Issue Paper: The Colorado Higher Education Grant (COHEG).  Presented to the Governor’s Blue Ribbon Panel on June 28, 2002, and further discussed Aug. 1, 2002.

Presentation by James Jacobs and Brian Burnett.

 

Issue: The Colorado Commission on Higher Education and the Governor’s Blue Ribbon Panel on Higher Education, have proposed a policy change to drastically alter the manner in which higher education is funded in Colorado.  Currently, there is what as know as a Reexamination model which funds Full Time Enrollment (FTE) for each student at the institution with a regard to the role and mission of the institution and dollars required to complete that mission.  The calculations involved with this form of funding are tedious and often confusing—some would even say unreadable to the average person.  For instance, given the high cost of certain physical sciences at the major research institutions such as CU and CSU, they receive more dollars per FTE than an institution such as Metro State College.

            Under the COHEG proposal, instead of each school receiving money for students directly from the state, the money would go to the students and then to the schools.  This money would be a flat “voucher” of, for example, $4,300.  Basically, the money would go into an account, and then (seconds later) be transferred to the school.  No longer would the schools receive state money, the first step toward getting out from under the TABOR restrictions by becoming state run enterprises.  TABOR allows for programs that receive less than 10% of their funding from the state to be exempt from certain restrictions and to remove the cash funds they receive (tuition in this case) out from under the overall state pot.  Under this plan direct state funding would be well below 10%.

            Current deliberations would give the grants only to in-state students.  It is unclear at what point the grant would be cut off.  Certainly the state would look to cap the number of hours a student could take and still receive a grant (discussion has centered around 135 credits).  However, it is unclear how someone with a professional certificate or associate’s degree, especially earned in another state, would factor into the equation.

 

Arguments for:

 

Arguments against:

 

Concerns for students:

            At first glance, this appears to be a “free money” for students program.  Many view this as the state writing a check to a student for $4,300 and then the student using the money as he or she sees fit.  This is by no means the case.  Under this system, the state takes the total amount of money spent on higher education, divides it by the number of students and then funnels the money to the schools.  Quite simply, the money currently sent out per FTE would be sent out again but in the form of a flat amount rate per student.  This money would by no means cover the cost of a post-secondary education.   There would still be tuition and fees and books.

In order to implement the program, measures would be put into place to create a short-term equilibrium with current funding levels.  This would require tuition to drop at some institutions and increase at others.  For example, tuition at CSU would increase (because they would receive fewer general fund dollars than they do now) while tuition at Metro would drop dramatically (the $4,300 is quite a bit more than what they receive currently).  This seems reasonable and even beneficial on the surface and in the short term.  However, two things must be taken into account.  First, there is no guarantee that those tuition levels would remain at low rates.  Unless there are agreements (placed in statute) that those tuition increases are held at a modest rate, TABOR no longer limits the amount of money schools can take in from cash funds and gives neither the schools who propose them nor the legislators who enact them a fiscal reason to hold them down.  Second, if tuition could remain at such a low level at a school such as Metro with modified open enrollment, or even a selective enrollment institution, the number of students would be nearly unlimited given the cost.  (One need only look at what has occurred in France with free tuition, there are lines out the doors for certain classes.)  This is certainly counter-productive to access policies, especially if this should lead a school such as Metro have to cap its enrollment.

Access is also the issue in a purely tuition or voucher funded system.  Should enrollment in schools such as Western, Mesa, Adams, and some of the more rural community colleges dip even for a year, the funding to keep the school operating could drop below sustainable levels.  What then occurs is a downward spiral as the school must cut costs, students transfer or shy away from the institution due to lack of services, the funding drops again, and so on until the school is put out of existence.   Once these schools disappear, the opportunity costs for attending a post-secondary institution become that much greater.  Lower income students do not have the means to leave their jobs or families in order to move to a college town to receive needed education. 

Certainly the argument for quality increasing as the schools compete for students is a valid one.  However, the above arguments should be recognized as indicators of a system that lacks the qualities of a true free market system given public policy desires.  Education is something the government takes a stake in because of the future benefits to its citizens.  If the free market removes unprofitable entities, as most certainly will be the case, citizens outside of the Front Range will be denied the geographic access and the funding needed to attend a post-secondary institution.  And quite simply, with fewer institutions, the existing schools could find themselves overcrowded by students that may have taken their tuition elsewhere had the opportunity presented itself.

 

Recommended Position:

            In order to preserve the system of higher education enjoyed by the greatest number of citizens in Colorado for the present and the future, the Colorado Student Association should oppose the proposed system in its current form for a number of reasons.  First, the scheme for transferring dollars from the state to the student to the school is little more than an accounting trick that is certain to face legal challenges from pro-TABOR forces.  Certainly the institutions would no longer receive direct funding, but the General Fund dollars would be utilized in the same manner that they are now.  Secondly, should the legal battles be won, the institutions, freed from the revenue caps of TABOR, would have the ability to raise tuition without fear of triggering a refund to the taxpayers.  Since TABOR’s passage, tuition increases have been kept to a very low average of 1.3% per year.  Without the protection of TABOR, 12% or greater increases could become the norm.  Some have even hoped to limit increases to some factor of inflation, which seems reasonable until the time when inflation could again reach double-digit levels.  Third, this system would give no guarantees that each of the institutions in the state would survive a couple of lean years.  No longer would the state be able to back-fill losses in tuition revenue with general fund dollars. 

            Certainly there is some room for compromise; there is no question that something must be done to gain more state money for better, more, high-quality education in the state.  Equality in funding per student puts much more power in the hands of students and the schools they choose to attend.  However, without a number of guarantees regarding tuition, access and financial aid, a voucher system would be extremely damaging to the students of Colorado. 

 

Derek M. Johnson

Executive Vice-President

 

Higher Ed. Grants

Sub Issue: Credit Cap

  Issue Paper: Under the proposed Colorado Higher Education Grant program, a limitation on the number of credits would be established after which point the state no longer grants the school money for attendance, leaving the student to pay the full price for his or her education. 

 

Issue: Under a system where the state subsidizes the education of its citizens, public policy would dictate that at some point the subsidy would end.  Under the new COHEG Program, the level could be as low as 132 credits, a level that does not allow for much wiggle room.

·        Currently there is no limit on the length of state subsidy for post-secondary education.

·        132 credits allows for a 10% margin of error for a 120-credit degree.

·        150 credits is equivalent to 5, full-time enrollment, years in school.

·        Current federal aid for higher education ends at 180 credits.

·        The lower the credit limit the greater the state grant will be for each student below that level.

·        Any student facing financial hard-ship in the latter years of college will have a larger obstacle to climb should he or she be forced to pay the full cost of education to complete the last few required courses.

 

CSA’s Position: CSA does support a credit limit at some level in order to ensure the availability of funds for all students.  However, a limit as low as 132 credits does not allow for students to choose a major based on experience in a program, instead, they would feel locked into a major regardless of the market need for that major or their continued interest in the subject.  150 credits would allow for the necessary experimentation with courses and changes in the marketplace.  A low limit would also more adversely affect the students that do not have the background and support at home or at school that would grant them the knowledge of the system needed to complete a college program in four or four-and-a-half years. 

 

Sub Issue: Differentiated Vouchers

 

Issue Paper:  It could be argued that the cost of educating juniors and seniors is greater than the cost of freshman and sophomores.  Therefore any higher ed. grant system should have two-tiers, a greater grant for upper division students and a lesser grant for lower.

 

Issue:  Higher education grants could be differentiated to allow for higher grants for juniors and seniors to allow for the higher cost of educating those students.

 

CSA Position:  Differentiated grants are not beneficial to the access and qualities of the goals of Colorado higher education.  Schools that offer initial access but have a high rate of transfer lose out in this funding model, and therefore are unable to provide the guidance for students.  It is important for retention and graduation within the entire system for all students to have the information, guidance, and support in the early years to succeed in the years to come.  This costs money, and that money would not be available should grants for upper division courses be higher than lower division.