Financing in Sync: Aligning the Pieces of Higher Education Funding

1. Financing in Sync:Aligning the Pieces of Higher Education Funding College Affordability SummitChicago, Illinois February 26, 2010

2. The Illinois Public Agenda for College & Career Success • Goals • Increase educational attainment to match best-performing states • Ensure college affordability for students, families, & taxpayers • Increase the number of high-quality postsecondary credentials to meet the demands of the economy and an increasingly global society • Better integrate Illinois’ educational, research, and innovation assets to meet economic needs of the state and its regions

3. Among the principles established in conjunction with the public agenda “2. Priorities, policies, and budgets must align with state goals.”

4. Policy Levers Alignment Consistency

5. Of the Policy Levers Available to Legislatures, the Most Powerful is Finance • Finance Policy • Sends the strongest signals • Creates the strongest incentives for institutional behavior In the absence of alignment between goals and finance policy, failure to achieve goals will be assured.

6. Two Purposes for State Funding • Sustaining institutions – capacity creation & maintenance • Investing in state priorities – capacity utilization

7. Federal Government Economy Available State and Local Govt. Funds Higher Education PublicInstitutionsPrivate FederalGovernment The Flow of Funds Tax Policy Stimulus Funds • K-12 • Corrections • Health Care • Other Govt. Income Student Aid Appropriations/Grants Tuition Donors Foundations Corporations Students Scholarships &Waivers Student Aid (Restricted)

8. Federal Government Available State and Local Govt. Funds Higher Education The Flow of Funds - State Economy Stimulus Funds Tax Policy • K-12 • Corrections • Health Care • Other Govt. Income Student Aid Appropriations/Grants PublicInstitutionsPrivate Tuition Students Scholarships &Waivers Student Aid Federal Government

9. State/Local Funding plus Tuition Revenues per Student (FTE)Illinois Public Institutions, 1983-2008

10. State Tax Capacity & EffortIndexed to U.S. Average 1.7 DE 1.6 1.5 1.4 CT NJ 1.3 MA AK 1.2 WY State Tax Capacity (Total Taxable Resources Per Capita) MD NY VA NH 1.1 MN CO IL NV WA CA RI 1.0 US PA NE WI NC GA KS HI MO SD IA OH FL IN VT TX OR 0.9 TN AZ ND ME MI UT SC KY 0.8 ID NM LA AL OK WV MT AR 0.7 MS 0.6 0.6 0.8 1.0 1.2 1.4 State Tax Effort (Effective Tax Rate) Source: State Higher Education Executive Officers (SHEEO)

11. U.S. Average State Tax Capacity and Effort - Illinois Indexed to U.S. Average Source: State Higher Education Executive Officers (SHEEO)

12. Revenues Per Student from Net Tuition, State, & Local AppropriationsPublic Research Sources: NCES, IPEDS 2006-07 Finance Files; f0607_f1a and f0607_f2 Final Release Data Files. NCES, IPEDS 2007-08 Institutional Characteristics File; hd2007 Final Release Data File. NCES, IPEDS 2006-07 Enrollment Files; ef2006a, effy2007, and efia2007 Final Release Data Files.

13. Revenues Per Student from Net Tuition, State, & Local AppropriationsPublic Masters and Baccalaureate Sources: NCES, IPEDS 2006-07 Finance Files; f0607_f1a and f0607_f2 Final Release Data Files. NCES, IPEDS 2007-08 Institutional Characteristics File; hd2007 Final Release Data File. NCES, IPEDS 2006-07 Enrollment Files; ef2006a, effy2007, and efia2007 Final Release Data Files.

14. Revenues Per Student from Net Tuition, State, & Local AppropriationsPublic 2-Year Sources: NCES, IPEDS 2006-07 Finance Files; f0607_f1a and f0607_f2 Final Release Data Files. NCES, IPEDS 2007-08 Institutional Characteristics File; hd2007 Final Release Data File. NCES, IPEDS 2006-07 Enrollment Files; ef2006a, effy2007, and efia2007 Final Release Data Files.

15. Net Tuition as a Percent of Public Higher Education Total Educational Revenue by State, FY 2008 Note: Dollars adjusted by 2008 HECA, Cost of Living Adjustment, and Enrollment Mix Source: SHEEO SHEF

16. Affordability

17. Percent of Family Income Needed to Pay for CollegeMinus Financial Aid Public 2-Year Public 4-Year Private 4-YearNot for Profit Source: Measuring Up 2008

18. Illinois Public Institutions – State & Family Share of Funding1988-2008 Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.

19. Illinois Public Research Institutions State & Family Share of Funding1988-2008 Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.

20. Illinois Public Masters & Bachelors Institutions State & Family Share of Funding1988-2008 Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.

21. Illinois Public Associates Institutions State & Family Share of Funding1988-2008 Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.

22. Affordability: Need-based Financial Aid State need-based aid as a proportion of federal need-based aid. Source: Measuring Up 2008

23. Finance Policy – The Options InstitutionFocused StudentFocused CapacityCreation &Maintenance Capacity Utilization/Public Agenda

24. Remember – all funding mechanisms create incentives for behavior Institutions Students Question – are the incentives created consistent with pursuit of stated goals?

25. Incentives in the Current Funding Mechanism • Keep students enrolled – but not necessarily completing • Increase tuition to compensate for declines in state allocations