Welcome back, the next section of this lecture will provide an overview of the
finance and policy challenges facing the Academy. This section aligns with the
readings around the midpoint of the semester, in which from a journal article
perspective we will dive into those factors that provide the historical
foundation as well as the modern evolution of the change in the social
compact with our nation's educational system. I contend that in the sixties,
seventies, and eighties that our universities and colleges had a social
compact with the nation in which it was the responsibility of states to fund the
significant portion of operating costs. Now that social compact has been
undermined, as students and parents are look to cover a greater cost of the cost,
a greater cost of the operations of our institutions. But where do we find
ourselves presently, where do we find ourselves from an economic perspective
here in 2016 as we're preparing for the start of the fall semester? The slide
talks about how outside entities view our industry, those outside entities
being bond rating groups, Moody's and Standard course. You see in the first
slide that Moody's Investor Services notes the difficult financial future
facing public colleges and universities. They see that flagship institutions have
the positive ability to weather uncertain winds but regional institutions
and community colleges really are finding a situation in which their growth and
expenses is outpacing their revenue growth, and those two different tracks
are unsustainable. That finding is also reflected in the Standard & Poor's quote
that's contained in bullet two that states " unless colleges and
institutions are able to distinguish themselves in the marketplace, that they
will weaken their demand and cut into their enrollment over time." What you're
seeing
ladies and gentlemen, is essentially the privatization of our nation's public
system of education.
We're also seeing, unfortunately, the closure of many public and private
universities.
Each week, if you pick up the chronicle, you will either see an article on downsizing
or you will see an article on institutional closure. In my former state of West
Virginia, West Virginia Tech, located in Montgomery has closed and relocated to
Beckley and hopes of moving its location to a greater enrollment base. Mountain
State University in Beckley has closed and as you look across the country you
see with repeated frequency, stories of small regional institutions, small
private institutions closing because they're no longer able to sustain their
place in the higher education market. This slide is a slide that I put
together a long time ago for Dr. Rota when I was on his staff, and it's a
slide that I've continue to update because it tracks over time that shift
in the social compact for our state institutions and for those states who
comprise the members of the Southern Regional Education Board. SREB, those sixteen
states, are outlined in blue, you can see that in 2000-2001 about sixty-six cents on the
dollar of what it took to run an institution the SREB was provided by the
taxpayers of those states, that number is forty-three cents on the dollar for 2014. Here in
the state of Tennessee, sixty-one cents on the dollar in 2000, now thirty-nine cents on the dollar
in 2013-14 and that number will continue to turn downward. So you really see the
shift here that paradigm shift of a public good to a private good being
epitomized it means through which states provide support for their system of
post-secondary institutions. Here's that slide disaggregated for the 16 states
who comprise the membership of the SREB you can see that on average, across the
SREB, institutions have about fourteen thousand seven hundred and eighty
dollars to run their operations, this is data for university sector institutions.
within the state of Tennessee that numbers 14,310, but you can
compare and contrast the reliance upon different sectors of revenue by state. So
North Carolina, which has historically supported its institutions from the
stateside coming in at 9,500 dollars per FTE and six thousand dollars per ft in
terms of net tuition revenue,
contrasted against the state of South Carolina who has really put all of their
emphasis on the privatization side of the equation through tuition fee
revenues. I want to talk a little bit about how states support universities,
I've referenced in a prior section of the lecture performance funding 2.0.
A system through which institutions are rewarded for outcomes, but this slide
talks a little bit about how states have historically supported their colleges
and universities. In the late 1960s the state of Texas developed the Texas model,
a model that rewarded institutions based on the number of students that were
enrolled. Those students were weighted at different levels based upon zip code, CIP
codes, the taxonomy for classification of academic programs, with the
recognition that some programs such as nursing and engineering costs more than
programs such as my discipline in political science. So Texas put together
a mathematical model that provided recognition of differential weights,
differential cost, differential class sizes, but then through that mathematical
model was able to generate a predicted level of funding required to support the
institutions within its state. That concept became the base for
institutional funding across the nation and for decades was the base through
which institutional funding was provided within the state of Tennessee.
However, as states begin to realize their challenges of supporting that model,
other models began to emerge. Within the state of Kentucky and then within West
Virginia they developed peer models in which an institution is compared to its
funding peers and then there's an aspirational target or midpoint for
which funding would be recommended and that was a level of funding that would
be provided to a university. So for example, if the university of kentucky's
funding peers included UT, Florida, Ohio State, etc, you take those 20
institutions, develop their overall per FTE state support, examine Kentucky in
comparison to that level, and then the difference would be what the
University of Kentucky would submit to the state in terms of a funding request.
When I was in West Virginia, we had a similar model, a peer equity model, in
which each institution had a peer target and then I would go before the General
Assembly each year and make a request to close that gap between the institution
and its peers. That model on the surface worked because the primary driver of
costs within higher education are the individuals who comprise the heart of the
Academy, our faculty and staff, so seventy percent of your costs are related to
faculty staff salaries, that can be benchmarked against peers. If you are
trailing peer institutions in terms of state support, then it's not a gigantic
leap of faith to assume that you're trailing peer institutions in terms of
faculty staff salaries. So from a base ability perspective, this model held its
own the better part of 10 to 15 years. However, with the advent of the focus on
completion with groups such as the Lumina Foundation, the Gates Foundation,
and others putting a significant policy access on completion
institutions led by the states of Indiana and Tennessee shifted their funding
formulas, moving away from the old Texas model to develop a model predicated on
outcomes. As you can see from the literature references, the McKewon-Monk in
2009, thirty-six states use some form of funding guidelines to shape their allocation and
according to a complete college Tennessee report in 2011 Indiana,
Tennessee, West Virginia, Ohio, and Kentucky are developing new formulas with
Tennessee and Indiana taking the lead in this 2.0 funding paradigm and
outcome. Here are the basic models of the funding formula within the state of
Tennessee. Here are state appropriations for institutions in the UTTBR and
Community College systems across the state, and this chart to me is I think
really really powerful and I would encourage you to spend some time with it
because what it shows is that just on the face value
the state has increased its investment in post-secondary education. I've
highlighted East Tennessee State University for example. So we received
about 45 million dollars in state support for the base aspects of the
institution, not college of medicine, or
our other affiliated health units, but for the base aspects of the university.
In 2014-15 that number had increased by 3 million, overall you see about a
hundred million dollar increase in terms of support for the system over that time
period, so from a laypersons perspective they look at this chart and say well the
state's investing more in higher education.
What's missing from that however is the fact that that support is being utilized
to supplement the education of more students so as the system has grown what
we have witnessed is that level of support is actually diminishing overtime,
this is a chart that then Chancellor Morgan provided to the Board of Regents
in the fall of 2014. With the Chancellor looked at all dollars in state
plus student generated revenues, the blue bars represent error, the stimulus money
that we receive during the downturn and what for me is important to note
here is that in 1986, the year that I was a freshman in college,
the state had about 15,000 dollars per student to support the operations of its
universities. Now, in 2014
we have about fifteen thousand dollars to support the operations of the
university's. So even though from a raw dollar perspective the state is
investing more in its institutions, from an operational perspective we the
faculty staff at ETSU, you at your respective colleges, are essentially
operating with a constant amount of dollars over a 30-year time period. So when we
talk about affordability, when we talk about tuition price increases, when we
talk about state investments, you really have to preface that on a per-student
basis because as enrollment has grown it takes more faculty, it takes more staff,
it takes a larger infrastructure to support that larger enrollment base. So
shifting gears a little bit, let's talk some about price. So these slides hit on
the state investment portion of the equation. Talk about price, affordability
is on the tips of anyone's tongue who has a child going to college, who they
themselves are enrolled, or who they're preparing to send a child to college.
This charges chart that's conveyed in public media all across the nation,
an upward trend with each passing year college becomes more and more expensive,
but what's complicated from a descriptive perspective is that in the community
colleges, college somewhat is still affordable, college doesn't cost thirty-
six thousand dollars which is the average price at a private institution
or doesn't cost an excess of 60 thousand dollars which is what it would cost to
send your son or daughter or yourself to George Washington University. The next
slide shows in-state tuition fees for those states that comprise the SREB, and
you can see on average those numbers are far below the significant dollar figures
that you saw for private institutions. So in places like Tennessee and in the
year reported here, seventy-five hundred dollars in tuition fees. I know that the slides a
little dated, but it's the most recent information available from SREB for
which I have comparative lens to examine a state-based tuition and fees. As a point of
context, tuition at ETSU this fall is 8500 dollars. Here you see Tennessee
compare to SREB data, but here's the other end of the coin, affordability.
You can see the purchasing power of the pell over time, so as we've increased
tuition and fees, the purchasing power of pell has not been able to maintain pace
with fee increases. As a result, more students are borrowing. At our university
almost forty percent of the students who graduate graduate with debt and that
average debt load is twenty-three thousand dollars per year. In terms of
the amount that students borrow each year you can see within the state of
Tennessee the average student borrowers about 4,600 dollars per year to help
offset the cost of college. But a point that I alluded to earlier with respect
to ETSU data is now conveyed here with respect to the state of Tennessee as a
whole,
forty-one percent of the students who enrolled in our state's post-secondary
system are pell recipients. So we must be mindful of tuition and fees as we look
to that issue of balancing access, the first public priority of higher
education, with affordability, the environmental lens through which this
portion of the lecture is covering.
So I'm going to pause for a second, take a break, and then come back and touch
upon ways through its institutions, be they community colleges or universities,
can look to examine aspects to realize cost savings. So I look forward to you
joining me in the next section of the lecture. Thank you.