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Trend Towards Flat Budgets, Performance-Based Funding in Higher Education

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After years of budget cuts, most higher education lobbyists across the country expect flat or slightly increased funding for higher education during upcoming state legislative sessions. According to a survey by the American Association of State Colleges and Universities, three-quarters of states increased spending on higher education by more than 3 percent in the current fiscal year. Despite these efforts, funding for public colleges and universities is still well below 2008 funding levels. Many experts believe that this may be the new normal—with continued economic uncertainty and many other programs, such as Medicaid, K-12 education, or state pensions, competing for the state’s resources, higher education may have to make do with less.

For those states that are increasing funding for higher education, the money is often coming with more strings attached. About 20 states have implemented performance-based funding, which ties state dollars to the accomplishment of certain goals, such as an increased graduation rate, lower student debt, or more STEM majors. Some states, including Washington, are also limiting tuition increases or requiring universities to divert more money to financial aid. While many higher education administrators welcome the chance to improve institutional efficiency and student outcomes, they are also wary of legislators setting unrealistic goals or failing to appreciate the complexity of their institutions.

Washington seems to be following the national trend, both in the expectation of flat or moderately increased funding in the coming session and in the likely adoption of performance-based funding. Governor Inslee’s proposed supplemental budget includes some modest funding for select UW initiatives, but no across-the-board increase. The public institution-led Technical Incentive Funding Model Task Force is exploring ways to implement performance-based funding in Washington. To read more about either of these, check out our blog post on Governor Inslee’s supplemental budget and the Technical Incentive Funding website. To learn more about state budgets and performance funding nationally, check out this article in the Chronicle of Higher Education and this piece in Inside Higher Ed.

Higher Ed Roundup–Happy New Year!

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Now that news sources are back from their holiday hiatus, we have a couple of noteworthy stories to bring you.  Both articles highlight the continuing trend toward greater accountability.

Florida’s new rules linking tenure with student success are upheld:  Last week in Florida, a judge upheld new rules by the State Department of Education that require tenure decisions—known in Florida as “continuing contracts”—to be contingent upon professors’ performance on certain student success criteria. The judge also upheld a new requirement that faculty must work for five years, rather than three, before being eligible for the contracts. The United Faculty of Florida had contested that the new rules were beyond the scope of the department’s powers, but the judge rejected that claim.

Senators propose penalties for colleges with high student-loan default rates:  On Thursday, three Democratic senators introduced a bill dubbed “the Protect Student Borrowers Act of 2013,” which would impose a fine on colleges with high student-loan default rates and federal student-aid enrollment rates of at least 25 percent. Penalties would be on a sliding scale. On the low end, colleges with default rates of 15 to 20 percent would incur a fee equal to 5 percent of the total value of loans issued to their students in default. On the high end, schools with default rates of 30 percent or more would incur a 20 percent penalty.  The Education Department currently cuts off federal funds for institutions with high default rates, but the senators argue it punishes only “the most extravagant, outrageous schools.” The Chronicle writes, “The proposed legislation would hit for-profit institutions the hardest, as their graduates have the highest default rates, on average.”

UW Plans To Create Startup Hub in Condon Hall

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The University of Washington (UW) plans to convert a small section of the UDistrict into a “startup hub” that will help connect UW research activity with the entrepreneurial talent who can help commercialize it. The effort will begin with just one floor of Condon Hall – the old law school, which currently houses departments displaced by other campus construction – but will expand if there is demand. The ground floor will be transformed into an open meeting area, or “mixing chamber,” where University-based entrepreneurs can connect and collaborate with the startup community, including startups that don’t necessarily have a connection to the UW. The third floor may eventually be converted into space for startups. So far, TechStars, Founder’s Co-op, and UP Global (formerly Startup Weekend) are considering taking space on the second floor starting next July.

The Office of Planning & Budgeting and the Office of the University Architect are working on this and other UDistrict planning efforts. To read more about this project, see the article by GeekWire. For more information about UDistrict planning as a whole, see the recent Seattle Times article and visit the U District Livability Partnership website.

Governor Releases 2014 Supplemental Budgets

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Governor Jay Inslee released 2014 supplemental budgets, making changes to the current 2013-15 (FY14 & FY15) biennial operating and capital budgets. As a reminder, both chambers of the Legislature will propose their own supplemental budgets throughout this short 60-day session as they work towards compromise budgets.

The supplemental operating budget would provide an additional $1 million for the University of Washington’s Institute for Protein Design and $500,000 for an Advanced Materials Manufacturing Facility plan, associated with the ongoing attempt to keep Boeing’s production of the 777x and its carbon fiber wing in Washington.

Additionally, the Governor’s supplemental operating budget appropriated new funds for the College Bound program and the Entrepreneurs-In-Residence program.

The budget also contains some changes to the UW’s state appropriation related to unanticipated positive claim activity for health insurance. The change appears to be a reduction in funding available to the UW during FY15. More information will follow as details are available.

The Governor did not provide additional capital funding for the UW in his supplemental capital budget.

A full budget briefing is available on OPB’s website. As usual, please post any comments or questions you may have.

Research Suggests MOOCs Primarily Serve the Well-Educated

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Researchers at the University of Pennsylvania recently surveyed students who had taken at least one of Penn’s twenty-four MOOCs and viewed at least one online video lecture. Findings from the responses of 34,779 students revealed that 80 percent of the MOOC-takers already had a 2- or 4-year degree and that 44 percent already had some graduate education. This research supports the platitude that MOOCs primarily serve the well-educated.

The trend was observed for MOOC students in the U.S., as well as those in developing countries, and even those in countries where MOOCs are popular. Coursera – the MOOC provider for Penn and several other universities – has made “access” central to its mission of bringing world-class education to everyone. However, The Chronicle notes:

“Coursera has taken a hands-off approach to publicity, relying almost entirely on word of mouth (and its university partners) to spread awareness of MOOCs. It stands to reason that much of the hubbub about MOOCs has occurred in well-educated circles. Combine that with spotty Internet availability in underprivileged communities, and it makes sense that only the most privileged populations have had occasion to take a MOOC.”

Coursera says they are working on several projects to help reach underserved students, particularly those without internet access. One of these efforts (we assume) are the global “learning hubs” discussed in a prior post and in this NY Times article.

Although the findings are noteworthy, the authors mention two important caveats:

  1. Their findings don’t necessarily mean MOOCs will never reach underrepresented populations, just that they haven’t done so yet; and
  2. The respondents represent only a small percentage of students registered for Penn MOOCs, let alone all MOOCs; thus “the survey may not be generalizable.”

This Week in Higher Ed News

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Student Exchanges Hit Record High.  According to the Open Doors Report on International Educational Exchange, the number of international students at U.S. colleges and universities and the number of American students studying abroad are at record highs. In 2012-13, 820,000 foreign students attended American higher ed institutions, a 55,000 increase (7.2 percent) from the previous year. Chinese undergraduates exhibited the biggest increase, 26 percent, bringing the total number of Chinese students studying in the U.S. (undergraduates and graduates) to 235,000. In 2011-12 (the most recent year for which data are available) 283,000 American students went abroad for credit university courses, up 3.4 percent from the prior year.  For institutions hosting the most international students, the UW ranked 14th in the country.

New Studies Cast Doubt on Effectivenessof State Performance-based Funding.  Now that economies are recovering from the Great Recession, state legislators across the country have been hurrying to adopt systems that link state funding for higher education to student outcomes like degree production and completion rates. However, several research papers presented at the annual meeting of the Association for the Study of Higher Education question the effectiveness of these “performance-based funding” systems. See Inside Higher Ed for a summary of the findings.

College Completion Rates See Little Improvement.  College-completion rates remained largely unchanged this year, according to the National Student Clearinghouse Research Center. Of the first-time students who entered college in fall 2007, 54.2 percent earned a degree or certificate within six years—up 0.1 percentage points from the 2006 cohort. In the public sector, completion rates rose by 1.3 percentage points for students who started at public four-years and by 1.1 percentage points for those who began at public two-years. Unlike the federal government’s college-completion measure, the center tracks part-time students and students who transfer to a different college, sector, or state. Only 22 percent of part-time students earned credentials within six years, compared with 76 percent of those enrolled full time. The research center will issue its full report next month.

University of Michigan’s Shared Services Strategy Faces Opposition.  The University of Michigan is the latest campus to implement “shared services,” a cost-saving strategy that has academic departments rely on centralized staff, rather than department-level staffers. Theoretically, employees in the central pool could become more specialized, and thus more efficient, than departments’ jack-of-all-trades staff. Administrators at Michigan hoped to save $17 million by moving 275 staffers from their campus offices to a single building on the edge of town. However, not only are faculty and students speaking out in opposition, the plan is no longer expected to save nearly as much as once hoped and may barely break even in the short term. Read more at Inside Higher Ed.

Slight Decline in State Revenue Forecast

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Today’s release of the November general fund state revenue forecast indicates that current biennial revenue is slightly down from September’s projection. The decline is largely due to a technical adjustment which resulted in a $41 million decrease of available funding this biennium, though collections for the current biennium are $16 million over prior projections. The net decrease in November’s revenue forecast is $24 million less than the September revenue forecast.

In other words, new revenue and an offsetting technical adjustment give Governor Inslee a $32.98 million general fund target for his supplemental operating budget, expected in December.

This forecast, once again, does not contemplate any tax revenue associated with the impending sale of cannabis.

Gainful Employment Regulations Anger For-Profits, Cheered by Consumer Advocates

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Consumer advocates applauded the Department of Education’s second—and substantially more stringent—set of draft regulations for the “gainful employment” rule, released on Friday. They claim the metrics, which apply to vocational programs at for-profit institutions and community colleges, will better measure the program’s loan default and repayment rates. Programs that do not meet the Department of Education’s standards under the gainful employment rule will lose federal student aid eligibility.  

The Department of Education’s initial regulatory language, released in September, included two measures of debt-to-earnings ratios for graduates of vocational programs. However, these measures did not require the institutions to report debt-to-earnings ratios for students who dropped out of the program without earning a degree—an oversight that critics of for-profits believed would be misleading.

The new regulations would include a loan default ratio metric, as well as a measure of repayment rates across an academic program’s “portfolio” of loans. The law would require that the total principal balance of loans borrowed for an academic program is less at the end of the year than it was at the beginning. The measure will therefore capture repayment rates both for students who earn a credential and those who do not.

For-profit supporters are critical of the new language, saying their ideas and suggestions for crafting a metric for gainful employment were not taken into account. They claim that the new rules, if implemented, could deny needy students access to vocational programs that may help them get better jobs. Critics of for-profits counter that the rules will help students make more informed decisions about the likelihood that they will be able to repay their loans, as well as ensure that institutions that receive federal aid dollars are offering high-quality degrees.

While the gainful employment rule applies only to vocational programs at for-profit institutions and community colleges, President Obama’s proposed ratings system, which would tie federal financial aid funds to performance metrics, applies to all institutions that receive federal dollars. If implemented, the ratings system would hold all institutions accountable to similar standards—a prospect that worries many administrators who claim they cannot control their students’ career success or the labor market.

The second round of negotiations on the gainful employment rule begins this week. As always, we will keep you posted on their progress.

Special Session Concluded

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Governor Inslee signed two bills into law Monday, November 11th, to encourage Boeing to build 777X planes in the Pacific Northwest. Both bills remained largely unchanged from their original form and neither included provisions for the University of Washington. Bill summaries are available in this linked PDF and also this House bill report.

While Boeing stands to benefit most from this bill activity, the State Board for Community and Technical Colleges would receive $8 million in supplemental operating appropriations for 1,000 additional student FTE in aerospace worker education and training.

Update: Special Legislative Session

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Governor Jay Inslee called the Washington State Legislature back to Olympia beginning today, Thursday, November 7, 2013 to introduce and ultimately approve several bills aimed at Boeing production of a 777x plane and its carbon fiber wing. The Governor’s press conference is available on line, but a cursory read of the initial bills introduced today indicate that the package will not directly affect the University of Washington.

Stay tuned!