A state audit released Monday found what everybody in higher education already knows – the College Opportunity Fund program of student stipends doesn’t work as intended.
The first-ever performance audit of how state colleges and universities are funded was presented to the Legislature Audit Committee by representatives of the Sacramento, Calif.-based firm Sjoberg Evanshenk, which did the review on contract with the state auditor.
It concluded, “The shift in the funding mechanism for higher education has not been fully implemented.”
The program doesn’t work as intended because of tight state budgets in recent years, auditors found, not because the Department of Higher Education or campus administrators haven’t administered it properly.
Rather than following the funding requirements of the law, “The amount of state support provided to each institution is decided through a legislative budgeting process based on the state’s fiscal capacity to fund higher education,” not much different from what was done before the program was created, the audit noted.
The method for funding state colleges and universities was created by the 2004 legislature to replace the old system of direct state appropriations to colleges and universities.
The system has two parts. The stipends are tuition discounts for resident undergraduate students and are the same amount per credit hour at every institution. The total amount of stipends was supposed to increase annually by enrollment and inflation.
The second part of the system is called fee for service and was intended to reimburse colleges and universities for services they provide beyond educating undergraduates, such as graduate education and service to rural areas.
A key reason for the change was to exempt the higher education system from the Taxpayer’s Bill of Rights, which limits annual growth in state revenues. Those limits don’t apply to government agencies that qualify as “enterprises,” defined as entities that receive less than 10 percent of their funding directly from the state.
Technically, the College Opportunity Fund stipends go directly to students, not to institutions, so the new system allowed colleges to become enterprises. Taking colleges out from under TABOR also solved the problem of having tuition income count against TABOR revenue limits for the entire state budget.
The stipends and fee-for-service system solved the TABOR problem, as was noted by a 2009 study done for the Colorado Commission on Higher Education by the Western Interstate Commission for Higher Education, a research organization.
But, as the new audit confirmed, declining state revenues in recent years have forced the stipends to fluctuate as the legislature balanced the budget each year. Lawmakers have adjusted both stipends and fees for service to match the amount of money available for higher education in a given year.
The audit noted that total stipend and fee funding hit a high of about $628 million in 2007-08 and dropped to a low of $312 million in 2009-10.
The original stipend-and-fee funding system also required individual performance contracts for colleges and universities, which also were reviewed by the auditors.
That performance system will be replaced under a more recent state law, Senate Bill 11-052, which requires creation of a new state higher education master plan and negotiation of new performance plans. Those plans are to be hammered out this fall, and the law intends part of college funding eventually to be tied to how colleges perform on those plans.
The audit also recommended tightening up procedures for calculating individual college’s fee-for-service amounts, for verifying students’ eligibility for stipends, and for granting waivers to the program’s credit-hour maximum.
“This audit acknowledges the funding challenges which have hindered achieving some of the COF program’s goals,” said Lt. Gov. Joe Garcia, “but also notes important areas where we can improve our oversight and management of this unique and complex financing system while encouraging us to move toward rewarding performance and outcomes.”
Garcia, who met with the audit committee to discuss the findings, also serves as director of the Department of Higher Education.