Fiscal and State Policies Impacting Public Higher Education

Daniel J. HurleyDirector, State Relations and Policy Analysis

American Association of State Colleges and UniversitiesWashington, D.C. / March 23, 2012

STATE OUTLOOK

Agenda

• Economic and employment conditions • State budget conditions• Higher education funding• State policy priorities and actions in 2012• AASCU higher education advocacy

initiatives

U.S. Economy:

Stabilizing Trajectory

Sources: Tradingeconomics.com; Bureau of Economic Analysis; U.S. Department of Commerce

U.S. GDP Growth RatePercent Change in Gross Domestic Product / Adjusted for Inflation

U.S. Unemployment: Positive Trajectory

Source: The Economist, Briefing on the American Economy, March 17, 2012

U.S. Unemployment RatePercentage of the Labor Force

Unemployment: Slow Improvement

Jobs Created UE RateFeb: 227,000 8.3%Jan: 284,000 8.3%Dec: 223,000 8.5%Nov: 100,000 8.6%Oct: 80,000 9.0%

State Revenues on the Rebound

• State tax revenue increases 8 consecutive quarters – after 5 consecutive quarters of losses (longest on record)• 4th Quarter of 2011: +2.7% compared to 4Q 2010• +4.4% when excluding CA & IL

• FY 2011: Overall, up 8.4% (strongest since 2005)• Only NH witnessed lower revenues in FY 2011

• Overall revenues still 7.8% lower than in 2008• Continued weak growth expected for balance of FY 2012

• Future implications? – State sales tax collection by online retailers?

Revenue data source: Nelson A. Rockefeller Institute of Government, University at Albany, SUNY, and U.S. Census Bureau

Courtesy of:

Courtesy of:

Courtesy of:

Courtesy of:

• States’ Medicaid costs: up 29% in FY 12 alone• State obligations: Medicaid, pension programs,

unemployment insurance, employee health care, K-12• State/public priorities: K-12, health care, public

safety• Diminishing legislative capacity to affect state

policy agenda through the state budget

State Budget Pressures

• Budget pressures• Spending obligations• Spending restrictions

• Interference by the courts• Anti-spending public

sentiment

Help!

State Higher Education Funding

Fiscal Year 2012 Funding – Grapevine Study

• Largest year-over-year cuts in a half century•Overall reduction of 7.5% • CA’s $1.5 billion reduction=26% of the $5.8 billion

national decline in state higher ed funding• 41 states cut funding; 9 increased funding• Largest cut: New Hampshire (-41%)• Largest increase: North Dakota (+10%)• FY 2012 state higher ed funding: $72.5B

Grapevine Project, Illinois State University, January, 2012

State Higher Education Funding

Fiscal Year 2011 Funding – SHEEO SHEF study

• 25-Year Low: Average state support per student ($6,290) • State/local funding per FTE student fell $242

while net tuition revenue per FTE increased $225•All Time High: Tuition revenues per student

(43.3%) as percentage of educational revenues

SHEEO, State Higher Education Finance, FY 2011, March, 2012

State Higher Education Funding

SHEEO, State Higher Education Finance, FY 2011, March, 2012

Total FTE Appropriations at 1996 Levels

State Higher Education Funding

State appropriations per full-time student• 1980s +6%• 1990s +5%• 2000s -23%• 2010 alone -7%• 2011 alone -4%

Sources: Delta Project, and SHEEO, State Higher Education Finance, FY 2011, March, 2012

State Higher Education FundingState-to-Student Cost Shift in Who Pays for

a Public College Education

1985 2011% Paid by State 75% 57%% Paid by Student 25% 43%

State Higher Education FundingFiscal Year 2012

• Executive budget recommendations: Range from -20% (PA) to +8% (ID)• Strong focus on Performance-Based Funding

PBF In-Place PBF DiscussionsPBF System in Design Stage

AK, IN, LA, MA, OK, PA, TN, UT,

VA

AZ, CT, GA, ID, ME, MA, MI, NM, NY, ND, OR, SC,

TX, WA, WV

IL, MO, KY

2012State Higher Education Policy Issues in the Mix

Overarching theme: Affordability

1) State operating support for higher education2) Productivity3) Governance restructuring and regulatory reform4) College completion5) Performance-based funding6) Tuition policy7) State student grant program funding8) College readiness9) Veterans Education10) Immigration policy

2012 Notable Policy Actions to Date

• Immigration: GA (ban on enrollment) MD (referendum)•Guns on campus: CO-Court strikes down ban

Activity in AZ, NH & OR•Mergers/Proposals: GA, NJ • State Grant Aid Program (cuts, “reform”): CA• State oversight of for-profits: CO•Governance: OR, WA

2012 Gubernatorial Higher Education Priorities

1) Role of higher education in economic and workforce development (CO, DE, FL, GA, ID, IL, IN, KY, ME, MD, MA, MN, MO, MS, NE, NH, NY OH, OK, PA, RI, SC, SD, TN, UT, WA, WV, WY) 2) Partnerships with the private sector

(GA, ID, IL, MD, MO, NE, NH, RI, SD, WV, WY) 3) Recognition of community and technical colleges (GA, ID, IL, KY, ME, MA, MS, OH, PA, SC, WY) 4) College readiness (AK, HI, IA, ME, MI, NH, NM, OK, UT) 5) State operating support/funding (ID, MA, MN, NH, PA, TN, VA, VT, WA)  6) Degree attainment (IL, MN, MO, OK, OR, TN, UT) 7) Early college/dual enrollment (IN, KY, MS, MO, VA, VT) 8) State financial aid (AK, CO, GA, IL, MO, TN) 9) Higher education performance (OH, OR, PA, SC, VA) 10)College affordability (MD, MO, TN, WA)   

Higher Education Advocacy

• AASCU Innovations Exchange• AASCU Perceptions and Policy Priorities

Project• AASCU/APLU Messaging Initiative

• Online resource showcasing successful initiatives across a range of issue areas (programs, policies, practices)– Advocacy, Accountability, State Funding and

Regulatory Reform – among the categories featured• Proprietary (password protected) produced by, and

for, AASCU member institutions• Focus on outcomes, replicability • Concise and uniform presentation• 110+ case illustrations to date

AASCU Innovations Exchange

• Goal: increase our under understanding of decline in state political and funding support for higher education– Explore disconnect between policymakers’ understanding of

the higher ed—economic development connection, against their policy/funding priorities and other perceptions

• Task Force-led project– Chaired by Bill Sederburg, Utah higher ed commissioner

• Outcomes: Published report to include– Framework for responding to the disconnect– Messages, strategies, tools for responding to the disconnect

The Perceptions and Policy Priorities Project:Understanding and Responding to Public

Higher Education Perceptions and Policy PrioritiesAmong State Political Leaders