National Center for Higher Education Management Systems3035 Center Green Drive, Suite 150Boulder, Colorado 80301

Financing in Sync:Aligning the Pieces of Higher Education Funding

College Affordability SummitChicago, Illinois

February 26, 2010

The Illinois Public Agenda for College & Career Success

• Goals1. Increase educational attainment to match best-

performing states

2. Ensure college affordability for students, families, & taxpayers

3. Increase the number of high-quality postsecondary credentials to meet the demands of the economy and an increasingly global society

4. Better integrate Illinois’ educational, research, and innovation assets to meet economic needs of the state and its regions

2

“2. Priorities, policies, and budgets must align with state goals.”

Among the principles established in conjunction with the public agenda

3

Policy Levers

slide 4

Strategies for Achieving Goal Attainment

Planning and Leadership

Finance RegulationAccountabilit

yGovernance

Goal 1Attainment

Goal 2Affordability

Goal 3IncreaseCredentials

Goal 4Meet EconomicNeeds

Consi

stency

Alignment

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.

5

Two Purposes for State Funding

• Sustaining institutions – capacity creation & maintenance

• Investing in state priorities – capacity utilization

slide 6

The Flow of Funds

7

Federal Government

Public

Institutions

Private

Tax Policy

Appropriations/GrantsStudent Aid

Tuition

Scholarships &Waivers

Student Aid (Restricted)

Income

Available State and Local

Govt. Funds

FederalGovernment

Higher Education

Students

Economy

• K-12• Corrections• Health Care• Other Govt.

DonorsFoundationsCorporations

Stimulus

Funds

The Flow of Funds - State

8

Federal Government

Tax Policy

Appropriations/GrantsStudent Aid

Tuition

Scholarships &Waivers

Available State and Local

Govt. Funds

Higher Education

Students

• K-12• Corrections• Health Care• Other Govt.

Stimulus

Funds

Federal Government

Student Aid

Income

Economy

Public

Institutions

Private

State/Local Funding plus Tuition Revenues per Student (FTE)

Illinois Public Institutions, 1983-2008$5

,813

$6,5

25

$6,6

07

$7,2

20

$7,2

70

$6,8

41

$7,0

21

$7,6

47

$7,2

55

$6,7

20

$6,7

67

$7,0

78

$7,4

27

$7,6

73

$8,2

28

$8,5

10

$8,8

39

$8,9

92

$9,3

06

$9,2

65

$8,1

67

$7,5

58

$7,4

59

$7,0

54

$7,3

29

$7,5

85

$1,4

37

$1,6

39

$1,7

40

$1,7

32

$1,6

51

$1,8

52

$1,9

68

$1,7

78

$1,6

87

$1,7

10

$1,8

49

$1,8

93

$1,9

04

$2,0

14

$2,1

16

$2,1

42

$2,1

69

$2,1

88

$2,2

42

$2,3

40

$2,5

40

$2,6

65

$3,0

00

$2,9

29

$3,0

76

$3,1

94

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

0

50

100

150

200

250

300

350

400

450

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Do

llars

pe

r F

TE

Pu

blic

FT

E E

nro

llme

nt

(Th

ou

sa

nd

s)

Public FTE Enrollment, Educational Appropriations and Total Educational Revenue per FTE, Illinois -- Fiscal 1983-2008

Net Tuition Revenue per FTE (constant $) Educational Appropriations per FTE (constant $) Public FTE Enrollment

Note: Constant 2008 dollars adjusted by SHEEO Higher Education Cost Adjustment. (HECA) Source:SHEEO SHEF

9

State Tax Capacity & EffortIndexed to U.S. Average

Source: State Higher Education Executive Officers (SHEEO)

AL

AK

AZ

AR

CACO

CT

DE

GA HI

IL

IN IAKS

KYLA

ME

MD

MA

MS

MT

NE

NV

NJ

NY

NC

ND

OH

OK

PA

RI

SC

SD

UT

VT

VA

WA

FL

ID

MI

MN

MO

NH

NM

TNTX

WV

WI

WY

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

0.6 0.8 1.0 1.2 1.4

Sta

te T

ax C

apacity

(Tota

l Taxable

Reso

urce

s Per C

apita

)

State Tax Effort (Effective Tax Rate)

US

OR

slide 10

State Tax Capacity and Effort - Illinois Indexed to U.S. Average

Source: State Higher Education Executive Officers (SHEEO)

0.90

1.00

1.10

1.20

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Tax Effort (Effective Tax Rate)

Tax Capacity (Total Taxable Resources Per Capita)

U.S. Average

Revenues Per Student from Net Tuition, State, & Local Appropriations

Public Research

slide 12

$29,172$24,184

$23,263$22,095

$21,640$21,384

$20,010$19,865$19,783$19,721$19,545$19,227$18,989$18,843$18,773$18,657$18,537

$17,610$17,360$17,267$16,974$16,774

$16,275$16,195$16,172$16,155$16,092$16,059$16,057$15,837$15,774$15,714$15,568$15,541$15,406$15,180$15,125$15,093$15,003$14,865$14,777

$14,018$14,006$13,675

$13,121$12,666$12,449$12,324

$11,620$11,243

$9,682

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Alaska

Minnesota

Haw

aiiConnecticutN

ew York

Vermont

North Carolina

Massachusett

sKentuckyW

yoming

Maryland

Nebraska

Alabam

aCaliforniaIow

aD

elaware

New

JerseyTennesseeW

ashingtonSouth CarolinaM

ainePennsylvaniaN

ew M

exicoN

ationIdahoIndianaM

ichiganM

issouriRhode IslandKansasVirginiaG

eorgiaU

tahW

isconsinO

klahoma

Nevada

Ohio

West Virginia

Arizona

Arkansas

IllinoisFloridaN

orth Dakota

New

Ham

pshireTexasLouisianaM

ississippiO

regonSouth D

akotaM

ontanaColorado

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.

Revenues Per Student from Net Tuition, State, & Local Appropriations

Public Masters and Baccalaureate

slide 13

$17,984 $16,148 $14,587$14,440$14,426

$13,683$12,929

$12,324$12,105$12,011$11,862

$11,443$11,443$11,389$11,284$11,266$11,249$11,063$10,836$10,788$10,778$10,721

$10,464$10,405$10,370$10,343$10,312$10,275$10,251$10,179$10,162$10,039

$9,957$9,945$9,933$9,702$9,701$9,630$9,622$9,410$9,185$8,959$8,846$8,748

$8,414$8,400

$7,964$7,877

$7,209$6,311 $5,105

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

Delaw

areH

awaii

ConnecticutN

orth CarolinaA

laskaN

ew Jersey

New

Mexico

Iowa

Maryland

Massachusett

sM

aineVerm

ontVirginiaRhode IslandA

labama

Montana

IllinoisW

ashingtonN

ew York

FloridaM

ichiganSouth CarolinaKentuckyO

hioM

ississippiN

ation IdahoM

issouriD

C KansasPennsylvaniaCaliforniaN

ew H

ampshire

Minnesota

TexasIndianaTennesseeO

regonN

orth Dakota

Arkansas

Nebraska

Wisconsin

Nevada

Oklahom

aLouisianaG

eorgiaW

est VirginiaSouth D

akotaA

rizonaU

tahColorado

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.

Revenues Per Student from Net Tuition, State, & Local Appropriations

Public 2-Year

slide 14

$14,793$11,197

$10,683$10,287

$9,964$9,953 $9,125

$8,844$8,801$8,705$8,625$8,480$8,449$8,411$8,378$8,214$8,067$8,044

$7,772$7,633$7,566$7,509$7,507$7,448$7,432$7,416$7,403$7,329$7,239$7,222$7,117$7,018$6,918$6,895$6,844$6,823$6,714$6,676$6,630$6,510$6,465$6,353

$6,082$6,028$5,970$5,945$5,939

$5,712$5,517

$5,297$3,369

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Wisconsin

Haw

aiiW

yoming

Maryland

Delaw

areConnecticutVerm

ontKansasO

regonN

ew York

New

Ham

pshireIdahoM

assachusetts

New

Mexico

Alaska

Michigan

PennsylvaniaN

orth Dakota

Minnesota

Arizona

Rhode IslandO

hioU

tahN

orth CarolinaTexasN

ationM

ontanaCaliforniaW

ashingtonM

aineN

evadaA

labama

IllinoisN

ebraskaM

issouriLouisianaTennesseeIow

aA

rkansasN

ew Jersey

Oklahom

aSouth CarolinaFloridaG

eorgiaM

ississippiVirginiaSouth D

akotaColoradoIndianaKentuckyW

est Virginia

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.

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 SHEF15

Affordability

16

Percent of Family Income Needed to Pay for College

Minus Financial Aid

Public 2-Year Public 4-Year

Source: Measuring Up 2008

Private 4-YearNot for Profit

17

Illinois Public Institutions – State & Family Share of Funding

1988-2008

Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.

18

Illinois Public Research Institutions State & Family Share of Funding

1988-2008

Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.

19

Illinois Public Masters & Bachelors Institutions State & Family Share of Funding

1988-2008

Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.

20

Illinois Public Associates Institutions State & Family Share of Funding

1988-2008

Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.

21

Affordability: Need-based Financial Aid

slide 22

108% 102%96%

88% 86% 84%84% 82%

74% 70%62% 59% 57%

56%50%49%48%48% 46% 43% 41%

41% 37%36% 33%

32% 29%28%28%28% 24% 21%

20%19% 17%

16% 13% 10% 9% 8% 8% 6% 5% 5% 5% 3% 1% 1% 0% 0%

0%

20%

40%

60%

80%

100%

120%

Washington

New

Jersey Verm

ont N

ew York

Pennsylvania Indiana M

innesota Illinois Connecticut N

orth Carolina W

isconsin M

aryland M

assachusetts

California Virginia D

elaware

Kentucky N

evada O

hio W

est Virginia Colorado O

klahoma

Maine

South Carolina Iow

a Texas M

issouri A

rkansas M

ichigan Rhode Island O

regon Florida N

ew M

exico N

ebraska Kansas Tennessee N

ew H

ampshire

North D

akota M

ontana Louisiana U

tah A

laska A

labama

Haw

aii Idaho A

rizona M

ississippi W

yoming

Georgia

South Dakota

Source: Measuring Up 2008

State need-based aid as a proportion of federal need-based aid.

Finance Policy – The Options

slide 23

• Base-Plus• Formulas• Investment

Funds

Tuition & Aid Policy Focused

on Revenue Generation

Performance Funding

Tuition & Aid Policy Focused on Attainment

of Specified Outcomes

CapacityCreation &

Maintenance

Capacity Utilization/

Public Agenda

InstitutionFocused

StudentFocused

Question – are the incentives created consistent with pursuit of

stated goals?

Remember – all funding mechanisms create incentives for behavior

• Institutions• Students

24

Incentives in the Current Funding Mechanism

• Keep students enrolled – but not necessarily completing

• Increase tuition to compensate for declines in state allocations

25