The University of Colorado is leading the charge to restructure higher education funding

In 2000, an entering in-state freshman at a public university in Colorado could expect to pay tuition and fees totaling approximately $2,300 for the academic year. The price has steadily increased at the University of Colorado over the last four years, reaching about $3,000 this past fall.

But everything is going to change starting in the fall of 2005. Earlier this year, lawmakers passed a voucher plan, which will provide funds directly to students instead of colleges to pay for tuition. The College Opportunity Fund will give recent high school graduates vouchers for $2,400 that can be put toward tuition at any public junior college, state college, or four-year university in the state.

Sounds like a great deal.

However, students won’t really know if they’ll come out ahead until the spring or summer of 2005 when new tuition and fee rates are announced. Some Colorado school officials have already speculated that tuition could increase as much as 10 percent in anticipation of less state funding. Until now, the state subsidized its public colleges and universities directly through block grants.

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“I’m concerned some of the students believe it is a $2,400 reduction in their bill,” Pam Shockley-Zalabak, chancellor of the University of Colorado in Colorado Springs, told The Christian Science Monitor in May. “It doesn’t make college less expensive; it is just a different funding mechanism.”

According to Governor Bill Owens (R), the new system is better because it puts money directly into the hands of students, forcing colleges and universities to compete for the funds. He says the change will yield two results: more Coloradoans taking advantage of the state’s investment in their education, and schools becoming more responsive to the students they serve.

Colorado’s decision to fundamentally change the way state higher education is funded is one that more states may consider, predicts Marcia Howard, editor of the newsletter State Policy Reports. “Most people who look at state governments think higher education [funding] is in need of reform, and [that] it’s most reasonable to change,” she says.

The Tuition Outlook
Colorado’s voucher system represents an effort to reconfigure the financial relationship between states, their higher education systems, students, and taxpayer dollars. It comes as state cuts to higher education budgets have resulted in steep tuition increases and concerns that low- and middle- income students are being priced out of their own state schools.

In 2004, nationwide state spending on higher education accounted for about 11.5 percent of total state expenditures, according to the National Association of State Budget Officers. In 1987, the level was 15.5 percent.

This year’s tuition report by the non-profit College Board found that 36 percent of college revenue came from state funding in 2000, down from 50 percent in 1980.

To make up for reduced levels of state budget support, many public colleges and universities around the nation have made dramatic increases in tuition. USA Today reported in September 2004 that two-year increases in in-state tuition at selected flagship public universities ranged from 57 percent in Arizona to 5 percent in Mississippi between 2003 and 2005. In California, the increase was 55 percent.

Why Colorado?
While many states have struggled with higher education funding, the situation in Colorado was intensified in 2000, when voters passed Amendment 23. This law mandates that spending on K-12 public education increase each year by an amount that reflects enrollment growth and inflation, plus a 1 percent real increase in spending. Another state initiative, the 1992 Taxpayer’s Bill of Rights, or TABOR, limits the growth in state revenues and spending to the sum of population growth plus inflation.

Taken together, these two measures have put the squeeze on higher education spending.

Colorado’s voucher system represents a way for state funding of public institutions of higher education to escape TABOR. Under the new law, each public college will have a performance contract with the Colorado Commission on Higher Education. The institutions will receive fee-for-service payments from the state for providing certain education services. If combined state and local payments can be held down to under 10 percent of the institution’s overall budget, then they will be exempt from TABOR limits.

Colorado University has met that qualification for the past two years. The school now only receives about 8 percent of its annual revenue from the state.

In addition to expected tuition increases in Colorado in the short term, the new law will change the competitive equation between public and private institutions, because it allows students who qualify for Pell grants to receive stipends towards tuition at private institutions as well. For 2005, that stipend has been set at $1,200.

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The new law is also designed to reduce a tendency among some students to take a leisurely approach to getting their degrees, by limiting stipend funding to 145 credit hours per resident student. The increase in the percentage of students taking five or more years to get their bachelor’s degrees has been a factor in rising college costs.

Another Western State
In Texas, the funding structure for public colleges has been undergoing major changes, too, with more costs shifted to students. Alan Werchan, a budget manager with the University of Texas, explains that tuition rates in the state were deregulated in 2003. “The state legislature historically set tuition rates,” he says. Now, each college’s board of regents has the ability to regulate its own tuition.

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The result is that costs for students have risen dramatically. That’s because regents at each university now have the authority to implement fees—administrative expenses, transfers, special class materials, and other costs.

Members of the UT Watch organization, a student-run group at the University of Texas, report that such fees are designed and introduced by the college administrations and then often unanimously approved by the regents. “Using fees, the university has been able to skirt the Texas legislature, which is not inclined to promiscuously raise tuition every time [the school] lobbies for it,” according to the group’s Web site.

“There’s a fundamental issue here,” says Werchan. “In the past, the state has picked up a bulk of the tab. Now the user picks up the tab.”

Deregulated Access
UT Watch members say that deregulation is a bad deal for students. They argue that because regents are not elected, they are not accountable to the public—even though the colleges are public institutions and receive taxpayer dollars to provide a public service.

UT Watchers also say that deregulation is a way for Texas regents and administrators to manage students. “This means speeding them up in their junior and senior years to ensure graduation and channeling students into majors that businesses in Texas want,” according to the group’s Web site. They say that certain classes, such as art, have very costly fees compared to classes like business administration.

According to some accounts, recent tuition increases at universities are causing some middle class students to seriously consider attending out-of-state schools. In border towns particularly, a student paying out-of-state tuition in New Mexico may get a better deal than he or she can in Texas.

“Tuition deregulation hurts middle class students the most,” state Senator Eliot Shapleigh, (D-El Paso) recently told The Daily Texan. “Low-income students have many grants, high-income students have lots of money, and middle-income students have neither. Middle-income Texans are strapped by increased tuition.”

Shapleigh added that he originally voted against deregulation and said most of the lawmakers who previously supported it would now be against it as well after seeing the possibility of most schools raising tuition considerably for the second time in two years.

Student Guinea Pigs

The full report, “Public College Quality and Higher Education Policies of U.S. States”

According to a 2003 report by Lei Zhang, a researcher with the Stanford Institute for Economic Policy Research, little is known about the effects of state funding policies on the overall performance of state colleges and universities.

There are substantial differences in higher education policies across the states. Northeastern states tend to spend the least per student and charge the highest tuition, while western states spend more and charge lower tuitions.

Deregulation has been tried before in Texas. In 1987, tuition was deregulated for graduate students at the University of Texas. Within two years, tuition doubled at the school’s Graduate School of Business and went up 87 percent in the School of Law.

The experiment quickly died.

Zhang’s research indicates that policymakers looking to save money on the higher education front would be wise to support distinct college choices for students. The idea is that every school would have its niche, and therefore fewer schools would need to exist. Some Colorado officials say that the voucher plan may accomplish this by having students vote with their feet and take the money with them to schools that best suit their needs.

Howard, for one, is sure that more experiments are yet to come: “It’s just a natural response to the pattern.”

Resources:

• UT Watch
• Connect for Kids’ Beyond High School Topics Pages
• The Institute for Higher Education Policy
• The State Higher Education Executive Officers

Talk Back

If you’ve got comments or questions about this story, we’d like to hear them. Send your response to Robert Capriccioso (info@connectforkids.org).