Robert Reichardt, the former director of the Center for Education Policy Analysis at CU-Denver’s School of Public Affairs, is president of R-Squared Research, LLC, a local research firm.
The Lobato case is a win for Colorado K-12 education. It adds weight to the call for increased funding to K-12. But it is probably a loss for higher education in Colorado. If we need to add money to K-12 education then it must come from somewhere.
Over the past decade, higher education has been the place to cut when money is needed for K-12, healthcare, human services and corrections. And in some ways this makes sense: higher education has access to another source of funding (tuition) which makes it easier to maintain operations. However, the trend is clear (with or without Lobato): unless we find a new sustainable source of money for higher education, state support for higher education will drop to near zero within the decade.
What we need
We need a new, increased source of funding dedicated to higher education. We need a funding stream $750 million to $1 billion per year to replace the current, but dwindling, $650 million that comes from the state’s general fund. This new source of funding will not occur without legislative and voter approval. Key to voter approval is a conversation about options for funding higher education, and I hope this blog adds to that conversation.
In October 2011 Tim Foster, president of Colorado Mesa University (CMU, formerly Mesa State College) put forward his “A Public Good” plan to create a funding stream for CMU. This basic plan is for the state to borrow money to create an endowment for CMU and a (hopefully) secure stream of funding from investing this endowment in the bond and securities market. This plan essentially locks the state into a 20-year obligation to pay off the bonds. When the bonds are paid off, the state ends its financial obligations to CMU.
If applied to the entire state, the yearly cost of paying off the bonds is close to the current level of state funding for higher education. Challenges with this plan include it is risky to higher education institutions (relying on the market for funds) and reduced taxpayer control over the institutions as they “own” their endowments.
Connecting money to control
I suggest another idea that builds off of the recommendation of the Higher Education Strategic Plan published in 2010 as well as the performance contracts and College Opportunity Fund (COF) that are currently in place. Key to these plans is connecting money with a sense of public control over how the money is used: people want to know what they get for their money. I propose a combination of governance (i.e. elected boards) control over institutions and dedicating funding to particular activities in exchange for higher property and severance taxes.
On the activity side, we should explicitly link the majority of new funding (70% or so) to student scholarships so that people know where the money is going. The scholarships would build on the COF but have more flexibility in terms of requirements for students to get the money (maybe higher stipends for higher ACT scores) and matching scholarships to institutional goals (maybe higher stipends for engineering students). The remaining funding should be split between contracts for graduate services (medical and veterinary schools, research, and service) and funding for capital infrastructure.
A very back-of-the-envelop calculation suggests an overall state increase in property taxes by two to three mills should raise between $170 million and $250 million for two and four year regional institutions (i.e. community colleges and regional institutions such as Fort Lewis, Mesa, Adams, Western and CSU Pueblo). The property taxes should be linked to a governance change through locally elected boards each region. This board would have authority over the how the funds are used, determining:
- How people qualify for scholarships and their amounts;
- What are the contracted services (few are expected); and
- The nature of the infrastructure investments.
And each board should have the authority to ask to raise property taxes in its region.
The statewide institutions (CSU, CU, Metro, Mines and UNC) should also have a dedicated pot of funding that is a combination of property taxes and severance taxes. Another two to three mills of property tax should go to these statewide scholarships. An increase of three percentage points on the severance tax could raise another $200 million for contracted services. Here the amounts and contracts would be negotiated between the state (Colorado Commission on Higher Education) and each university’s governing board.
Taken together, these are big changes that will face a lot of political headwinds. The goal is to increase higher education funding while giving voters more control over the use of those funds. It upsets the current governance structure of higher education institutions, adds a new statewide property tax (which would increase statewide property revenue by about 7 percent) and significantly increases severance taxes. But the size of the fiscal problem is huge and it will require big solutions.
A wide-ranging conversation about solving the higher education funding problem is needed if we hope to actually reach a solution. Hopefully, the conversation will continue.