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1. Welcome to Austin

2. Recession, Retrenchment, and Recovery: State Higher Education Funding and Student Financial AidRoss A. Hodel, Center for the Study of Education Policy, ISUSheila Pruden, Student Financial Aid Policy Analyst NASSGAP CONFERENCE FALL 2004

3. Higher Education’s Perfect Storm • Ebbing state support • Changes in demographic characteristics • Rising student demand • Increasing college costs

4. Center for the Study of Education Policy at Illinois State University April 2004 32 policymakers, practitioners, and academicians To discuss short- and long-term trends in funding and fundamental changes in public policy To discuss alternatives to simply weathering the storm Symposium on Financing Higher Education

7. The national numbers State Tax Appropriations per FTE in Constant 2003 Dollars,Fiscal 1970 - 2003 Constant dollars adjusted by CPI Sources: Grapevine and NCES Digest of Education Statistics

8. State tax revenues for higher education may stay down Projected Annual Surplus (Deficit) in Selected States for 2010 Minnesota: (1.9) Ohio: (1.4) United States: (3.4) Kentucky: (3.4) Tennessee: (9.7) Wisconsin: 0.0 Vermont: 3.1 Florida: (5.7) Illinois: (4.2) 0.0 North Dakota: 2.2 Michigan: (1.7) Indiana: (5.2) California: (2.5) Iowa: (3.7) Source: Donald Boyd, Rockefeller Institute of Government, “Update to State Spending for Higher Education in the Next Decade,” July 1999, sponsored by National Center for Higher Education Management Systems (NCHEMS)

9. Why? Reason # 1: Tax base mismatch Source: NASBO

10. Why? Reason #2: Aging Population Source: U.S. Census Bureau

11. Why? Reasons # 3, 4, 5, 6, & 7 • Tax cuts popular, tax increases not • K-12 has political base, momentum, and constitutional protections • Health care costs and aging population are growing • Tuition is available • Higher education can “take care of itself”

12. Share of Growth in Traditional College-Aged Students, 2000-2015 Non-HispanicWhite18% Hispanic49% Non-Hispanic Black16% Native American1% Asian/Pacific Islander 16% Source: Demography and the Future of Higher Education Policy, Richard Fry, April 2001

13. The national numbers Public Four-Year Tuition and Fees in Current dollars and Constant Dollars, 1981-2003 Constant dollars adjusted by CPI Source: College Board, Trends in College Pricing 2003

14. Higher Education vs. The State Higher Education Responds: The money is going for: • (Barely) competitive faculty salaries • Student aid and student services • Health care costs and retirement • Keeping pace with technological change • Keeping programs current • Teaching loads to attract strong faculty • O&M of aging facilities

15. Higher Education vs. The State The State Responds – What about: • Incoherent curricula – courses on obscure topics • Lots of mediocre research • Wasteful competition for empty prestige • Wasteful uses of faculty time • Frills (athletics, amenities) for pampered students (Your children and mine!) • Unjustified reductions in teaching loads • No motivation to reduce costs in seller’s market

16. Responses in Current Environment • Replacing state funds with tuition • Exploring privatization of public colleges • Exploring charter universities • Increasing merit-based student aid • Decreasing emphasis on choice • Increasing emphasis on enrollment management

17. Critical Concern # 1 The increasing share of college costs borne by students and families reflects a fundamental shift away from the principle that increasing the population’s educational attainment is a public good as well as a benefit to the individual. “Interest in higher education is high and we are seeing record enrollments. However, it seems that the public thinks of higher education as a personal benefit, not as a public good.”

18. Critical Concern # 2 Access and affordability has been threatened. High academic achievers among low-income students are discouraged from enrolling in college. They are no more likely to attend college than the lowest performing wealthy students.

19. Percentage of 1992 High School Graduates Attending College in 1994 Source: Access Denied, Department of Education, February 2001

20. Critical Concern # 3 The national trend in student financial aid programs has been toward merit-based programs.

21. Civil Rights Project Report, August 2002 • Georgia: Over 90% of expenditures on HOPE went to students who would have attended college anyway • Florida and Michigan: Grants awarded disproportionately to racial majority students and students in wealthier communities • New Mexico: No impact on access; did shift some students from 2 to 4-year institutions. 80% of recipients were from families with income > $40,000 per year above state median of $38,000

22. Critical Concern #4 Institutional effectiveness is reduced when cuts are incremental and unpredictable. “There is always hope that we can weather the storm. Small amounts are reallocated and cuts are made in drips and dribbles. Decisions would have been very different if we had known that we would eventually cut $19 million.”

23. Research Questions • What has been the effect of recessions on states’ higher education funding and to what extent have states been able to recover after each recession? • What impact has the current recession had on states’ higher education and student financial aid policies and priorities? • What strategies can state higher education systems pursue now to prepare for the next recession in order to maintain financial access for their students?

24. Research Partners • National Association of State Student Grant and Aid Programs (NASSGAP) • State Higher Education Executive Officers (SHEEO) • The Center for the Study of Education Policy at Illinois State University

25. PROJECT GOAL To identify and disseminate successful state-level strategies and policy tools to protect students’ access to postsecondary education

26. Project Objectives • To analyze and describe the effects of recessions on states’ funding for higher education and student aid and the extent funding recovered after each recession • To identify states with similar characteristics and collect information about their efforts to maintain and expand financial access across economic cycles • To compare and describe the policy tools and strategies that states have used to protect financial access and the extent to which these tools were successful

27. PROJECT SCHEDULE • Fall 2004 Seek funding • Winter 2004-05 Policy and Funding Trend Analysis • Summer 2005 State Survey • Fall 2005 Selected State Interviews • Winter 2005-06 Final Report

28. Slide Credits • Paul Lingenfelter, Executive Director, SHEEO • Don Heller, Associate Professor, Center for the Study of Higher Education, The Pennsylvania State University • Jim Palmer, Grapevine Editor, Illinois State University • Steve Bragg, Vice President, Finance and Planning, Illinois State University • Kathleen Kelly, Higher Education Policy Consultant

29. Research Questions • Recession: What has been the effect of recessions on states’ higher education funding and to what extent have states been able to recover after each recession? • Retrenchment: What impact has the current recession had on states’ higher education and student financial aid policies and priorities? • Recovery: What strategies can state higher education systems pursue now to prepare for the next recession in order to maintain financial access for their students?