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Minority Report Executive Summary - Governor's Task Force on Higher Education
GOVERNOR'S TASK FORCE ON HIGHER EDUCATION
MAJORITY REPORT
MISSION:
Propose a new financing system
and accountability measures that establish the state's commitment
to efficient, effective, and innovative institutions through the
year 2010.
- From the Governor's Executive Order
July 24, 1995
GOVERNOR'S TASK FORCE ON HIGHER EDUCATION
TASK FORCE MEMBERS
Governor Mike Lowry
Washington State Governor
Joe King, Chair
Higher Education Task Force
King & Crowley
Senator Al Bauer
Chair, Senate Higher Education Committee
Washington State Senator, 49th District
Representative Don Carlson
Chair, House Higher Education Committee
Washington State Representative, 49th District
Representative Tom Huff
Chair, House Appropriations Committee
Washington State Representative,
26th District
Representative Ken Jacobsen
Washington State Representative,
46th District
Senator Jeanne Kohl
Washington State Senator, 36th District
Senator Gene Prince
Washington State Senator, 9th District
Representative Helen Sommers
Washington State Representative,
36th District
Senator Jeannette Wood
Washington State Senator, 21st District
Ann Daley
Assistant State Treasurer and University
of Washington Regent
Susan Johnson
Washington State Health Care Policy
Board
Gary Robinson
Acting Director
Office of Financial Management
Mari Clack
University of Washington Regent
Chuck Collins
Chair, Commission on Student Learning
Former Chair, Washington Higher Education Coordinating Board
Rich Sonstelie
Chair, Higher Education Coordinating
Board
Puget Sound Power and Light
Barney Goltz
Member, State Board for Community
and Technical Colleges
Juan Aguilar
Heritage College Trustee and President
of the Hispanic Chamber of Commerce of Greater Yakima
Carolyn Bilby
Bellevue Community College
Dick Davis
Pentzer Corporation
Washington State University Regent
Grace Yuan
Preston, Gates, and Ellis
Western Washington University Regent
Devone Smith
Federation of State Employees
Garrick Hileman
President, Associated Students of
the University of Washington
STAFF TO THE TASK FORCE:
Sue Crystal
Higher Education Task Force Coordinator
Special Assistant to the Governor
Mike Bigelow
Senior Budget Assistant, Office
of Financial Management
Jim Tharp
Budget Analyst, Office of Financial
Management
Irv Lefberg
Coordinator, Economic Forecasting,
Office of Financial Management
Jessie Brunswig
Administrative Assistant, Office
of Financial Management
PART 1: THE CHALLENGE FACING HIGHER
EDUCATION
After two decades of relatively stable
enrollment, new demands for enrollment space are expected to increase
significantly in Washington State's colleges and universities.
In response to immediate and foreseeable demographic and fiscal
pressures on higher education, Governor Lowry issued Executive
Order 95-02 on July 24, 1995 establishing the Governor's Higher
Education Task Force.
The Executive Order directs the Task
Force to propose a new financing system and establish accountability
measures to fulfill the state's commitment to efficient, effective,
and innovative institutions through the year 2010. From August
1995 through June 1996, the 23-member Task Force met monthly to
develop recommendations for funding, enrollment, quality, and
effectiveness. This report summarizes the challenge facing higher
education and the major components of the final Task Force proposal.
For more information about the proposal, please contact Mike Bigelow
at the Office of Financial Management, (360) 753-4702.
HIGHER EDUCATION DEMOGRAPHICS
- Higher education is encountering
the first wave of the "baby boom echo" generation at
a time when competing demands on the state general fund and changes
in federal policy are limiting resources.
- From 1970 through 1995, the primary
college-going population of 17 to 22 year-olds stayed relatively
stable, increasing at an annual average of three-tenths of one
percent from about 380,000 to 410,000 citizens. Actual participation
rates for those 17 to 22 year olds students were also stable,
increasing from 10 percent to 11 percent from 1970 to 1993 in
the two-year system, while remaining constant at 12 percent in
the four-year public system. Meanwhile, the secondary college-going
population of 23 to 29 year-olds increased at an annual average
of 2.1 percent from 350,000 in 1970 to 540,000 in 1995, and their
participation rates remained stable in both the two-year and public
four-year systems.1
- Demographic projections for the
primary and secondary college-going populations diverge sharply
from their relatively flat patterns of the last 25 years. Between
1995 and 2010, the 17 to 22 year-old population is forecast to
grow at an annual average of 2.3 percent from 410,477 to 562,300;
and the 23 to 29 year-olds are forecast to grow at an average
of 1.7 percent from 541,018 to 690,867. Just to maintain the current
participation rates will require space for an additional 55,392
public and private full-time equivalent (FTE) students by 2010
- in addition to the 225,036 public and private FTE students currently
in the system. The demographic trends and forecast are shown below.
POPULATION, AGES 17-22 AND
23-29: 1970 TO 2020
- Historical participation rates by
age group tell only part of the story. Counting all levels and
both the public and private sectors, Washington's higher education
participation rate ranks about 30th among 50 states. The public
two-year system consistently ranks in the top five states, but
public four-year upper division and graduate rates consistently
rank in the bottom ten states in the nation.
EXPENDITURE TRENDS
- From 1984 to 1997, the portion of
the state general fund budgeted for higher education declined
from 16 percent to 11 percent. At the same time, tuition revenues
available to the higher education system increased by 194 percent.
In nominal terms, higher education "state" budgets have
grown from $674 million in 1984 to $1,259 million in 1987 (a cumulative
increase of 92 percent and an average annual increase of 7.1 percent).
This funding level has been sufficient to support higher education
at the stable participation rates.
- During the years when higher education
budgets remained stable, other sectors of the state budget began
to claim growing shares of the total general fund. Growth in those
sectors has been driven by caseload requirements, constitutional
mandates, legislative policy decisions, inflation, and other factors.
Forecasts for those other sectors promise to claim a growing share
of the state budget.
- In addition to demographic and other
pressures, Initiative 601 will also influence funding available
for higher education budgets in the future by increasing competition
for general fund dollars - precisely when higher education will
need more resources. Impending federal budget reductions may further
increase the competition for general fund dollars now restrained
under the Initiative 601 expenditure limit.
STATE GENERAL FUND, 5-YEAR
ANNUAL AVERAGE GROWTH RATES, FY92 TO FY97
HIGHER EDUCATION: FUTURE NEEDS
- To accommodate future population
growth and bring participation rates in upper division and graduate
enrollment up to the national average, the state higher education
system will require an additional 84,000 FTE enrollments by the
year 2010. Retraining and training of unemployed workers will
require about 10,000 additional slots by 2010.
- The state's population is becoming
more and more diverse, increasing the demand for financial aid
to maintain equitable access.
- Technology now offers opportunities
that will allow higher education institutions to provide students
with enhanced learning capabilities, alternative program and course
delivery options, and job skills essential in the global economy.
- The Governor, the Legislature, parents,
and students are all seeking greater accountability to ensure
that higher education provides the results expected by Washington
businesses and the general public.
HOW MUCH IS NEEDED?
- To adequately fund enrollments,
worker retraining, equitable financial aid, technology applications,
and effective accountability, the Governor's Task Force on Higher
Education estimates $1.937 billion per year is needed by 2010.
(See chart below.)
- Based on the rate of growth between
1990 and 1995 (about 1.5 percent per year), state general fund
support for higher education would grow to just $1.221 billion
by 2010.
- If other areas of state government
grow at .25 percent faster than the Initiative 601 growth rate
- still a conservative estimate - about $1.329 billion would be
available for higher education in 2010.
The chart below compares these three
funding scenarios.
1997 HIGHER EDUCATION BUDGET
COMPARED TO 2010 FORECAST SCENARIOS
PART 2: THE TASK FORCE PROPOSAL
At its final meeting in Seattle on June
3, 1996, the Governor's Task Force on Higher Education adopted
a proposal designed to maintain the state's commitment to higher
education by stabilizing the funding base, providing for greater
innovation, and instituting new measures of accountability.
REVENUE
The Task Force proposal diversifies
the funding base to include three primary revenue sources.
- Dedicated Fund
- Under the new proposal, revenues from current sources would
be transferred to a dedicated fund for higher education that would
grow based on inflation plus percentage changes in the primary
college-age population (18 to 23 year olds). Revenues flowing
into this new fund are projected to grow to approximately $2 billion
by 2010.
- Business and Occupation Tax Credits
- A new Innovation Fund is proposed that would allow businesses
to take dollar-for-dollar credits on their Business and Occupation
tax liability for specific program contributions to higher education.
These contributions would target the specific needs of Washington
residents, allowing them to gain the skills they need to compete
in Washington's changing labor market. Guidelines for contributions
will be written into legislation, and may include money donated
for technology expansion, distance learning, improved instructional
quality, or additional classes to relieve overcrowded courses.
- Student Tuition
- The proposal would tie
resident undergraduate tuition rates to the rate of inflation.
Tuition rates for all other student categories would also be tied
to inflation, but institutions would have the authority to vary
the rates within a prescribed range. The Higher Education Coordinating
Board would have approval for rates established by the institutions.
The three funding sources for the new
proposal are shown below.
REVENUE SOURCES FOR THE TASK
FORCE PROPOSAL
EXPENDITURES AND PROGRAMS
- Enrollments
- The Task Force proposal includes funding for student growth
enrollment through 2010, as calculated under the Higher Education
Coordinating Board Master Plan and the Workforce Training and
Education Coordinating Board vocational FTE plan. Public and private
higher education enrollment would grow from 225,036 FTE students
in 1997 to 319,546 FTE students in 2010. All public enrollments
would be funded by the dedicated fund and tuition (except for
unemployed workers supported by the Employment and Training Trust
Fund or other sources). The matrix below shows additional net
FTEs.
| Net New Growth in FTEs by 2010
|
| Public
| Private |
Total |
Higher Education Coordinating Board Master Plan
| 76,425 |
7,717 | 84,142
|
Workforce Training and Education Board Vocational FTEs
| 9,432 |
936 | 10,368
|
Total |
85,857 | 8,653
| 94,510 |
- Unemployed Worker Training
- Funding would continue for the program in the community and
technical college system providing training, support services,
and financial aid for 7,200 unemployed workers.
- Inflation
- Funding to pay for inflation annually through 2010 would help
to ensure quality and stability in the public higher education
system (inflation will be based on implicit price deflator).
- Financial Aid
- Under the proposal, aid for students is significantly expanded
into the future through Need Grants.
Need Grants
- Revenues from the newly created dedicated fund will allow the
state to gradually increase the recipient threshold for students
in need. Currently, need grants are provided to students of families
whose income is approximately 40 percent of the Median Family
Income level. The proposal increases the recipient family income
threshold to 75 percent of Median Family Income by the year 2010.
These expenditures will grow from $57.2 million in 1997 to $163.6
million in 2010, including funding for inflation and enrollment
increases.
Work Study -
The Task Force encourages off-campus employment for work study
jobs.
- Innovation Fund
- Revenues provided by contributions through the newly created
Business and Occupation tax credit program would be targeted for
improving quality in higher education, supporting technology,
distance learning, relief for overcrowded courses, faculty training,
and other public purposes. This program is assumed to grow from
$51.4 million in 1998 to $73.3 million in 2010, including adjustments
for inflation. Funds will be available to institutions that demonstrate
satisfactory improvement on their performance measures developed
collaboratively with the Higher Education Coordinating Board.
EFFICIENCIES AND INCENTIVES
- Productivity Increases
- The Task Force proposal assumes productivity increases to serve
more students within available funding.
- Credits to Degree Incentive
- Institutions are encouraged to develop innovative programs that
provide incentives for students to complete their degree within
a prescribed margin of credits.
- Penalty for Excess Credits
- Institutions would be authorized to impose a tuition
surcharge on students who enroll for credits over the prescribed
number of credits necessary to complete their degree or program.
The revenues generated should be targeted to quality enhancements
directly benefiting students.
- Innovation Fund
- Innovation funds provided through the Business and Occupation
tax credit program would be available to institutions that make
progress toward accountability measures as defined collaboratively
by Higher Education Coordinating Board and institutions.
TUITION
- Rate Increases
- The Task Force proposal would set increases in general tuition
rates for resident undergraduate students according to the annual
rate of inflation (estimated at 3 percent through 2010). This
would provide predictable rates for students, families, institutions,
and the state in planning for higher education needs.
- Rate Setting Authority -
In addition, public four-year institutions would receive tuition
rate-setting authority within a prescribed range for all graduate,
professional, and non-resident students with approval of the Higher
Education Coordinating Board.
ACCOUNTABILITY
- Four-year Institutions
- Public four-year institutions
would be directed to collaborate with the Higher Education Coordinating
Board to develop institutional and student academic performance
measures.
- Community and Technical College System
- Community and Technical colleges
would be directed to collaborate with the State Board for Community
and Technical Colleges and the Higher Education Coordinating Board
to develop institutional and student academic performance measures;
they would also be directed to collaborate with the Workforce
Training and Education Coordinating Board to develop vocational
student and program performance measures.
- Innovation Fund
- Funds generated by contributions through the Business and Occupation
tax credit program will be allocated only when institutions satisfactorily
demonstrate improvement on performance measures developed collaboratively
with the Higher Education Coordinating Board and the State Board
for Community and Technical Colleges.
LINKING K-12 AND HIGHER EDUCATION
- Certificate of Mastery
- The Task Force endorses using savings generated by the Certificate
of Mastery program to make quality improvements in the K-12 and
higher education systems. The Certificate of Mastery program allows
K-12 students entry to the higher educational system, which not
only provides new opportunities for those students, but also produces
savings that can be used for such improvements as reducing class
sizes, increasing student access to technology, and providing
enrichment activities to all students.
1"Presentation
on Population Trends, Enrollment Projections and Funding Outlook,"
Prepared for the Governor's Task Force on Higher Education by
Irv Lefberg and Mike Bigelow, Office of Financial Management,
August 4, 1995, pp 15-17.
A full report of the Governor's
Task Force on Higher Education, containing technical papers presented to the Task Force,
is available from the Office of Financial Management, (360) 753-1802.
To obtain either publication
in alternative format, please contact the OFM ADA Coordinator,
(360) 753-5459.