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"Shared Responsibility"
Oregon's governor supports a new model for financing public higher education

By Kay Mills
Portland, Oregon

Last fall Oregon voters had before them two ballot measures that would have dramatically choked off money for state government, especially for higher education. Before the vote, George Pernsteiner, chancellor of the Oregon University System (OUS), recalled the "death by a thousand cuts" to which higher education had been subjected after state voters passed a severe property tax limitation in 1990. But this time around, voters overwhelmingly rejected the restrictive measures. Still, Oregon's public universities and community colleges face serious financial problems.

After the 1990 property tax cap passed, "we had to cut 100 academic programs. We had a 40 percent tuition increase," Pernsteiner said a few days before the election last November. "We can't do that again. It would send a bad message." Measure 48, which would have sharply limited state spending, was so "draconian," Pernsteiner said, that he would have recommended the university system change its relationship with the state. There was precedent for such a move. In 1995 the Oregon Health and Sciences University became a public corporation, with a separate board controlling faculty salaries and revenue sources, although it is still affiliated with OUS.

Oregonians also re-elected Governor Ted Kulongoski, a big supporter of education. He has asked the 2007 biennial session of the legislature for a 12.5 percent increase in general appropriations for OUS—$827.1 million in 2007–2009 compared to $735.4 million in 2005–2007. The governor also requested a 12.6 percent increase—an additional $55 million—in the state contribution toward community college costs. (Oregon community colleges are locally governed but receive about half of their funds from the state.)

Governor Kulongoski, education leaders and business leaders are supporting a new "shared responsibility" approach to the financing of public higher education. Students would be responsible for about half of their total costs, from parental contributions, jobs or loans, while the federal government would contribute through Pell grants or tax credits. State aid would cover remaining need.

Kulongoski has asked the legislature for $110 million to implement the "shared responsibility" model this year. For the following biennium (2009-2011) the cost to the state is estimated to be $152 million. The plan now is before the legislature.

President Gretchen Schuette of Chemeketa Community College had to trim $21 million from the college budget over the last three years but expects increased funding this year.
(Photo by Rod Searcey for CrossTalk)
The combination of voter initiatives and economic downturns has sent the price of college spiraling. Oregon has no sales tax and, with the cap on property taxes, the state has become increasingly dependent on income taxes for revenue. When the economy is healthy, revenue pours in and spending on state services like public higher education is generous. But when times are bad, as they have been in several recent years, state spending is severely curtailed.

In 1990 the state paid 62 percent of an Oregon university student's cost, but by 2006 that contribution had dropped to 35 percent. Since an economic downturn in 2001, annual tuition and fees for a student taking 12 credits rose from $4,071 at the University of Oregon and $3,621 at Eastern Oregon University, to $5,349 and $4,941 respectively. Community colleges increased tuition by $25 to $30 per credit hour in that five-year span. For example, Portland Community College charged $40 per credit hour five years ago; last fall, tuition was $67, plus $6 in fees, per credit hour.

Students at four-year universities obtain loans routinely, but increasingly community college students like Cynthia Edison also must borrow to pay for tuition, books, transportation and childcare. Edison has borrowed about $8,000 during her first two years at Portland Community College as part of her financial aid package, which has included a need-based Oregon Opportunity Grant, a federal Pell grant and money from the federal work-study program.

Edison, 32 and the mother of four children, hopes to transfer to Portland State University, to earn a master's degree in social work. Ultimately, she would like to start a mentoring house for families in which a parent has had an addiction to drugs or alcohol. Edison says she is a recovering methamphetamine addict and has seen families of addicts torn apart when their children were placed in foster care.

People recover in many aspects of their lives, she said, but when they get their children back, "they go right back into treating each other the way they did before, and the cycle seems to repeat itself." To achieve her goal, Edison knew she could not work, go to school full-time and be a mother and a wife, she said, so she and her husband, who lays flooring, decided that she should go straight through school and apply for financial aid.

George Pernsteiner, chancellor of the Oregon University System, was relieved when voters rejected a cap on state spending, which would have led to further higher education budget cuts.
(Photo by Rod Searcey for CrossTalk)
Oregon ranks 46th in the nation in per capita spending on college students, according to a State Higher Education Executive Officers survey. Yet OUS officials say the state must enroll 37,000 more students in postsecondary education by 2025 (up from the current 81,000) and produce another 4,000 bachelor's degrees in order to meet projected population growth and demand, especially in Portland and in Bend, in the central part of the state. Officials also hope to enroll more of the state's increasing Hispanic population in higher education.

"We have an obligation to educate more students," said Dave Frohnmayer, president of the University of Oregon, the state's flagship campus. "I think it's a moral imperative." Or, as Jill Kirk, vice president of the Oregon Business Council, put it: "Every state has economic difficulties. The question is how are we responding? All of the players in education policy are coming together in unprecedented ways. We're looking for new ways to do it. We really have to change, and we have to do it now."

One challenge is to help students avoid burdensome debt. The Project on Student Debt, a foundation-funded organization that provides information about higher education borrowing, said students at Oregon's public four-year universities average $19,050 in loans.

At Portland Community College, Corbett S. Gottfried, director of financial aid, said last fall 41 percent of students enrolled at least half-time in certificate, associate's degree or transfer programs were receiving some form of financial aid—loans, Pell grants or work-study grants. Last year 74 percent of the college's students who were receiving financial aid had loans, compared with 47 percent five years ago. Last year the average loan total was $4,300; five years ago it was $3,400.

When Gottfried started working at the college in 1978, tuition was extremely low, and students could get by on Pell grants and perhaps the small state grants. "They did not take out any loans whatsoever," he said. Now, while borrowing may be much more modest at community colleges than at four-year schools, the percentage of those with loans has been increasing as tuition rises but Pell grants do not. (Pell grants have been frozen at $4,050 for five years.) "We've been talking about student debt since the 1990s, but we've seen a real spike in the last five or six years," Gottfried said.

Taking on debt provides a powerful incentive, said Chris Ramirez, a student at Chemeketa Community College, in Salem. Ramirez wants to go into sports medicine and already has borrowed about $6,000. "You have to succeed to get a good job to pay back the loans you've taken out," he said.

Governor Kulongoski revamped the State Higher Education Board by naming seven new members in early 2004, and he directed the board to focus "on ensuring that a college education in this state is not limited to those who have the means to afford it." Oregon is at the low end among the states in the amount of student financial aid it provides. A report in The Oregonian found that neighboring Washington State charges lower tuition than Oregon and spends five times more on student financial aid.

The board created an Access and Affordability Working Group, which reported that state need-based grants reached only about one-third of eligible students, failed to cover part-time and middle-income students and paid only 11 percent of students' total college costs. The panel also pointed out that tuition increases of 56 percent at Oregon community colleges, and 36 percent at public four-year campuses, between 1999 and 2003, had outstripped the 14 percent increase in median family income during that period.

The working group recommended that the state increase need-based aid, which it did during the last legislative session. The program grew from $44 million in the 2003-2005 appropriation to $78 million for 2005-2007. Part-time students taking at least six credits can also receive these grants, making many more community college students eligible.

Meantime, the governor was considering the establishment of an endowment to expand financial aid. However, this plan stalled after focus group sessions revealed a "public perception that higher education appeared to be for the few but not the many," said Tim Nesbitt, co-chair of the working group and former president of the Oregon AFL-CIO. "Endowment sounded like entitlement, not just alliteratively but also conceptually."

As the governor's education adviser, James Sager, former president of the Oregon Education Association, put it, "It didn't matter if someone was a high school dropout or a college graduate, urban or rural, they said K–12 is a right, but postsecondary education is a privilege."

The focus group participants believed that students should be able to work their way through college. In years past, that was Plan B for students whose parents could not afford to pay all the bills, Nesbitt said. "Now, Plan B for this generation is borrowing." In the 1970s, "you could work 20 hours a week at a minimum-wage job and pay your way through an Oregon school," he added. "Now it would take 50 hours. It's no longer possible."

The working group's recommendations led to the "shared responsibility" model, which has four parts. First, the student's contribution would be $4,750 a year for a community college student (including work or loans, but not both), and $7,500 a year for a four-year college or university student (including part-time work and loans). Nesbitt said the plan assumes some borrowing-about $2,750 for a university student, but none for a community college student-that is, an amount that could be paid off in a reasonable period of time on a teacher's salary.

The second part of "shared responsibility" would be the amount paid by a student's parents or other bill payers-higher amounts for families with means, little or nothing for low-income families. The third part would be the federal share, in the form of Pell grants or tuition tax credits. Finally, the state would pay whatever need remained.

"The beauty of this model is that it's dynamic," Nesbitt said. "If federal grants rise, the state can lower its amount. If income increases, the state can lower its contribution." With increased aid, "you can get more students into higher education and get them through faster."

Dave Frohnmayer, president of the University of Oregon, says, "We have an obligation to educate more students. I think it's a moral imperative."
(Photo by Rod Searcey for CrossTalk)
"The focus wasn't just on students at four-year institutions, as it has tended to be in the past," said Nan Poppe, co-chair of the working group and president of Portland Community College's Extended Learning Campus. Community college students need to be covered as well, even when they can't attend classes full-time, she said. "Our students tend to be older, they have family responsibilities, they work, they go to school, so every dollar counts."

Nesbitt believes there is "a lot of support in the business community" for increasing the amount of need-based aid. "There are lots of heavy hitters on the higher education board," he said, for example Donald Blair, vice president and financial officer of Nike, and Howard Sohn, chairman of Lone Rock Timber Company.

Julie Suchanek, who handles governmental relations for the Oregon Community College Association, said a leadership summit in January 2006, sponsored by the Oregon Business Council, "really brought the education issue to the forefront." As The Oregonian reported, "The event convenes more of the state's business and civic leadership than any other on the state calendar." At that session, speaker after speaker maintained that improving public education held the key to solving Oregon's problems, including declining income, loss of jobs, and chronic budget shortages.

The Oregon Business Council includes chief executive officers from Oregon-based companies or divisions of national companies, such as Nike, Weyerhauser, Intel and Hewlett-Packard. They are tackling education and public finance issues, said Duncan Wyse, the council's full-time president.

"We are trying to make it one conversation about pre-kindergarten to 20," Wyse said. "We want to improve delivery along the continuum."

"Some of the business people are willing to put their money where their mouth is," Julie Suchanek said. "But they want their money to go for something specific, rather than just into the general pot."

Cynthia Edison, a 32-year-old mother of four, has borrowed $8,000 to help pay for her education at Portland Community College.
(Photo by Rod Searcey for CrossTalk)
The legislature is receptive to proposals to increase need-based aid, said state Senator Richard Devlin, a Democrat from Tualatin, south of Portland. But Devlin, a leader on education finance issues, added, "There is a question of how much money is available. If they can figure out a way to phase this in, I think the legislature will go for it...[But] as long as we fund the state largely from one source—personal income tax—there will always be needs in education, public safety and health that we can't meet."

Raising the money will require increasing the corporate minimum tax, which is now $10 and has been since 1931. Companies paying this minimum claim no income tax liability, even though they might be profitable, because they carry losses forward from one year to the next, or they use tax credits. Sager, the governor's education adviser, said that with the anticipated spending increases, small businesses would pay $25 a year, and corporations with more than one million dollars in annual earnings would pay $5,000, which he said is still low. That would provide $84 million toward implementation of the "shared responsibility" plan, Head Start and other education programs.

The governor also has recommended appropriating $14.6 million for enrollment growth in the public colleges and universities. Chancellor Pernsteiner said the OUS system has received no enrollment growth money since 1997. And Kulongoski has asked for $8 million to increase faculty salaries, along with $6.9 million to help reduce student-faculty ratios. The governor's budget also includes spending and bonding authority for $594.5 million in capital construction costs for 45 projects on university campuses.

Despite continuing fiscal challenges, Oregon educators point to some positive developments. Last year the seven-campus university system awarded a record number of degrees—19,138. Six-year graduation rates continued to improve, from 48.8 percent for freshmen who enrolled in 1987 to 58 percent for those who began in 1999-2000. The ratio of students to full-time faculty declined to 25.7 in the 2005-06 academic year, although that was still higher than the 24.3 ratio of five years ago. Diversity also increased—minorities now make up 14 percent of total OUS enrollment.

"We are doing a lot of things better-funded universities are doing," Pernsteiner said. "But we are only successful if compared to ourselves. We are not doing the job Oregon needs."

The budget cuts of recent years have played out in various ways for both students and faculty. When Adrianna Mendoza started at Eastern Oregon University, in La Grande, it was "a good school for a good price." But at the start of her sophomore year, the "tuition plateau" was eliminated. (The "plateau" had enabled a student to take 15 credit hours each semester for the same price as 12, making it possible to graduate in four years.) "As the tuition plateau was taken away, tuition was going up," Mendoza said.

Mendoza, a student member of the State Higher Education Board, graduated from Eastern Oregon last June and now is working toward a master's degree in business administration there. She said the campus offices used to be open early and all day, but not anymore. "The staff has been reduced so its ability to advise students is greatly reduced. Student services definitely took a hit. People say, 'it's faculty that matters—that's how students learn.' But unless students have the support to get them to those classes, they're not going to make it."

The Eastern Oregon philosophy department, which had consisted of two professors, has been reduced to only one. "He's a great teacher, but you'd like to have different viewpoints," said Mendoza, who majored in the subject. "It is philosophy, after all."

At the University of Oregon, the College of Education was "severely decimated," President Frohnmayer said. There also was a government-mandated salary freeze. "In retrospect, I think that was a mistake," he said. "It eroded salaries." And it contributed to what Frohnmayer called a "hiring frost."

Julie Suchanek, who handles governmental relations for the Oregon Community College Association, says a leadership summit sponsored by the Oregon Business Council, "really brought the education issue to the forefront."
(Photo by Rod Searcey for CrossTalk)
Southern Oregon University, in Ashland, still faces budget cuts because of a drop in enrollment since 1999. This month President Mary Cullinan, who assumed her post last fall, announced that 17 people, none of them faculty members, would be laid off and another eight job vacancies would not be filled. But the university still needs to save another $1.6 million. "I have not been convinced so far that we can meet our reduction budget without laying off tenured faculty," Cullinan said.

Community colleges also have been hard hit. Chemeketa Community College President Gretchen Schuette gave her first speech as president of the college on September 10, 2001. "By November, we were in recession," she said. For three years, starting in fiscal 2003-04, Schuette had to balance budget gaps, reducing expenses by $9 million, $7 million and $5 million, from a budget that started at $55 million. From fiscal 2002-03 to the current academic year she cut administration by 19 percent, faculty by ten percent and support personnel by seven percent.

Nor could Chemeketa, in Salem, the state capitol, accept all the students who wanted to attend. Two hundred applied for the nursing program, but only 54 were accepted. And there is a shortage of nurses in Oregon, as there is in most states.

"But our goal is to open the door, not to close it," Schuette said. So new certificate and associate's degree programs in pharmacy technology and pharmacology will be started next fall, in response to requests from area pharmacists.

Meanwhile, tuition increased from $38 per credit hour in 2000-01 to $58 per credit hour this year; in addition, there is an "access fee" of $6 per credit. "Full-time enrollment declined because we had fewer things to offer and because of the increased cost. I'm absolutely certain of that," Schuette said. "This year we are asking the state for $1 million more. With that, we could make a modest investment in student support and in our academic program."

Dave Frohnmayer, a former state representative and state attorney general, said, "Our dire funding is not because of any hostility in the legislature. It's not due to a lack of understanding. Higher education is a small constituency. It isn't difficult to make the sale to people intellectually or emotionally-they get it, two-to-one. They understand that if you don't have a college degree, your standard of living will be lower. But turning that knowledge into legislation is sometimes another matter. Education has to be the train. The engine is K-12, but we can't be the caboose."

Kay Mills, a former Los Angeles Times editorial writer, is the author of "Changing Channels: The Civil Rights Case that Transformed Television" (University Press of Mississippi, 2004).

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National CrossTalk Winter 2007



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