The State of Arkansas Financial Aid

1. The State of Arkansas Financial Aid

2. At the end of WWII, the U.S made a bold decision to invest in the future of its economy by providing $1.9 billion annually to the education of returning veterans of the war. This commitment to human capital helped enable the WWII generation to become the “greatest generation.” Possibly, Arkansas’s greatest generation is at the schoolhouse door waiting for the opportunity to propel Arkansas into the global economy.

3. Three things • 30% to 15% proposal • Scholarship fund balance • Lottery questions

4. Preparation: Revisions to policies and legislation that impedes“Speed to Market and Close to Customer” 1 2 3 4 5 • Finance • 90/10: 90% course enrollment/ 10% complete term • Legislation to reduce institutional E&G scholarships • Annual Report of Institutional Financial Health • Revised calculation for bonds • Academic • Program Viability threshold • Academic Program review

5. Business Leaders • Strengths • Access • Access • Access • Many colleges • Geographic location of colleges • The two-year colleges are able to make changes quicker to accommodate business and industry. • Increased efforts to collaborate across institutions, focus on teaching, recent priority on retention • Providing “local” access to higher education opportunities

6. Business Leaders • Weaknesses • Cost of attendance • Turf battles, everyone not always on the same page about what is best for the state. • Unhealthy in-state competition • Need for improved coordination duplication of curriculum • Lack of accountability • Higher education seems to have no accountability or ability to control costs. Annual tuition increases of 7 – 10% seem to be the norm while inflation is 3% or less.   • Graduation rates/retention – there is no incentive for higher education to graduate students.  Their funding incentive is only to enroll them • Not customer focused to business/manufacturing needs - seem more concerned about turf.

7. No state with a low proportion of Bachelor’s degrees has a high per capita income. No state with a high proportion of Bachelor’s degrees has a low per capita income. State Per Capita Personal Income v. Share of Adult Population with Bachelor's Degree or Higher (2007) 2002= 19.7% DC CT NJ MD MA VA 2007= 19.3% NY NH DE RI MN CA AK IL CO WA VT NV WI FL WY MI PA HI ME GA IA OR KS MO AZ IN OH NC NE ND TN TX MT AL SD SC UT KY NM OK AR LA ID WV MS 2007 2006 2005 2002

8. Growth in Associate Degrees Awarded by Public Institutions by State from 1999-2000 to 2004-2005 Arkansas ranks 7th in the growth of associate degrees since 1999-2000 SOURCE: U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS), "Completions" survey.

9. Growth in Bachelor’s Degrees Awarded by Public Institutions by State from 1999-2000 to 2004-2005 Arkansas ranks 11th in the growth of bachelor’s degrees since 1999-2000 SOURCE: U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS), "Completions" survey.

11. Legislation to reduce Institutional E&G Scholarships • From 30% of Tuition revenue to 15% • Not a new idea: October, 1999 Dr. Steven Gamble, president of SAU and Dr. Win Thompson, president of UCA, addressed the AHECB concerning resolution of the issue of the excessive amount of money being expended by four-year institutions for scholarships in the competition for students. Gamble and Thompson told the board that the four-year presidents and chancellors could not resolve the issue and requested that the board intervene to establish a policy to limit the percentage of E&G funds that four-year institutions may use for scholarships.

12. Legislation to reduce Institutional E&G Scholarships The academic arms race… “In an arms race, there is a lot of action, a lot of spending, a lot of worry, but if it’s a successful arms race, nothing much changes. The essence of an arms race is position—how a country or university stands relative to others.No single institution alone can safely quit the race, even though all institutions, together, would be better off if everyone did.Unilateral disarmament will swiftly be punished by loss of position and increased vulnerability.” (Winston, 2003)

13. Institutional E@G Funded Scholarships are great for students receiving a scholarship, but expensive for those who do not receive the scholarship

14. Sources of E&G Revenue • State Funding formula determines institutional need • Need includes: • Faculty salaries, operating supplies, Library, equipment • Utilities, on-going maintenance • Student support, staffing • Does not include scholarships • Does not include debt service • Legislature allocates funds according to formula with assumption funds will go to address institutional needs determined by the formula • Quality instruction and quality student experiences diminish if institutions use these funds for unintended purposes. • Prior to1997 -- 15% cap in board policy • No cap from 1997-2005 • < 30% in 2005 by legislation, No repercussions • Tuition/Fees and State Funds

15. FY 2007

16. Institutional E@G Funded Scholarships are great for students receiving a scholarship, but expensive for those who do not receive the scholarship

17. Expendable Fund Balances should not be interpreted as an indication of an institution’s cash funds or that an institution has difficulty in meeting payroll or accounts payable. UAF Fund Balance is Consolidated UA Fund Balance ASUJ Fund Balance is Consolidated Fund Balance In this Chart Only

18. Revised calculation for bonds

19. Revised calculation for bonds

20. Academic and Performance Scholarship Expenditures for Fiscal 2007-08

21. Recommend that the legislature reduce E&G scholarship threshold to 15% • (b) Beginning with the 2013-2014 fiscal year, no public college or university’s educational and general spending for academic and performance scholarships shall exceed fifteen percent (15%) of its unrestricted educational and general tuition and mandatory fee income. • (c) Any expenditure for academic and performance scholarships over fifteen percent 15% of unrestricted educational and general tuition and mandatory fee income will be deducted from the state funding recommendations as determined by the appropriate funding formula model for each fiscal year in the following biennium. Repercussion:

23. Plenty What can we do to improve our performance? • Performance Measures: • Accountability, Oversight, Repercussions • Incentives connected to student success • Remove impediments to student success • Target particular workforce needs • Greater State Support • Imbalance in Tuition/State Funding ratio • Low tuition • Enhance Scholarships

24. Plenty What can we do to improve our performance? • Performance Measures: • Accountability, Oversight, Repercussions • Incentives connected to student success • Remove impediments to student success • Target particular workforce needs • Greater State Support • Imbalance in Tuition/State Funding ratio • Low tuition • Enhance Scholarships Historically there has been no enthusiasm for any of these measures

25. IF you could develop a scholarship system for a state, what would it look like? The scholarship should: • Motivate/reward students to be prepared for college. – Smart core? More prepared? Less? • Allow students to choose where to attend college. • Encourage students to complete their degree. • Encourage students to major in disciplines important to Arkansas. • Address student merit. • Address student need. • Easy to understand rules and regulations. • Financially stable. 21 Scholarship Programs: difficult to qualify, difficult to keep.

26. FY08 Scholarship Fund Balance? $ 51,854,906 How in blazing saddles could that happen? • ADHE authorized by the legislature to spend up to X amount for each scholarship • Each scholarship has strict criteria • Unawarded funds are deferred for future years in fund balance as required by law • Every student who applied and met the current scholarship criteria was awarded the funds What in tarnation are you going to do to fix it?

27. Exacerbating Factors/Excuses $ 51,854,906 • Advertising funds are not authorized for all programs (Only for GO and Academic Challenge) • Very precise qualifications for many scholarships • Paperwork, paperwork • Inability to adjust as needed

28. How did we get such a large fund balance? Scholarships (21 programs) 51,854,906 Academic Challenge Governor’s Go Grant Teachers (4) WIG Other Other Adults - w/ Need 5 M Targeted Need 6 M Merit 8 M Of Those that lose AC: 20% Lose Academics 27% Lose Hours 53% Both 26 M Need- Merit

29. How did we get such a large fund balance? Scholarships (21 programs) 51,854,906 2002 - 2003 2004 2005 2006 2007 2008 5 M 8 M 10 M 15 M 13 M -1 M

30. Does ADHE want to spend these funds on scholarships? YES And we will. Based upon future projections the fund balance will be needed to cover current scholarships. Should we be careful in doing this? YES Absolutely. We need to be careful. We do not want to have an inability to pay our scholarship obligations such as happened in 2002-2003. The next three charts illustrate our concerns.

31. Higher Income limits Higher award No Awards Lower income limits Higher award

32. Financial Aid Growth Projections Expense 16 M General Revenue Fund Balance Expanding current scholarships will impact the fund balance even more than the above scenario illustrates. 2016

33. c

34. Student Aid Performance: Then, Now and Going Forward Academic Challenge 8,306 23.4 M 7,547 7,196 19.5 18.9 M 2008 2003 2013 2003 2008 2013 Students Dollars

35. Student Aid Performance: Then, Now and Going Forward Governor’s Scholars 1,350 1,118 10.7 M 9.3 M 7.0 M 705 2008 2003 2013 2003 2008 2013 Students Dollars

36. Student Aid Performance: Then, Now and Going Forward WIG 3,600 3.9 M 3.9 M 3,695 3,422 3.7 M 2008 2006 2013 2006 2008 2013 Students Dollars

37. Student Aid Performance: Then, Now and Going Forward Go Grant 5,000 5.0 M 1,170 1.1 M 2008 2003 2013 2003 2008 2013 Students Dollars

38. Student Aid Performance: Then, Now and Going Forward Teacher Programs 1,250 Minority Teachers Minority Masters STAR TOP SREB Doctoral Scholars Arkansas Geographical Critical Shortage Minority Teacher Scholarship Faculty Admin Fellows 7.9 M 999 6.6 M 535 0.9 M 2008 2003 2013 2003 2008 2013 Students Dollars * STAR added 2004

39. Proposed Scholarship Changes Use 800k of fund balance to do this • Streamline Programs - Common application for all programs • Simplify process for applicants • Improve efficiency • GO! Opportunities Grant – expand • Expand eligibility to all students enrolled in college that meet the income guidelines ($25,000 or less) • Consolidate Teacher Programs – (STAR, Minority Teachers Scholars & Minority Masters) • Simplify process for applicants • Convert from a loan forgiveness program to a loan repayment program that will assist teachers in paying outstanding federal students loans • Increase award or income requirement for academic Challenge Current allocation for this program should cover this Current allocation for this program should cover this May draw from current fund balance in future years

40. College Access Challenge Grant Week of February 16-22 ADHE has a grant from US DOE and Winthrop Rockefeller Foundation to promote college going and scholarships

41. Lottery Scholarship Questions Many groups have suggested different lottery ideas. ADHE feels we should budget 40-50 million as projected revenue for lottery and should use the funds to expand current aid programs. Here are the questions that groups have been wrestling with: • How many $$$ will the lottery create for scholarships? $30-50-100-120 million? • Smart core or not smart core? • Will there be a preparation component? • Expand current programs? • Add a separate lottery scholarship? • Merge most programs into one big program? • Do you want to target funds for particular workforce needs? How much? • Need? Merit? Both? Income cap? • How many $$$ should reside in the fund balance? • Is the legislature willing to address shortages, if scholarships out spend the lottery/fund balance?

42. Time and Place Nearly all economic growth and prosperity for individuals, families, cities, states, and the country is now driven by college educated workers. Those individuals, families, cities, states and –increasingly—countries with the most education are prospering, while those with the least higher education are experiencing relative and often absolute economic decline. --Postsecondary Education OPPORTUNITY, June 2005.