated2.5 percent drop in Spring 2017.10 This is on theheels of a dramatic increase in community college enrollments (some of which was due to therecession) that occurred from 2000 to 2010, when“FTE enrollments at community colleges grew byover one-quarter (from 5.7 million to 7.2 millionenrollees each fall semester [U.S. Department ofEducation, 2013].”11As noted earlier, the Great Recession that started in 2007 generated unprecedented state funding disinvestments. But ten years later, as wepull out of recessionary woes, we still have notyet reached pre-recession levels of state supportat community colleges.An April 2017 article published by Inside HigherEducation reports that:Public support has generally yet to recover from a high point in 2008, the yearbefore the Great Recession devastated4
Facing the Future: State Funding of Community CollegesSHEEO’s reporting focuses primarily on nationaltrends of all public colleges and universities, witha partial emphasis on two-year institutional dataand analysis. Parsing out some of the SHEEOreport’s accounting relative to two-year institutions on a national level, includes the followingmixed bag of data:-Associate degree programs saw one ofthe largest increases in completion ratesamong all higher education institutionsfrom 2005 to 2015.-Since 2011, two-year institutions haveseen a 15 percent drop in FTE (but thisfigure does not account for seven statesthat make up 10.5 percent of nationaltotals).-From 2009 to 2012, two-year institutionssaw an 8 percent increase in state supportper FTE, while four-year institutions sawa 2 percent decrease in state support (notincluding RAM/Research – Agricultural Medical) per FTE.-The total revenue available to two-yearinstitutions (net tuition plus state andlocal support) decreased 7 percent duringthe Great Recession from 2009 to 2012,but increased 13 percent overall from2009 to 2016.-Two-year institutions experienced morevolatility than four-year institutions instate support from 2009 to 2016.12For example:Per capita support for higher educationaverages 283 nationally and ranges from 93 in New Hampshire to 705 in Wyoming. When measured relative to personal income, support for higher educationper 1,000 of personal income varies from 1.66 in New Hampshire to 13.21 inNew Mexico. Nationally, state and localsupport for higher education per 1,000 ofpersonal income was 5.90 in 2015.13In poor states, per capita support is lower thannational averages, but may exceed the nationalaverage per 1,000 of personal income. Additionally, some low-population states exceed bothnational average and per 1,000 personal income. SHEEO also notes that “tuition revenuefrequently (but not universally) has increasedwhen state and local sources of support have notkept pace with enrollment growth and inflation.”Other factors also come into play, especiallywhen explaining stresses that state budgets face,in general, such as the pressures experiencedby some colleges due to higher enrollment rates,increased demands from K-12, and rising Medicaid costs. Even online shopping [as noted earlier] has had an important negative effect on statetax revenues that normally are allocated towardhigher education.14This is the tip of the iceberg, so to speak, on thetopic of state funding at community colleges.Additional resources on this topic that can helpunpack all the nuances related to state fundingat community colleges are widely published inwell-researched reports from numerous non-profit higher education organizations and educationpublishers. Many are referred to in the remainder of this report.The SHEEO report also features an interestingcomparative compilation that reflects interstate“differences in wealth, population characteristicsand density, enrollment rates, the relative sizeof the public and independent higher educationsectors, student mobility, and numerous otherfactors.”5
Facing the Future: State Funding of Community CollegesHow to Possibly Stabilize FundingAbrief published by the Midwestern Higher Education Compact, (MHEC) writtenby Sandy Baum, senior fellow for theUrban Institute, offers four effective policy directions that are designed to strengthen highereducation financing systems at the state level.The MHEC brief notes how “most states havebeen unsuccessful in designing higher education financing models that yield stable fundingstreams.” The four policy directions are presented as areas state policy makers can learn from.They are “year-to-year stability of funding, thebalance between appropriations for institutionsand student aid, the growing interest in tuition-free community colleges, and the allocationof funds across public colleges and universities,”outlined below.15high tuition vs. low aid and low-tuition. Thistrade-off is different across the country, withmost state appropriations based on need-basedfinancial circumstances and other states focusedon academic/merit-based aid. For example, inNew Jersey, 98 percent of state grant aid is needbased, while in South Carolina it is only 17 percent, yet both states have relatively high tuitionand high aid. In New Hampshire, where thereare no state grants, the result is high tuition andlow aid, which is noted as “the combination leastconducive to i
“one size does not fit all,” Lorenzo explores the variations in financing patterns and trends, while examining local innovations to share with the field. Serving as both a community college budget primer, and an advanced compilation of fund-ing policies and supports, Lorenzo takes the reader through a compendium of the fiscal con-
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