Fiscal and State Policies Impacting Higher Education

Daniel J. HurleyDirector, State Relations and Policy Analysis

American Association of State Colleges and UniversitiesDecember 2, 2011

STATE OUTLOOK

Agenda

1. U.S. economic outlook2. Unemployment scenario3. State revenues4. Budget pressures5. Higher education funding6. Higher education governance activity7. 2011 elections

U.S. Economy: Recent Term Growth…

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

U.S. 3Q growth: 2.5%

U.S. GDP Growth RateAdjusted for Inflation

…But a Downgraded Forecast

June IMF Growth Forecast

September IMF Growth Forecast

2011 2012 2011 2012U.S. 2.5% 2.7% 1.5% 1.8%E.U. 2.0% 1.7% 1.6% 1.1%China 9.6% 9.5% 9.5% 9.0%Global 4.3% 4.5% 4.0% 4.0%

IMF World Economic Outlook, September 2011

U.S. historical average quarterly GDP growth rate (1947-2011): 3.28%

Unemployment: Slow Improvement• November: 120,000 new jobs created • Unemployment rate: 8.6% Lowest level since March 2009

•October: 80,000 new jobs created • 158K private sector jobs created; 24K public sector jobs

lost• Unemployment rate: 9.0%

• 125,000 new jobs per month needed to keep unemployment rate level• 200,000 new jobs per monthly needed to

reduce UE rate 1% over a year• CBO estimate:• Rate dissipation to 8.5% by 4Q 2012• Rate to remain above 8.0% until 2014

• Feb 2010-Oct 2011: • Private sector: Added 2,600,000 jobs• Public sector: Shed 520,000 jobs

State Revenues on the Rebound

• State revenue increases 6 consecutive quarters – after 5 consecutive quarters of losses (longest on record)• Second quarter: +10.8% compared to 1Q 2010• FY 2011: Overall, up 8.4% (strongest since 2005)• Only NH witnessed lower revenues in 2Q and FY 2011• Preliminary July-August revenue reporting: +6.8%

• 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

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

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

safety, economic development• 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

• Current fiscal year – most difficult on record

Fiscal Year 2012 Funding*• Decreased funding: 36 states• 15 states double-digit cuts

• Increased funding: 8 states• Flat funding: 6 states• Largest cut: New Hampshire (-48%)• Largest increase: North Dakota (+6.8%)• Average change: -6.4%

AASCU informal survey of FY 2012 funding for Public 4-Year Institutions Only, as of July 12

State Higher Education Funding

State appropriations per full-time student

• 1980s +6%• 1990s +5%• 2000s -23%• 2010 alone -4%

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

a Public College Education

1985 2011% Paid by State 75% 52%% Paid by Student 25% 48%

Advancing Student Success

• TX: Requirement for students to file “degree plans” upon completion of 45 credit hours • Retroactive A.S. degree granting

for transfer students• VA: Governor-SCHEV funding

partnership to generate 100K more degrees by 2015 (via $100M in new funding)

State Higher Education Governance – A Sampling of 2011 Actions

State Funding, Performance-Based Funding (PBF)

• Some 17 states looking into PBF models• Legislation requiring recommendations/models

due in 2012 for consideration; implementation in 2013• Among active states: AZ, AR, CO, IL, MA, MI,

MS, MO, UT

State Higher Education Governance – A Sampling of 2011 Actions

State-Planning Imperatives

• TX: “Seven Breakthrough Solutions” proposal by Texas Public Policy Foundation (with Gov. Perry’s support)• Calls for faculty-performance pay, and tenure,

based on student success—as measured by student evaluations, retention and graduation rates

• FL: Gov. Rick Scott looking at duplicating approach; is using criteria in making state and institutional governing board appointments

State Higher Education Governance – A Sampling of 2011 Actions

Restructuring Governance and Statewide Coordination

• CA: Eliminated statewide advisory board (CPEC) due to Gov. line item veto • WA: Gov. eliminated state H.E. coordinating board. C/Us

now have control over tuition policy. Steering committee to create alternative plan for overseeing H.E. governance prior to 2012 legislative session• CT: Gov. eliminated free-standing statewide H.E.

coordinating entity as cost savings measure—per recommendation of bi-partisan committee• NJ: Gov. eliminated several commissions,

created/appointed new Secretary of Higher Education

State Higher Education Governance – A Sampling of 2011 Actions

Restructuring Governance and Statewide Coordination

• ND: Legislative proposal to merge K-12 and H.E. coordinating boards (only passed one chamber). Strong resistance from K-12, H.E.• Same result this session in RI

• OR: New Higher Education Coordinating Commission created to develop state goals and accountability measures• LA: Gov. call for merger of two public universities (failed) And call to merge five H.E. boards into one (failed)• NY: Increased tuition control at institutional level; more

control over procurement, HR policies, assigning more than 1 campus to a single president

State Higher Education Governance – A Sampling of 2011 Actions

Regulation and Autonomy

• OH: “Enterprise University Plan” – state’s 14 public U’s to receive tuition flexibility and autonomy/easing on 50 mandates/regulations – in exchange for meeting performance benchmarks (10-20% of approps)• OR: Oregon University System – now a university system

as opposed to a state agency; greater control over finances; investment in student aid (biggest victory in 2011)• WI: Proposal to separate UW-Madison from rest of UW-

System Board of Regents (failed; controversial)• Gov. subsequently created task force to study

structure of H.E.—recommendations due Jan. 1 (UW system just received mid-year cut)

State Higher Education Governance – A Sampling of 2011 Actions

Regulation and Autonomy

• LA: Passage of Grad Act 2.0 – C/U’s have more authority of contracting, purchasing, budgeting/financial investments—if performance measures are met• SC: Gov. signed legislation alleviating bureaucracy

involving building projects; same with procurement

Institutionally-Related Foundations• CA: “Transparency Act” requires foundations to publicly

disclose all financial records, including private gifts (Yee, Stanislaus, Palin)

State Higher Education Governance – A Sampling of 2011 Actions

2011 State Elections

• Limited state elections• Gubernatorial elections: KY, MS, WV (special)

• Legislative elections: LA, MS, NJ, VA

• Victories for Democrats in OH, AZ, MS (social issues)

• Victories for Republicans in MS, VA (party control)

•Overall, mixed messages sent by electorate• Ballot initiative of interest:

ColoradoProposition 103: Temporary increase in state income tax of .37% (to 5%) and increase in state sales tax of .1% (to 3%).$3 billion in annual funds generated to be invested in education.Failed 64% to 36%

Looking Ahead to 2012State Higher Education Policy Issues in the Mix

• Higher education financing reform (PBF)• Student aid programs (reforms, cuts)• Governance, regulatory impact, reform• Policy focus on college readiness, completion• “Social” issues • Guns on campus legislation• Undocumented students—tuition policy

• AASCU “Top 10 Higher Education State Policy Issues for 2012” due out in early January

Thank You to 2011 Conference Chair: Mary Davenport, Interim Dean, Health and Service Programs Saint Paul College

Welcome to 2012 Chair:Brian K. Jammer, Associate Vice Chancellor for Governmental RelationsUniversity of Texas System

And to 2012 Vice Chair and Chair of the State Relations Awards Committee:Imelda CuyuganAssistant Vice Chancellor for Government RelationsPima Community College

Task Force on Higher EducationGovernment Relations

Miami

2012 Higher Education Government Relations Conference

Wednesday, November 28 – Friday, November 30

Miami