Colorado colleges and universities are taking a wait-and-see attitude about their newly won ability to seek authority for raising tuition more than 9 percent a year.

Why? College leaders say they won’t know how much they may need to hike tuition until they get a better idea about how much state support will be available in 2011-12 and how that money will be split among institutions.

How to divide the money is the focus of ongoing work by the Department of Higher Education and the Colorado Commission on Higher Education. Whatever allocation system they come up with is bound to be contentious and to make some – or perhaps all – institutions unhappy.

Higher ed leaders are being forced to confront the issue because of a complicated and interlocking set of events and circumstances, including:

• The continuing state revenue crisis, which was highlighted in June revenue forecasts that warned the state may have to cut up to $1 billion from the 2011-12 state budget (see story). There’s no question that higher ed will receive less direct state support than the $620.8 million in the current budget, much of which is the last installment of federal stimulus funds.

• The hard truth that state colleges and universities have differing abilities to raise revenues from tuition and grants. It’s seen as easier for CU’s Boulder campus, CSU-Fort Collins and the Colorado School of Mines to raise tuition and still maintain enrollment than it is for some of the state’s four-year colleges, which have smaller pools of potential applicants and more lower-income students.

• A new state law (Senate Bill 10-003) that gives colleges greater freedom in managing their budgets and the right to ask for tuition increases higher than the 9 percent hikes that now are allowed annually through 2015-16. Another key piece of that law gives the CCHE more clout than it’s had in recent years, including review over those tuition authority requests.

The big picture

The state support being debated by CCHE and college leaders is only part of state higher education funding.

The current, 2010-11 budget for state colleges and universities totals about $2 billion, funded by about $900 million in resident tuition, $500 million in non-resident tuition and about $600 million in state dollars and federal ARRA funds. This is the last budget year those federal funds will be available.

At its July 8 meeting the commission adopted a deadline schedule and an application form for institutions that want tuition flexibility. Applications will be accepted between Aug. 2 and Oct. 1, review and negotiations with institutions is be finished by Oct. 29, CCHE decisions will be made by Nov. 4 and recommendations to the Joint Budget Committee will be made by Dec. 10. (See the template for college financial accountability plans.)

The deadline schedule was a compromise between CCHE and the institutions, but some college leaders are still uncomfortable with it. And, it doesn’t look like colleges will be rushing to file applications in early August.

Education News Colorado last week surveyed all 10 state colleges and systems. No institution is definitely planning to apply, and only Adams State College has no plans to apply. Representatives of the Colorado and Colorado State university systems, the community colleges, the School of Mines and the University of Northern Colorado plus Metro, Fort Lewis, Mesa and Western State colleges said they were still studying the issue or haven’t yet taken it up.

Metro State President Steve Jordan discussed the unknowns that colleges face. “We are doing some modeling that makes the presumption that general fund [state support] will be cut.” So, Metro will prepare an initial document that suggests different levels of tuition for different amounts of state cuts. “We intend to put in some markers … and then we will revise those once we know the reality” of state funding, Jordan said.

Metro State President Steve Jordan

Other colleges also are expected to prepare similar “what if” proposals.

Mesa President Tim Foster said, “We will probably hedge and ask for some nominal increase above 9 percent.  In that way we can keep an eye on what the legislature does with respect to higher education budgets and react accordingly with a possible amendment.”

Brad Baca, Western State vice president for finance and administration, said, “Most likely, the plan and the amount of tuition flexibility proposed will be indexed against varying scenarios of state support.”

The commission is scheduled to return to the allocation issue at its next meeting, scheduled for Aug. 5 at Front Range Community College in Westminster.

At a June 17 meeting, commissioners discussed guiding principles for proposed allocation of state funds. The key elements of that document were based on whether state support in 2011-12 is below or above $500 million.

If state funds are less than $500 million, DHE staff propose using a “total revenue” model that would “allow institutions better positioned to utilize tuition flexibility to do so while protecting core functions at community colleges and institutions less able to leverage tuition flexibility.”

If state funding is above $500 million, DHE staff propose using a blended model for allocating funds to individual colleges, taking into consideration prior year funding, ability to raise tuition and enrollment changes. (Read document.)

At a lightly attended meeting on July 8, DHE Chief Financial Officer Mark Cavanaugh presented the commission with more detailed scenarios.

In a worst-case scenario of $450 million in state support for 2011-12, a proportional cut would mean each school would lose 30.2 percent of the state and stimulus funding it’s receiving this year.

The cuts would vary if more state money is channeled to institutions with less ability to raise tuition. Under that model, cuts would range from about 41 percent for the School of Mines and the CU system to a low of 17.2 percent at Western State College. In theory, institutions that received less state support would raise tuition to make up the difference.

Cavanaugh also presented options for $550 million, which still is less than this year’s budget for higher ed. “Fiscal year 11-12 is going to be rough year,” Cavanaugh told the commission. “It’s a very difficult thing to know what that number [state support] is going to be.” (See the full document here. EdNews summary is below, and the story continues after the chart.)

Allocation of state support among colleges is an issue fraught with contention, because every institution and system zealously protects its own financial interests and is quick to see harm in proposals that shift support among campuses.

Leaders of community colleges and Metro, for instance, point out that they draw historically under-served groups of students and have had the largest enrollment growth. They believe funding allocations in recent budgets haven’t accounted for that growth.

Jordan told EdNews, “It seems to make more sense” to use the tuition-adjustment model and funnel more state support to institutions like his that “don’t have the ability to do that cost shift” – raising tuition and then using revenue from wealthier students to subsidize financial aid for poorer students.

Research institutions, particularly the CU system, argue that their ability to raise tuition much more is limited, that they’re key drivers of the state’s economy and need support for high-cost professional programs such as those on the Anschutz Medical Campus.

CU President Bruce Benson

CU President Bruce Benson said in an interview that proposed allocation formulas often slight the needs of high-cost programs like Anschutz and the CSE veterinary medicine program. “People keep disregarding the major assets of this state … in their formulas.”

Smaller outstate institutions like Adams State, Western State, Mesa State and Fort Lewis colleges point to the services they provide to their regions and their inability to significantly raise tuition, given the kinds and numbers of applicants they attract.

Community college leader also are reluctant to raise tuition because of their open-access mission and the large numbers of low-income students they serve.

Taking the long view
While CCHE is wrestling with immediate budget issues, a collection of other panels (which include several commission members) is working on a long-term strategic plan for higher ed, including how to pay for it.

The Higher Education Strategic Planning Steering Committee also is discussing the idea of concentrating scarce state dollars at some colleges while allowing otherss to rely more on tuition.

The steering committee meets Aug. 3 to begin narrowing down possible recommendations.

“They [CCHE] ought to look at tuition-raising ability,” Benson said, but he suggested that more institutions than CU, CSU and Mines could afford to raise tuition rates, which he said in some cases lag behind costs at similar institutions in other states. “There is a capacity to raise tuition.”

The window for making budget recommendations is a relatively narrow one. The executive branch must make its 2011-12 budget recommendations to the JBC by Nov. 1, and the panel begins hearings on the 2011-12 budget shortly after that.

In the meantime, there’s going to be lots of rhetorical jostling in the higher ed community.

“Yes,” Benson said with a chuckle, “we’re going to have some serious discussions.”

While they’re debating allocations, institutions and CCHE also face an even grimmer financial assignment. SB 10-003 requires them to prepare plans for what they’d do if state support is cut by 50 percent in 2011-12. Those reports, to be coordinated by CCHE, are due Nov. 10.

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