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Colorado On the Edge
Years of state funding cuts put higher education in a precarious position

By Robert A. Jones

Colorado's long-awaited voucher system for public universities swung into operation this summer, making this state the first in the nation to use vouchers for higher education. But the hoopla has been noticeably muted as attention has focused instead on a state budget crisis that threatens to cripple campuses and reduce the vouchers to virtual meaninglessness.

The brewing crisis in the state capitol emanates not from a business downturn—Colorado's economy is doing nicely—but from strict limits on state spending and revenues imposed by a 1992 referendum known as the Taxpayers' Bill of Rights or TABOR. The TABOR restrictions have left the government staring at a $400 million deficit next year, and much of that money is likely to come out of the higher education budget.

The threatened cuts have imparted a sharp sense of déjá vu in college administration offices statewide. For more than a decade, TABOR has delivered a series of financial shocks to Colorado's public colleges and universities. In the last three years alone, state financial support for The University of Colorado at Boulder, the state's flagship campus, has dropped 55 percent, and the state has not provided funds for new construction on campuses since 2001.

Higher education consultant Dennis Jones says "there's no bigger mess anywhere" than the financial crisis facing Colorado higher education.
(Photo by Geoffrey Wheeler, Black Star, for CrossTalk)
Ironically, the vouchers—which could be a prime target of the cuts—were developed in 2003 precisely to circumvent some of TABOR's more draconian provisions. At the time, public institutions were prevented from raising tuition, even though state support had fallen dramatically, because such increases would have violated revenue caps. By directing money to students rather than institutions, the campuses could skirt the restrictions and raise tuition.

As proposed by the state's Blue Ribbon Panel on Higher Education in 2003, the program would have granted $4,200 to each student annually while simultaneously bringing to an end traditional institutional funding. Students then would have the right to spend their vouchers at the public campus of their choice.

Institutional funding of undergraduate education was, indeed, terminated in Colorado. But TABOR restrictions came back to bite the voucher proposal in the state legislature, which reduced the amount to $2,400. And now, only three months after starting the program, state officials say the upcoming cash crisis in Colorado could force them to slash the vouchers down to $768 per student.

Such predictions have set up predictable howls from college presidents who claim entire campuses could close and tuition rates soar under such circumstances. Even before the threatened cuts Colorado had fallen to 47th in state funding of higher education.

University of Colorado official Kay Orten says many students are confused by the state's new tuition voucher program.
(Photo by Geoffrey Wheeler, Black Star, for CrossTalk)
One projection by the University of Colorado (CU) estimated tuition could jump as much as 42 percent for some programs, and those increases would come on top of hikes of 28 percent this year. On the state's community college campuses the percentage increases in tuition could be even steeper.

Currently, tuition and fees at four-year institutions in Colorado range from $5,500 at Mesa State College in Grand Junction, to $9,400 for an engineering student at the University of Colorado at Boulder. At the community college in Aurora, in suburban Denver, charges stand at $4,700.

Hank Brown, the new president of CU, barely had settled into his office before the dire predictions began. Brown, a former businessman and Republican U.S. Senator, replaced Elizabeth Hoffman after she failed to survive dual scandals at the university, one involving accusations of sexual abuse by members of the football team and the other growing out of pronouncements by Ward Churchill, the CU professor who described victims of the World Trade Center attack as "little Eichmanns."

Brown knew he was taking over CU during a bad patch. The scandals had eroded public support for CU, and the university's national reputation was seen as slipping into the third tier. But the financial firestorm drew his first attention.

In his Denver office, Brown characterized the budget cuts and the shrinkage of voucher amounts as "devastating" to CU. "Higher education has gone from one of our highest priorities in Colorado to one of the lowest," Brown said. "And it's going to get worse unless there's a major change."

Brown then reeled off some numbers. "When I served in the state legislature in 1975, higher education amounted to 25 percent of the state budget, and no one even talked about cutting it," he said. "Today that figure stands at ten percent, and the cuts keep coming."

Brown, a longtime member of the Republican establishment in Colorado, supported TABOR's passage and still believes it helped reform spending in state government. But, he said, if Colorado does not make some changes in TABOR's provisions, the impact on higher education will be disastrous.

"By 2015, if nothing changes, the state's funding of higher education will go to zero," he said. Then he leaned forward and repeated himself for emphasis: "Zero."

Startling as it seems, the zero figure comes from a straightforward application of TABOR's provisions. The referendum caps state expenditures by dictating that they can rise only at the rate of inflation. At the same time, the state is obligated to pay the costs of major programs such as Medicaid and K–12 education that are rising faster than inflation. To compensate, the legislature must cut other programs, most notably higher education.

Next year's predicted downsizing of the vouchers to $768, in fact, stems from this process. Extend that forward to 2015 and state funding of higher education hits zero.

This doomsday scenario has quickly converted Brown and many other college officials into champions of two stopgap measures that will appear on November's ballot. Referendums C and D would suspend the TABOR limits for five years and allow the state to spend an estimated $3.1 billion in tax revenues that otherwise would be refunded to taxpayers. Of the $3.1 billion, community colleges and state universities would get 30 percent.

But passage of C and D is hardly certain. David Longanecker, executive director of the Boulder-based Western Interstate Commission for Higher Education, said polls have consistently shown a 50/50 split on the issue. "That's not particularly good for a referendum at this point," he said. "The fact is, Colorado does not seem to have heartfelt support for higher education. There's no feeling of urgency over this issue, and the vote could go either way."

Interestingly, the referendums appear to have split conservatives in the state, giving supporters some basis for optimism. Governor Bill Owens, a Republican who has advocated privatization of many government functions, has outraged some in his party by co-sponsoring C and D, and he has been joined by Colorado's business community which has pledged financial support.

The opposition, furious over Owens' support, springs largely from Colorado's anti-tax, starve-the-beast crowd that has enjoyed extraordinary success here in recent years. In a state with the seventh highest per capita income in the nation, anti-tax groups have whittled the tax burden down to the third lowest. Led by the Colorado-based Independence Institute, the opponents are characterizing C and D as a tax increase and are questioning the legitimacy of a public higher education system.

In a recent debate, John Andrews, the founder of the Independence Institute, accused the community college system of being "nothing more than a local jobs program." Others have pooh-poohed the threat of closing campuses, dismissing it as a scare tactic.

The political drama has mesmerized one group of analysts who are accustomed to viewing states undergoing educational crises. Colorado's collection of higher education think tanks is one of the largest in the nation, and their leaders have watched in fascination and dismay as a potential fiasco develops in their own back yard.

"There's no bigger mess anywhere," said Dennis Jones, president of the National Center for Higher Education Management Systems in Boulder. "There's a lot of states hurting, but I know of no other state where the leadership has so little control as Colorado and where there's so little inclination to deal with it. If I was a faculty member at a Colorado university and I had an offer someplace else, I would think very seriously about taking it."

Longanecker, at the Western Interstate Commission for Higher Education, said the relative wealth of the Colorado electorate makes the crisis all the more disturbing. "This is not a poor state, so the motive is not poverty. It's stinginess. And you have a political leadership that does not like public higher education and will say that. They see a college education as a private good, not a public good."

Hank Brown, the new president at CU-Boulder, says budget cuts have been "devastating" and warns that "it's going to get worse unless there's a change."
(Photo by Geoffrey Wheeler, Black Star, for CrossTalk)
Meanwhile, throughout Colorado, campuses are busily implementing the first year of the vouchers. The program is managed through something known as the College Opportunity Fund, which mandates the procedural requirements, some of which have proven a challenge to students and administrators. The COF, for mysterious reasons, also expunged the word "voucher" from all its materials and substituted the word "stipend," a nomenclature that has now also been adopted by state officials.

At CU-Boulder the process involved months of planning by a team of managers to make sure students were familiar with the program and knew how to take advantage of it. The task was not always easy. Students first had to go online to the College Access Network and create a personal account. Then they had to go to their chosen institution and signify during the registration process that they had established an account and were applying for voucher, or stipend, funds for that semester.

At that point the institution was responsible for determining whether students were official residents of the state and therefore eligible for the voucher. If so, the institution went back to the students and asked for signed approvals to credit the voucher amount to their accounts. Similar approval must be given for each semester that a student enrolls, or the state will not credit the institution with the funds.

Kay Orten headed the CU team, which conducted several focus groups early in the process to see whether students understood the program.

"It was the state's hope that the program would raise the visibility of higher education. I don't know that our students got that," Orten said. "There was confusion over some of the language, like the use of 'stipend' rather than 'voucher.' The students seemed to connect the word 'stipend' with financial aid or a loan, and that made them wary."

The several-part process also confused them, she said, and as late as February of this year only 43 percent of eligible students at CU had established their accounts. "We got concerned at that point and started doing everything but deliver pizza to their door and say, 'Sign up.'"

Eventually the effort paid off, and about 95 percent of the CU Boulder students used the vouchers if they were eligible. Those numbers are similar to other campuses across the state.

However, the 95 percent compliance rate pertains only to students who actually enrolled on a campus. That number says nothing about the success of the program in attracting high school seniors who otherwise might not have attended college. Statistical reports from high schools are not yet available.

Ric Porreca, senior vice chancellor for finance at CU-Boulder, worries that a decision to lower freshman enrollment might cost the campus millions of dollars.
(Photo by Geoffrey Wheeler, Black Star, for CrossTalk)
The high school statistics are important because the stated goal of the voucher program is to increase college participation by high school seniors, which has been particularly low in Colorado. According to the Colorado Commission on Higher Education (CCHE), Hispanics made up 25.3 percent of high school students in 2003 but only 13.9 percent of the freshman class at the state's public colleges.

So the program's effectiveness in meeting its primary goal remains unknown. But Richard O'Donnell, executive director of CCHE, said he is confident the results will show that the stipend program will succeed.

"Our study of low-income kids says if you ask them whether they are going to college, they will say they can't afford it, that tuition is skyrocketing," O'Donnell said. "Then if you say to them, 'Here's $2,400 for next year, use it or lose it,' they light up. They begin to get engaged in a conversation about how college might be affordable."

O'Donnell said six or seven other states have made inquiries about the Colorado program and have suggested they may try vouchers themselves if the system works well here.

In campus administration offices, attitudes toward the program tend to divide into two camps. The leaders of so-called "low-cost" campuses such as community colleges usually support the program, at least at the $2,400 level. Officials at "high-cost" campuses such as CU tend to see it as a poison pill.

The reasons are obvious. At Colorado's community colleges total funding per student now stands at $4,500. Thus, a $2,400 voucher will pay for more than half the total amount.

Nancy McCallin, recently appointed president of the community college system, sees another advantage: Students who sign up at a community college will bring $2,400 with them, meaning the system is guaranteed funding when enrollment grows. Under the old system of institutional funding, there was no such guarantee.

"It gives us a flexibility we didn't have before," McCallin said. "The reality is that state funding has dropped significantly over the past few years, and it's been tough. But at this ($2,400) funding level, we are much more in charge of our fate with the stipends than under the old system."

Although the voucher amount is usually cited as $2,400, the College Opportunity Fund actually specifies the voucher amount as $80 per credit hour. The $2,400 figure is merely a calculation based on the standard 30 credit hours per year. A student is capped at a total of 145 credit hours, but each student can choose how and when to "spend" their hours. If a student were to take 36 credit hours in a year, for instance, their voucher or stipend would amount to $2,888.

That also represents an advantage, according to McCallin, because it assures funding for each course rather than obligating the colleges to provide however many courses a student chooses to take.

Over at CU-Boulder, the highest-cost institution in the state, a very different view of the voucher program emerges. The campus gets the same $2,400 for each in-state student, but its costs are twice as high.

CU President Brown argues that this disparity puts both CU and its potential students at a large disadvantage. CU will be forced to cut programs and raise tuition to make up the difference, and the higher tuition rates will then drive low-income students away from CU toward the community colleges.

"I believe the whole purpose of this scheme is to force low-income kids into community colleges, because that's the only place they will be able to afford," Brown said. "It's just bad policy to say low-income students can't go to a quality institution."

Asked the possible reason for such a "scheme," Brown replied, "Some in Colorado believe you can deliver basic courses more economically at community colleges. That may be true, but you can't help but notice that, at some institutions, kids can make straight A's and still not be able to write a simple sentence. To assume that all institutions have the same quality and requirements in basic courses is just not true."

Ric Porreca, senior vice chancellor for finance at CU-Boulder, also noted that the per-capita funding of the voucher program can work in the opposite direction of the example cited by McCallin at the community colleges. If a particular campus experiences a declining enrollment for whatever reason, its state funding will fall.

And that is the current case at the Boulder campus. In the early years of the decade, Porreca says, the freshman class grew so large, to approximately 5,600 students, that the administration concluded the education experience was eroding. So the decision was made to reduce the class size gradually to 5,000.

That decision could now cost the campus $1.4 million for each entering class. "We made that decision before the stipend program came along," Porreca said. "The idea was to make an investment in quality, but I suspect we may now have to re-evaluate."

Richard O'Donnell, executive director of the Colorado Commission on Higher Education, says the vouchers will persuade low-income youngsters to attend college.
(Photo by Geoffrey Wheeler, Black Star, for CrossTalk)
It is a measure of the gloominess on the state's campuses that few administrators assume Referendums C and D will pass. In fact, speculation over which campuses will close, should the referendums fail, has become a ghoulish game in some administration offices. The consensus seems to be that the rural community colleges would be the first targets. Another version of the game directs itself to which programs would be eliminated, and there's a debate about whether the victims would be high-cost programs such as engineering or the old-style liberal arts courses that are no longer seen as connected to jobs.

If the referendums fail, the state has projected it will face a $400 million shortfall immediately. O'Donnell at CCHE argues that Colorado could buy a year or two of normalcy by spending the state's tobacco settlement funds to support higher education. After that, he said, higher education could try to get another ballot measure past the voters or face the music.

Jason Hopfer, an aide to O'Donnell, said the Commission also has discussed the possibility of campus asset sales to raise operating income should the referendums fail. When asked what type of campus asset might be attractive to investors, Hopfer suggested dormitories.

"Essentially you'd be privatizing student housing by selling the dorms to private interests and then leasing them back to the university," Hopfer said. He conceded that dorm rates would likely rise significantly in such a case. "Also the question has been raised about privatizing institutions themselves, and whether we should be looking at which institutions could go entirely private," he said.

Nancy McCallin, president of the Colorado Community College System, thinks student vouchers will benefit the two-year schools.
(Photo by Geoffrey Wheeler, Black Star, for CrossTalk)
The notion of privatizing institutions has been raised in other states over the past five years, particularly when those states were experiencing financial upheaval. Thus far, it hasn't happened, except in the case of some professional schools in Virginia and elsewhere.

But Porreca said Colorado may, indeed, be moving toward privatization, only in a new way. Recently, he pointed out, the legislature opened the door to private colleges in the state receiving voucher monies. The legislature limited private voucher use to low-income students eligible for Pell grants and restricted the amount to 50 percent of the $2,400 received by public campuses. Still, three private institutions applied and will begin receiving the 50 percent vouchers in the spring.

Everyone expects the legislature to consider expanding private institutions' involvement in the voucher program in coming years. "Once the legislature says the privates have equal access to stipends, what's the difference between private and public institutions?" Porreca asked in his Boulder office.

He answered his own question: "Very little. There's the issue of campus assets that are owned by the state on public campuses but that could be handled in a number of ways. At that point, the distinction between public and private has disappeared."

The questions of public vs. private, Referendums C and D and the voucher program could decide the fate of higher education in Colorado for the near future. The state stands on the cusp of some very large decisions. "It's going to be a real spectacle," Porreca said. "If there wasn't so much at stake in the outcome, I'd be fascinated to just sit back and watch."

Robert A. Jones is a former reporter and columnist for the Los Angeles Times.

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National CrossTalk Fall 2005



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