Preserving Access with Preserving Access with Excellence:Excellence:

Financing for Rural Community Colleges

By Stephen G. Katsinas

Don A. Buchholz Chair and Director

Bill J. Priest Center for Community College Education

Organization of the presentationOrganization of the presentation

INTRODUCTION: ACCESS AND EXCELLENCE STATE FUNDING: FROM “DOING MORE WITH

LESS” TO SIMPLY DOING LESS FUNDING ISSUES FOR RURAL COMMUNITY

COLLEGES: THE STOOL WITH A MISSING LEG  KEEPING COMMUNITY COLLEGE AFFORDABLE:

LOW TUITION AND FINANCIAL AID RECOMMENDATIONS FOR STATE AND FEDERAL

POLICY

Introduction: The “Big Picture”Introduction: The “Big Picture”

1. State investment in public HIED after Vietnam. Legislative distrust = categorical funding increases and declining operating budgets.

2. Federal student aid has not kept pace with costs.

3. A shift in what aid is available, from direct aid to students (grants and work) to loans.

4. Workforce training did not make up state cuts.

STATE FUNDING: STATE FUNDING: FROM “DOING MORE FROM “DOING MORE

WITH LESS” TO WITH LESS” TO SIMPLY DOING LESSSIMPLY DOING LESS

For rural community colleges…a For rural community colleges…a 4-legged stool with a missing leg4-legged stool with a missing leg

In an era of state disinvestment, rural CCs get MUCH less local revenues than their urban and suburban counterparts

States assume funding formulas provide adequate foundation, yet state disinvestment has eroded that base, producing fundamental contradiction

STILL, states, regions, & communities expect MORE from their rural community colleges

Respondents from 21 of 29 functioning Statewide Respondents from 21 of 29 functioning Statewide (Governors) Human Resource Investment Councils (Governors) Human Resource Investment Councils

in ’96.in ’96.

*67% agreed community colleges offered a broad array of excellent workforce training programs for recent high school graduates.

*63% agreed their state's community colleges a good job of preparing workers with work readiness skills.

*83% believed community colleges should provide developmental education

*65% believed states should finance dev. education if federal funds cannot

*Yet 25%–-a significant minority--were unsure if adequate funding existed to support CC involvement in workforce development, plus other missions..

*And 55%believed funding for CC workforce training was inadequate. Konz, Thomas A. A Study of the Perceptions of Community Colleges of Members of Statewide Human Resource Investment Councils in 22

States. PhD Dissertation, University of Toledo (June, 1997).

The two new claimants on state dollars The two new claimants on state dollars since Vietnam are Medicaid and since Vietnam are Medicaid and

prisons…prisons… In Ohio, in 1969-71 biennium, elementary and

secondary education received 38% of state budget, and higher education received 17%; by 1996 those percentages were 23 and 10%, respectively.[1]

In Oklahoma, for the period 1985-1993, state spending increases on Medicaid averaged 15.5% each year. [2]

Nationally, 300,000 state and federal incarcerated in 1980. By 1990, 700,000; by 2000, 1.2 million. [1] Johnson, J.L, & Katsinas, S.G. (1999). A Study of Higher Education Finance and Outcomes in the Great Lakes States, with Emphasis on Ohio, The Toledo Journal of the Great Lakes.

[2] Katsinas, S.G. "Is the Open Door Closing? The Democratizing Role of the Community College in the Post-Cold War Era." in Community College Journal, April/May, 1994.

Federal investments in all levels of

education declined by 14.4% in constant,

inflation-adjusted dollars between

1975 and 1990.SOURCE: U.S. Department of Education, National Center Education Statistic, Federal Support for Education: Fiscal Years 1980 to 1997, NCES

97-383, Washington DC, September 1997, p. 15.

While these drivers of new state funds, Medicaid and corrections, are well understood by state leaders in both parties, their massive costs have resulted in significant long-term shifts in state budget policy.

These shifts are not well understood by the general population.[3]

From doing more with less, to From doing more with less, to simply doing less…simply doing less…

According to NEA’s 2000-1 survey, when state legislative were asked whether they thought the current level of state funding for higher education in their states was adequate to meet current state needs, over three-quarters of them responded "no."

...In explanation, many said that the state's economic and workforce development goals have contributed to setting an ambitious agenda for HIED that includes a variety of long-term costly priorities designed to expand capacity and maintain quality in the system as well as to accommodate changing enrollment demands.

From doing more with less, to From doing more with less, to simply doing less… (continued)simply doing less… (continued)

“…Many legislators also referred to HIED's traditional role as the "budget balancer" as a related issue that has fed their concerns about the level of state funding…Most are well aware that HIED, as the single largest discretionary item of state budgets, has been subject historically to widely fluctuating funding cycles, faring better than other major spending categories in good economic times and disproportionately worse in a downturn. Moreover, even as the total amount of state appropriations for HIED has steadily grown for much of the last decade, the percentage of state general fund budgets allocated to HIED has continued to shrink, from 14% in FY1990 to 11.7% in FY2001.

State support for higher education State support for higher education has declined since the Vietnam has declined since the Vietnam

WarWarIn 1996, the report of the Commission on National Investment in Higher Education,

"Breaking the Social Contract, the Fiscal Crisis in Higher Education, co-chaired by Joseph L. Dionne, Chair and CEO of McGraw-Hill and Thomas Kean, President of Drew University and former two-term governor of New Jersey, was released:

“While both enrollment and costs have increased rapidly over the last two decades, public funding of the [higher education] sector has not kept pace. Total public appropriations to higher education from federal, state, and local sources in real terms--that is, adjusted for inflation--per student (by which we always mean FTE student) relative to 1976. ...public support per student has just kept pace with inflation, but real costs per student have grown by about 40 percent.

…In effect, the United States has been underfunding higher education since the mid-1970s.”

FUNDING ISSUES FOR FUNDING ISSUES FOR RURAL COMMUNITY RURAL COMMUNITY

COLLEGES: THE COLLEGES: THE STOOL WITH A STOOL WITH A MISSING LEGMISSING LEG

IN GENERAL….*Rural community colleges have a much smaller budget

base over which to spread program costs.*Rural community colleges have fewer sources of

revenue; in general the smaller the college, the lower the amount of local tax appropriations and the greater the dependency upon state funding.

*Workforce development programs at rural colleges are a significant but largely stagnant revenue source, and endowments are nearly nonexistent.

* Rural community colleges receive significantly lower total funding from tuition and fees

Enrollment Rises as % of State Funding Enrollment Rises as % of State Funding Drops Drops

(expressed in 1997 dollars)(expressed in 1997 dollars)

Small Medium Large FY93 FY97 FY93 FY97 FY93 FY97

State 49% 44% 43% 42% 38% 37%Local 4 4 9 8 13 13Tuition/Fees 18 18 18 19 20 19Workforce Dev. 21% 24% 20% 20% 21% 21% Federal 1 1 1 1 - - Unrestricted & Other 7% 10% 9% 10% 8% 11%  

 TOTAL: 100% 100% 100% 100% 100% 100%  

FTE, FY93-FY97 +13% +3% +1% Average Total Budget in Dollars, and Percentage Distribution of Sources of Revenue at Community Colleges, FY 1998

•

Average Total Budget in Dollars, and Percentage Average Total Budget in Dollars, and Percentage Distribution of Sources of Revenue at Community Distribution of Sources of Revenue at Community

Colleges, FY 1998Colleges, FY 1998

Number, Average Colleges Total Budget RURAL Small (<1,000) 121 $ 5,148,867 Medium (1-1,500) 227 11,600,196 Large (>1,500) 270 24,809,916

Sub-total 618 16,101,839

SUBURBAN Single Campus 137 35,125,948Multi-Campus 57 29,401,431 Sub-Total 194

URBAN Single Campus 47 37,858,577 Multi-Campus 115 47,958,842 Sub-Total: 162

Average Total Budget in Dollars, and Percentage Average Total Budget in Dollars, and Percentage Distribution of Sources of RevenueDistribution of Sources of Revenue

at Community Colleges, FY 1998at Community Colleges, FY 1998

Tuition Work- Endow- Sales & force ment & Auxi- State Local Fees Dev’ment Income Services liary OtherRURAL Small 45% 4% 17% 25% – 1% 6% 2% Medium 42 8 19 21 – 1 7 2 Large 37 12 19 21 – 1 6 3 SU SUBURBAN Single 31 22 22 16 – 1 6 3 Multi- 32 20 24 15 – – 6 4 URBAN Single 42 8 25 18 – 1 4 3 Multi- 36 18 20 19 – 1 4 3

What do fewer revenue streams in What do fewer revenue streams in practice for rural community practice for rural community

colleges?colleges?1. Vulnerability to Economic Downturns 2. Less venture capital for new programs3. State Workforce Policies Don’t Match Rural

Needs 4. Effect of Low-Wealth Tax Districts 5. Operating Costs are Higher at Rural

Community Colleges 6. Technology Programs Are Often

Unaffordable for Rural Colleges

1. Vulnerability to 1. Vulnerability to Economic DownturnsEconomic Downturns

Since state funding is more important to rural community colleges, by definition if state funding goes down, rural community colleges hurt. Welfare, unemployment compensation, and K-12 have higher claims on scarce state funds than higher education and community colleges.

RESULT: SINCE ENROLLMENTS RISE IN RECESSIONS, RURAL COMMUNITY COLLEGES LACK THE FINANCIAL FLEXIBILITY TO RESPOND AT THE PRECISE TIME THEIR COMMUNITIES NEED THEM TO “RETOOL” THEIR PROGRAMS AND SERVICES.

2. Less venture capital for new programs 2. Less venture capital for new programs means a fundamentally different way of means a fundamentally different way of

doing business for rural community doing business for rural community colleges.colleges.

At larger suburban & urban CCs, expensive high-tech programs can be launched with part-time faculty. Leaders can see if new programs take root before committing funds to hire permanent faculty. At rural CCs, however, adjunct pool is small or non-existent.

RESULT: IN TERMS OF DEVELOPING CURRICULUM RURAL COMMUNITY COLLEGES PLAY “FIELD OF DREAMS” (BUILD IT AND THEY WILL COME) EVERY TIME. YET STATE POLICY ASSUMES AN URBAN/SUBURBAN CONTEXT, WITH LOWER UP-FRONT ENTRY COSTS FOR NEW PROGRAMS.

2. A fundamentally different way of doing 2. A fundamentally different way of doing business for rural community colleges business for rural community colleges

(continued)(continued)

Culturally, the rural context is different…when rural CC presidents and deans hire new faculty and staff, they ask people to join a community. In these more isolated communities, the rural CC is often only employer that pays at that skill level.

RESULT: RURAL CCS CANNOT EASILY LAY PEOPLE OFF JUST BECAUSE A RECESSION OCCURS, BECAUSE THEY WILL NEED SKILLED FACULTY AND STAFF WHEN RECESSION ENDS, AND GOOD STAFF ARE HARDER TO FIND.

2. A fundamentally different way of doing 2. A fundamentally different way of doing business for rural community colleges business for rural community colleges

(continued)(continued)

At rural community colleges, leaders must make programmatic choices carefully, against the backdrop of an unforgiving budgetary climate. If a high-tech grant opportunity appears, the rural CC leader must always ask “Can we cover the costs for staff when the grant funding runs out?”

RESULT: THE GENERAL EFFECT IS TO PROMOTE EXTREME BUDGET CONSERVATISM IN PLANNING NEW PROGRAMS.

3. State Workforce Policies Don’t 3. State Workforce Policies Don’t Match Rural NeedsMatch Rural Needs

Poorly meshed state/federal workforce training policy only makes matters worse for rural CCs. Each program requires a state plan for expenditure be submitted to the appropriate federal agency. State planners assume that maps match, but in rural areas, they don’t.

RESULT: “TURFISM” LESSENS ABILITY OF RURAL CCs IN ACHIEVEMENT OF STATE ECONOMIC DEVELOPMENT GOALS GENERALLY, AND WELFARE-TO-WORK, ADULT LITERACY, AND WORKFORCE TRAINING SPECIFICALLY.

3. State workforce policies don’t 3. State workforce policies don’t match rural needs (continued)match rural needs (continued)

Unless consistency in geographic service areas exists across all workforce programs—which rarely occurs--rural CCs with 5 counties might have 2 or 3 workforce investment councils…on top of county, region, and state job training, welfare, and literacy agencies…& city, county, and regional economic development authorities

RESULT: INABILITY OF STATES TO ASSIGN COMMON SERVICE AREAS ACROSS ALL PROGRAMS CREATES FRAGMENTATION, REDUCING INCENTIVES FOR RURAL CCs TO BE ACTIVE IN ECONOMIC DEVELOPMENT.

3. State workforce policies don’t 3. State workforce policies don’t match rural needsmatch rural needs

For rural CCs serving economically depressed areas--which themselves are challenged by smaller economies of scale—mismatched policies make it all the more difficult to provide access to continuous training and lifelong learning programs and services that rural Americans need.

RESULT: THE LACK OF ECONOMIES OF SCALE IN HIGHER EDUCATION FUNDING IS MIRRORED IN STATE WORKFORCE TRAINING POLICIES, YET RURAL CCs HAVE NOT CHOICE BUT TO WORK WITH THE MISMATCHED POLICIES AND PROGRAMS

3. State workforce policies don’t 3. State workforce policies don’t match rural needs (continued)match rural needs (continued)

Often, policy and program practice for adult literacy, welfare-to-work, and job training programs assume an urban context. In no area is this more consistently prevalent than as it relates to transportation accessibility.

RESULT: MOST STATE WORKFORCE POLICIES ASSUME AN URBAN CONTEXT, YET PUBLICLY SUBSIDIZED MASS TRANSPORTATION SERVICES DO NOT EXIST IN THEIR RURAL AREAS.

In 1973, John Lombardi, Chancellor of In 1973, John Lombardi, Chancellor of LACCD wrote "slowly but surely, CCs LACCD wrote "slowly but surely, CCs

are becoming dispensers of social are becoming dispensers of social welfare.”welfare.”

The evidence is limited and mixed as to impacts of economic investments in the community college as a social service agency. James Palmer observed

“The desired advantages of these funding arrangements (for social agency programs) may not be realized if hidden costs remain unrecognized in funding mechanisms. These costs are incurred through the paperwork burden of government contracts, the strictures within legislative mandates that impede responsiveness to local needs, and the tendency to involve colleges in noneducative work for which the institution may be ill suited. ...Although colleges must remain accountable, there is a point at which staff investment in paperwork endangers program effectiveness. There is also a point at which legislative strictures diminish college responsiveness to local needs. This responsiveness will be endangered to the extent that funding is tied to specific, centrally prescribed actions rather than to desired outcomes.

4. Effect of Low-Wealth Tax 4. Effect of Low-Wealth Tax DistrictsDistricts

Combination of political realities & environmental and geographically-related conditions not found in urban and suburban CCs explains low tax rural CC districts. Many state CC enabling laws were based upon flawed assumptions, assumptions that 40 years of practice have only magnified. TX, OH, MS are all examples of this.

RESULT: LOWER ABILITY OF RURAL CCs TO PROVIDE BOTH ACCESS AND ECONOMIC. DEV.

4. Low-Wealth Tax Districts (continued)4. Low-Wealth Tax Districts (continued)

The 90 rural community colleges that serve the 319 most economically distressed counties are severely challenged. For them and for presidents and boards of the other 400 small- and medium-sized community colleges in rural America, infuriating local voters to tax themselves when the financial payoff is so low is not politically viable.

In sharp contrast, a levy of only half a mil in 1994 to support the 10 campuses of the Maricopa Community College District produced $394 million in new revenue.

A 1999 national survey of rural CC A 1999 national survey of rural CC presidents revealed…presidents revealed…

66% agreed with the statement, "My state's funding process doesn't recognize higher costs of 'doing business' (just opening the door) at rural community colleges."

RESULT: Given their much lower local assessed property valuations, rural CCs operate without a key funding stream. Here state policy can make a critically important difference, and investment is justified if the rural CC is to become a full partner in economic development & access capacity building activities for rural areas of the states.

5. Operating costs are higher at 5. Operating costs are higher at rural community collegesrural community colleges

Rural community colleges – especially smaller institutions with enrollments below 2,500 -- have higher expenditures per full-time students than suburban or urban community colleges. These greater diseconomies of scale are consistent with a long line of work in the area of higher education finance by experts Howard R. Bowen and Kent D. Halstead in the 1960s and 1970s.

BUT SUCH DISECONOMIES OF SCALE ARE RARELY REFLECTED IN STATE POLICY DEVELOPMENT OR FUNDING

5. Operating costs are higher at 5. Operating costs are higher at rural community colleges rural community colleges

(continued)(continued)A 1999 national survey of rural community college

presidents revealed that 66% agreed with the statement, "My state's funding process doesn't recognize higher costs of 'doing business' (just opening the door) at rural community colleges."

RESULT: Given their much lower local assessed property valuations, rural CCs operate without a key funding stream. States can promote equity by creating tiers of per-FTE funding for small, rural colleges, particularly for institutions with less than 2,500 FTE students.

Financially, rural community Financially, rural community colleges are four legged stools colleges are four legged stools

with missing legswith missing legsSeveral states have some provisions in

their funding systems to reduce discrepancies, but most are not substantial enough to get the job done, or only cover one small area of the total funding picture.

It is worth noting here that no state holds small, rural CCs to any lesser standard in meeting the myriad of state rules, procedures, and accountability standards.

Financially, rural community Financially, rural community colleges are four legged stools colleges are four legged stools

with missing legswith missing legsIn state after state, the ability of CCs to make a

difference in both access and economic development is tied to a) access to a strong local property tax base, and b) the willingness of local voters to tax themselves. As CC missions have been broadened, the higher costs of just opening the door and hidden costs of meeting diverse state policy objectives--most notably in the economic development arena--are not reflected in state budgeting for rural CC operating budgets.

6. Technology Programs Are 6. Technology Programs Are Often Unaffordable for Rural Often Unaffordable for Rural

CollegesColleges.. Over 50% of rural CC CEOs in 4/99 national

survey agreed with statement, "My state's funding formula promotes high volume, low cost academic programs for rural areas, not lower volume, higher cost technology-oriented programs."

Many state funding formulae have no gradients of cost for expensive allied health, nursing, & eng tech programs, and CCs run high cost programs as “loss leaders.”

RESULT: But with a much lower budget base to spread costs over, rural CCs must offer a much more limited curriculum. They cannot afford loss leaders, period.

6. Technology Programs Are Often 6. Technology Programs Are Often Unaffordable for Rural Colleges (continued)Unaffordable for Rural Colleges (continued)..

Similarly, rural colleges are hard-pressed to keep up-to-date on information technology. Said one rural community college dean of instruction,

"When it comes to instructional technology, we are in an arms race we are destined to lose." Software firms will look to large, multi-campus community colleges for test sites for new product development; they don’t look to partner with small, rural community colleges like us."

6. Technology Programs Are Often 6. Technology Programs Are Often Unaffordable for Rural Colleges (continued)Unaffordable for Rural Colleges (continued)..

Yet high cost programs are often highest in demand, and produce the best prospects of high wages upon graduation. Rosenfeld and others have argued that such programs are key to assisting with economic development in depressed rural areas.

Why rural CCs matter…Why rural CCs matter…a great a great dealdeal

If state and federal policies are to ameliorate persistently low adult educational attainment rates in rural America, the rural CC’s capacity to provide access and economic development is of critical importance. Data from Thomas Mortensen reveal a purchasing power decline of nearly 30% for persons with less than a high school diploma, adjusted for inflation, between 1979 and 1997. [2]

The premium for college attendance has never been greater, yet Census Bureau data show persistently lower rates of adult educational attainment (and therefore, lifetime earnings) among adults from rural, when compared to urban and suburban areas.

Yet the rural community college—long one of the most important institutions in rural America—is clearly the most important institution when it comes to providing access for adults to lifelong learning. How does a regional economy provide computer literacy services on a mass basis to an entire workforce? This is not the role of the land-grant universities with their focus on research and discovery, nor is it the mission of the great regional universities that grew from teacher’s colleges with their contributions of teaching. It is the function of the multi—purpose comprehensive community college. And in rural America, where small manufacturing entities are key to rural development, it is the rural community college that must provide leadership in delivering lifelong learning, both for traditional transfer and career education.

In summary….In summary….

At a time when states need their CCs to be doing more to reach ever more people, to leave no one behind, state funding for CCs is at best flat, even though enrollments grow ever larger.

Rural America has traditionally suffered from lower rates of adult educational attainment, necessitating greater outreach by rural community colleges to the elementary and secondary educational systems.

Will the funds be there to do this critically important work, on top of access to baccalaureate transfer and lifelong learning/workforce training?

  KEEPING KEEPING COMMUNITY COMMUNITY

COLLEGE COLLEGE AFFORDABLE: LOW AFFORDABLE: LOW

TUITION AND TUITION AND FINANCIAL AIDFINANCIAL AID

Federal student aid & rural CCs: Federal student aid & rural CCs: Reinforcing inequitiesReinforcing inequities

Hope Scholarships reimburse students for up to $1,500 a year–about the average of CC tuition nationally in 1996. However, this tax credit is designed for middle-income students--one must generate income to take a tax deduction (students or their families must have taxable incomes in excess of $1,500 AND cash on hand for tuition, only to get reimbursed by Uncle Sam later on).

RESULT: For poor students and families, each new paperwork and financial hurdle to be crossed eliminates opportunity.

Average Awards of Federal Direct Student Aid Average Awards of Federal Direct Student Aid Grants (Pell, SEOG & SSIG) for Undergraduate Grants (Pell, SEOG & SSIG) for Undergraduate

Students, 1996Students, 1996

1994 Carnegie Income of <$30,000 Income of $30-60,000Classification Award Percentage Award PercentageResearch Universities Private $ 2,808 49% $ 1,423 13%

Public $ 2,005 55% $ 1,090 10%Doctoral Universities Private $ 2,352 59% $ 1,352 13%

Public $ 1,754 57% $ 1,141 11%Comprehensive U’s Private $ 2,235 62% $ 1,438 N/A

Public $ 1,875 60% $ 1,438 12%Baccalaureate C&U’s Private $ 2,337 74% $ 1,357 18%

Public $ 1,684 58% $ 1,198 10%Associate of Arts Colleges

Private, Non-Profit $ 1,846 65% $ 1,170 17%Private, For-Profit $ 1,590 73% $ 1,010 12%Public $ 1,567 34% $ 941 5%

What accounts for these striking What accounts for these striking differences in federal student aid?differences in federal student aid?

First, federal policy typically assumes dependent students attending 4-year institutions live on-campus; that same policy assumes CC students live at home.

Second, federal policy assumes students live on campus, and don’t need transportation (because of availability of mass transit, which is non-existent in rural areas).

Third, federal policies assumes students attend full-time. Yet 60% of all US CC enrollments are part-time students. Thus, the poorest students clustered at public CCs receive the smallest dollar amounts of direct federal grant aid.

The result: The result: Inequity!Inequity!

Only 34% of community college students receive grant aid, compared to 65% for private-for-profit two-year institutions, and 74% for students attending private for-profit four-year institutions like the University of Phoenix. Put differently, federal direct grant support has promoted an individual benefits as opposed to a social benefits model, and does not promote equity.

Built-in advantages for private Built-in advantages for private institutions (particularly for-profit), institutions (particularly for-profit),

over CCsover CCs Public institutions cannot discount their published

tuition and fee charges, while private colleges can. This is why 34% of students attending public CCs receive direct grant aid, compared to 65% at 2-year for-profit and 74% at 2-year non-profit.

Tuition policy at public colleges and universities is set by public boards of trustees influenced heavily by state policy. Private tuition is heavily influenced by aggressive admissions officers who discount tuition as a matter of course.

High tuition/high aid doesn’t work High tuition/high aid doesn’t work at the federal or state levels.at the federal or state levels.

The emphasis on choice (tax credits and loans) as opposed to direct grant aid (Pell and SEOG) by the federal gov’t has promoted higher tuition at public universities and CCs at the state level. The heart of the “high tuition/high aid” model is that the primary benefits of higher education accrue to the individual, therefore individuals should pay all or nearly all costs for benefits received. Increased tax credits and loans favor higher income students served by public flagships like U of N Carolina, not institutions that serve large numbers of first-generation-in-college students like Appalachian State University or rural CCs.

High tuition/high aid doesn’t work High tuition/high aid doesn’t work at the federal or state levels at the federal or state levels

(con’t).(con’t). The federal emphasis away from direct aid (Pell and

SEOG) toward loans has encouraged state policymakers to raise tuition to “recapture” federal funds, not unlike coming up with the 10% match for an interstate highway project.

The problem of mismatched state policies to promote access combined with federal high tuition policy is magnified when states increase tuition on an across-the-board basis, which does not take into the very different type of financial background of students served by different institutions.

High tuition/high aid comes to High tuition/high aid comes to states…states…

States increasingly invest in need-based and merit-based direct student aid programs, not low tuition and investing in public college and university operating budgets to make college accessible to all. In 1976-77, state direct student aid grant funds accounted for 4.8 percent of all state HIED appropriations; by 1997-98, it was 6.6 percent, and higher still in NE and upper midwestern states. Alexander found average award for state direct aid grants for dependent undergraduate students attending CCs was $995, compared to $2,075 for students attending private, non-profit and $2,279 for students attending private, for-profit institutions.

State inequities….State inequities….

Alexander and Hines (2001) found 31% of students receiving state direct student aid in Illinois attended CCs, but they received just 12% of funding. In other words, despite having nearly one-third of the students receiving state direct student aid in Illinois, public CC students only received $45 million of the nearly $400 million allocated to student aid programs through the Illinois State Scholarship Program.

RESULT: These important fiscal disparities emphasize the significant role tuition and fees play in government allocations of direct student aid resources. By tying aid to tuition, Pell Grants and state direct grant aid programs are not tied to real needs of students.

High Tuition/High Aid Model sounds High Tuition/High Aid Model sounds good in theory, but doesn’t work in good in theory, but doesn’t work in

practicepractice States do not increase state student aid in

recessions, nor does the federal government. More important, what is the state goal? If it’s to

have the best trained workforce possible, policies should increase as much as possible college going rates within their states for traditional aged students and older adults as well.

REALITY: Students at CCs generally, and rural CCs specifically, must earn a living and make care and child care payments in order to survive. State policy should recognize the reality of part-time working students.

Low tuition tends to result in Low tuition tends to result in higher college going rateshigher college going rates

Tuition Enrollment as % of the + or - population, 18-64State Tuition Pell 2&4-Yr CCsIL $ 1,232 $ +1,108 9.9% 4.7%IN $ 1,937 $ + 415 8.1% 1.1%MI $ 1,529 $ + 821 9.4% 3.5%OH $ 2,261 $ + 89 7.9% 2.2%WI $ 1,840 $ +510 9.7% 3.5%

The focus of state policymakers should be related to improving the skills of the workforce broadly, so as to impact the per capita income curve. In today’s economy, growth in per capita income is tied to workforce skills, not levels of employment as in past.

RECOMMENDATIONS RECOMMENDATIONS FOR STATE AND FOR STATE AND

FEDERAL POLICYFEDERAL POLICY

1.  Recognize higher operating 1.  Recognize higher operating expenses for rural CCs in state funding expenses for rural CCs in state funding

formulas.formulas. Small, rural CCs lack economies of scale, and

necessarily have higher expenditures /FT students than other institutions. 66% of rural CC CEOs agreed with the statement, “My state's funding process doesn't recognize higher costs of “doing business” (just opening the door) at rural CCs.

RECOMMENDATION: States should consider a) providing an administrative base of $1,000,000 for every institution, regardless of size, prior to cutting up the rest of the funding based upon enrollment and cost formulas, and b) create tiers of funding that provide higher per-FTE funding for small rural CCs with less than 2,500 FTE students.

2. More operating budget support, not 2. More operating budget support, not higher tuition, to promote lifelong higher tuition, to promote lifelong

learning.learning. States should recognize that the federal Hope

Scholarships and Lifelong Learning programs are tax credits and by definition of limited value in assisting students entry into CCs and higher education. Pell Grants, Supplemental Educational Opportunity, and College-Work-Study provide actual financial assistance to students who wish to enter college. States have a vested interest in this area, because in most states policy for tuition and fee determination is outside the practical and effective control of independent boards of trustees.

2. More operating budget support, not 2. More operating budget support, not higher tuition, to promote lifelong higher tuition, to promote lifelong

learninglearning James O'Hara, ex-Chair of US House HIED

Subcommittee said “Low tuition is the best form of financial aid ever devised.”

Instead of underfunding institutional operating budgets, which in turn causes governing boards to raise tuition or cut services, states should recognize that the best way to help rural CCs is to dramatically increase their operating budgets.

RECOMMENDATION: States should dramatically lower tuition, & increase operating budgets of their rural CCs.

2. More operating budget support, not 2. More operating budget support, not higher tuition, to promote lifelong learninghigher tuition, to promote lifelong learning

Instead of underfunding institutional operating budgets, which in turn causes institutional governing boards to raise tuition or cut services, states should recognize that the best way to help rural community colleges is to dramatically increase their operating budgets.

RECOMMENDATION: States should act to dramatically lower, not raise community college tuition, and increase the operating budgets of their rural community colleges.

3. Recognize reality in federal and 3. Recognize reality in federal and state financial aid policy.state financial aid policy.

Access in rural America assumes reliable personal transportation. It is required in most cases to attend college. The lower male to female student ratios rural CCs have reflects the rational choice made by students to purchase what can generate immediate income. Federal financial aid formulas assume full-time residential student attendance, as do most state student aid programs.

RECOMMENDATION: In rural areas, students need flexibility to purchase transportation and child care with financial aid. They need support for part-time attendance, and it’s time for federal and state student aid programs to recognize this reality.

3. Recognize reality in federal and 3. Recognize reality in federal and state financial aid policy.state financial aid policy.

The public good of a public community college is clearly above that provided by a proprietary, for-profit two-year institution, and should be recognized as such in federal financial aid policy.

RECOMMENDATION: The upcoming reauthorization of the federal Higher Education Act provides an excellent opportunity for states to encourage increases in maximum Pell Grants, Work-Study, and eliminating provisions that favor for-profit institutions at the expense of open-access 2- and 4-year colleges.

4. Target funding to promote high-4. Target funding to promote high-tech programs in rural areas.tech programs in rural areas.

Over half of rural CC CEOs responding to an April, 1999 national survey agreed with the statement, “My state funding formula promotes high volume, low cost academic programs for rural areas, not lower volume, higher cost technology-oriented programs.” Many state funding formulae have no gradients of cost to accommodate expensive programs in areas such as allied health and nursing, as well as engineering technology. In those states, community colleges run high cost programs as “loss leaders.”

4. Target funding to promote high-tech 4. Target funding to promote high-tech programs in rural areas (continued).programs in rural areas (continued).

But with a much lower budget base to spread costs over, rural CCs are necessarily forced to offer a much more limited curriculum. On top of this, the high cost program areas are also often highest in demand, and produce the best prospects of high wages upon graduation. Rosenfeld argues that such programs are key to assisting economic development in depressed rural areas.

RECOMMENDATION: The higher cost of initiating expensive high-tech programs at rural CCs should be reflected in operating budgets.

5.  Rural dispersion policy for all 5.  Rural dispersion policy for all federal & state categorical programs.federal & state categorical programs.

Flexibility, a strength of CCs, gives them the ability to respond quickly to local needs. Rural CCs, however, lack sufficient venture capital. One potential source of funding for CCs is categorical programs.

RECOMMENDATION: States can help by providing a flat base of administrative funding, and recognize higher start-up cost for technology-based programs at their rural community colleges.

5.  Rural dispersion policy for all 5.  Rural dispersion policy for all federal and state categorical programs.federal and state categorical programs.

At the federal level, expanded support for Titles III and V of the Higher Education Act, and renewal of the federal Endowment Challenge Program, can encourage private sector investment in rural community college programming.

RECOMMENDATION: The matching endowment building grant programs of the National Endowment for the Arts and the National Endowment for the Humanities should be targeted toward building the endowment base of rural CCs.

Suggested here is a rural dispersion policy, whereby all categorical programs include a rural dispersion policy, such that if the poverty rate was above a minimum level, or the population density was below a prescribed minimum people per square mile, rural institutions would receive additional points/favorable treatment in applying for federal and state categorical grants. Such policies would go far in better targeting federal and state efforts in categorical areas as diverse as nursing training programs to help alleviate the rural nursing crisis to arts and humanities funding through the National Endowment for the Arts and the National Endowment for the Humanities.

5.  Invest in information 5.  Invest in information technology to bridge digital divide.technology to bridge digital divide.

“When it comes to instructional technology, we are in an arms race we are destined to lose. Software firms look to large, multi-campus community colleges for test sites for new product development; they don’t look to partner with small, rural community colleges like us.”

--A rural CC dean of instruction

5.  Invest in information technology to 5.  Invest in information technology to bridge the digital divide (continued)bridge the digital divide (continued)

In his 1995 bestseller The Road Ahead, Microsoft Chairman Bill Gates predicted that there would be winners and losers, and that rural areas might be left behind.

Federal and state governments have special obligation to “bridge the digital divide.” Rural CCs are well positioned to provide regional leadership to technology investments in rural America, since their service delivery areas bridge counties and K-12 districts.

RECOMMENDATION: Federal efforts to provide more science and mathematics teachers to rural America within the US Dept of ED

and the NSF should target rural CCs in their delivery systems.

5.  Invest in information technology to 5.  Invest in information technology to bridge the digital divide (continued)bridge the digital divide (continued)

State policymakers should also be active participants. Texas’ Telecommunications Infrastructure Fund, created in 1999, represents a good example of targeted state funding that promotes digital connectivity across an entire state, and shows how state policy can ameliorate inequities.

RECOMMENDATION: Targeted investment by states and federal agencies is justified (if for no other reason) on the basis of the need to produce more teachers for rural America.

7. Renew State and Federal 7. Renew State and Federal Investment in Physical Plants.Investment in Physical Plants.

Physical plant infrastructure is a major problem for all of U.S. higher education. Within CCs it is acute, because most buildings were constructed during the period 1965-1980, with roofs and heating and AC systems that have lived the span of their usefulness. In addition, the first generation of CC facilities did not include infrastructure of the information age.

RECOMMENDATION: The federal government should expand Title VII of Higher Education Act, as in 1960s, with matching grants to states for HIED facilities.

8. Promote continuous education 8. Promote continuous education and skill upgrading.and skill upgrading.

Following passage of the Temporary Assistance to Needy Families (Personal Responsibility Act of 1996, or welfare reform) and the Workforce Investment Act of 1998, states have increased responsibility and flexibility in the delivery of welfare-to-work and job training programs.

RECOMMENDATION: It is time for the states to “make the maps match” in rural America as they do in urban America.