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States Finding Higher Ed Funding a Taxing Issue

070215_FundingWhen the Louisiana Community and Technical College System (LCTCS) unveiled its strategic plan for 2020 on June 8, the goals it outlined were quite ambitious. Just to start, LCTCS says it wants to double the number of students it serves and graduates. That would mean increasing enrollment to 325,000 students and graduates to 40,000 in 2020. The system also wants to double its $25 million foundation endowment and quadruple the number of students transferring to four-year universities.


It is a tall order, but Dr. Monty Sullivan, president of LCTCS, says that the system has a clear mandate to go ahead with its vision. According to Census data from 2013, there are 2.4 million working age adults in Louisiana, 366,000 of whom have not graduated from high school.


“Frankly [this situation also re­flects] the national skills gap,” Sullivan says. “Louisiana isn’t alone in this discussion. This is a national issue.”


The 2020 vision becomes all the more ambitious in light of the fact that state support for higher education has precipitously declined since the Great Recession. The Center on Budget and Policy Priorities (CBPP) found that Louisiana decreased state investment by 42 percent when adjusted for in­flation between 2008 and 2015.


As a result of the budget cuts, LCTCS changed its operational approach, consolidating campuses and merging internal operations. Sullivan says that the mergers helped the system save money and refine its vision to focus on preparing students for jobs that are in high demand.


“We have narrowed our program offerings dramatically over the last six or seven years, cut hundreds of programs, which allows us then to invest our limited resources … into those very important, high-demand fields,” he says.


Indeed, the Great Recession dramatically altered the higher education landscape. Colleges and universities in the majority of states suddenly had to make do with much less. Arizona, Louisiana and South Carolina reduced the amount they spend per student the most out of all the states in the country, but they are not alone. Only three states—Alaska, Wyoming, and North Dakota—are spending more per student than they did before the recession, even after adjusting for in­flation, according to the CBPP.


Although the economy is picking up some speed again, not all states have made the decision to reinvest in higher education. Other big expenses are cutting into their budgets, soaring Medicaid costs being one oft-cited issue. Indeed, if current trends persist, some states are on track to end funding for higher education altogether, according to Dr. Thomas G. Mortenson, a senior scholar at the Pell Institute for the Study of Opportunity in Higher Education. He says that Colorado could be the first state to divest completely, sometime between 2019 and 2022, followed by South Carolina and Rhode Island.


Governments are struggling with whether to invest in higher education amid high operating expenses, budget cuts and the need for an educated workforce.


One of the results of state disinvestment is higher tuitions. According to the CBPP, tuitions rose an average of $2,068 when adjusted for inflation since 2007-08. In Arizona, the state where tuitions rose the most, students are paying over $4,000 more than they were before the recession on average.


As the cost burden of operating public institutions shifts from the taxpayer to student tuition, four-year colleges and universities are incentivized to look for students from out of state or abroad who can pay more in tuition. That means in-state students are less desirable from a financial perspective, and institutions may have fewer resources to support low-income state residents who require financial aid from the state.


As a result, low-income students often bear the brunt of state divestment by being priced out of public universities due to rising tuitions. “This cost shifting is just devastating in so many ways: to opportunity, to completion, to choice,” Mortenson says. “We saddle these kids [incoming first-year students] with financial need with extraordinary amounts of debt, not understanding what that means to their ability to form families and buy [a] house and start their adult lives.”


Increasingly, community colleges are the only affordable option for students, although Mortenson notes that community colleges can still be prohibitively expensive for those whose families cannot help pay for their education.


An uphill battle


While larger state universities typically have the resources and brand name recognition to drum up funding from alternative sources when times get tough, community colleges typically have less to fall back on. Even in California, a state that historically prided itself on its open access mission at the community college level, community colleges were forced to essentially turn students away during the midst of the Great Recession.


“Funding for public colleges and universities has only recently been increasing,” says Michele Siqueiros, president of The Campaign for College Opportunity, a California-based advocacy group. “During the Great Recession, you had significant cuts to our public colleges and universities. At the community college level, while they don’t turn anyone away, they cut thousands of courses across the state. So if students can’t get to classes, they’re essentially being turned away.”


California, however, is reinvesting in higher education now that the state is bouncing back from the recession. The state budget for 2015-16 will increase funding for community colleges, bringing funding levels closer to—albeit not matching or surpassing—pre-recession levels.


Not all states are following California’s model. The governors of Louisiana, Wisconsin and Illinois put forward budget proposals for FY 2015-16 that included nine-figure reductions in state funding for higher education.


Louisiana’s situation was particularly dire because the state had already reduced funding so substantially. Wisconsin cut its per-student spending by 16.5 percent and Illinois by 4 percent between 2008 and 2015, according to the CBPP’s numbers. In Louisiana, if all of Gov. Bobby Jindal’s proposed cuts went through, the higher education system would have faced a further 82 percent reduction in funding.


For some Louisiana higher education officials and lawmakers, the concept of such a cut on an already-depleted system was unfathomable. Soon after the budget was announced in the beginning of 2015, state officials said that, in a worst-case scenario, some campuses and institutions would have to close, including potentially six of the state’s technical and community colleges.


As in Illinois, state lawmakers proposed raising funds through a series of tax bills, a plan that was complicated by the fact that Jindal had signed a “no new tax” pledge in 2003 with the Americans for Tax Reform (ATR), an anti-tax group headed by Grover Norquist. Jindal said he would veto any attempts to raise taxes.


As a result, the state instead resorted to a “tax credit” plan, called the Student Assessment for a Valuable Education (SAVE) Act. SAVE will create $350 million in tax credits by assessing a fee of $1,600 to $2,100 per student. Students will never pay the fee, which will be transferred as a tax credit to the Board of Regents. According to the House of Representatives Fiscal Division, the new budget will keep funding levels close to the FY 2014-15 level.


It has been described as a convoluted way of skirting around Jindal’s no-tax pledge. In the days leading up to and after the hashing out of the budget, many state legislators, Republican and Democrat alike, said they found the compromise unpalatable but necessary to ensure the continued survival of the University of Louisiana, Louisiana State University and LCTCS.


Despite the tumult in the state capitol, LCTCS is forging a new path, like many other community colleges across the nation. Although innovation is a term that is used so frequently as to almost be clichéd, that is exactly what so many community college systems are doing across the nation. They are pushed to do so by changing times and a changing and growing student population.

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