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Policy Implications
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Higher Education Governance
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Policy Implications

As our study makes apparent, state systems of higher education are structured in a variety of ways. Each state system offers different tools and opportunities to those charged with leading it, and some of these tools are more useful than others in adapting to conditions that are likely to dominate the future. Less obvious, but equally real, are the different incentives, explicit and implicit, offered by each state to assert its policy priorities. The first section below points out the need for each state to assess the capacity of its existing higher education system to meet the particular challenges that the state will face. The second section suggests, in broad terms, how the results of our study can be applied to policy analysis to resolve issues that arise from the assessment.

State Expectations: Assessing Performance
Differing combinations of policy roles and system designs result in differing capacities to meet future challenges. Some states may be well prepared for the future; others may not. Each state has the responsibility to its citizens to assess the capacity of its colleges and universities to respond to the substantial changes that the next several decades are likely to bring. The probability of seminal change in higher education is sufficiently great, we believe, for concerned policy leaders to assume that new issues and problems will arise and to take steps to explore that assumption. To prepare for this, each state should ask three fundamental sets of questions about the state as a whole, not about particular institutions or their organization.

First, what does the state need and expect of its colleges and universities, including public and private institutions? What factors--economic, demographic and technological, for example--are likely to influence future needs and expectations?

Second, how well does the current performance of colleges and universities meet state and public needs and expectations? Are there gaps in program offerings? In accessibility? In quality? Are realistic plans in place for filling these gaps? How well prepared are the state and its colleges and universities to meet projected future needs?

And third, if there is a gap between higher education performance and state needs--or if it appears that projected needs cannot be met without major changes--what options do state government and the institutions have to remedy the situation?

Implicit in these broad questions about expectations and performance are much more specific concerns about:

  • Educational Attainment. Does the educational attainment of the state's citizens match the state's plans or aspirations for enhancing individual opportunity and economic development? In what areas is such attainment adequate? In what areas is it lacking?

  • Enrollments. How many students will be expected to enroll in the years 2000, 2005 and 2010? In which institutions? How, if at all, will the economic, geographic and ethnic composition of the enrollment pool differ from that at present? If the differences are substantial, what are their implications for programs?

  • Costs. What are the present costs of educating college and university students, and how do these differ across types of institutions? How are these costs distributed between the state and the student? Based on state revenue projections, are these costs sustainable for the foreseeable future?

  • Institutional and Programmatic Adequacy. Are the types of institutions sufficiently diverse in programs and locations to serve all people in the state? Is the current mix of programs that has evolved from past needs--graduate, professional, baccalaureate, technical, and occupational--appropriate for the future? Is the state taking advantage of the capacity and programs of private institutions? How well are the state and its institutions of higher education prepared to utilize the new electronic technologies to address access needs and the improvement of quality and productivity?

In a few states, much of the information needed to answer these kinds of questions may be readily available. In most, however, answers will not be so easy to find, and this is particularly true for questions regarding state and regional needs and costs. Because the state policy emphasis has been focused so heavily on institutions, institutional projections and aspirations are more likely to be available than aggregated information about whether the totality of current and future institutional efforts can meet current and anticipated needs. State costs of student financial aid, a non-institutional cost, must be factored in, and program cost analyses should be disaggregated by level--that is, lower division at community colleges, and undergraduate and graduate at four-year institutions. Information on the qualitative dimensions, particularly on the performance of the system, is extremely difficult to find. Despite increasing state use of performance indicators, there is little agreement on criteria for measuring institutional performance.

An initial assessment, particularly if it is based on expert opinion, may support the conclusion that higher education performance is meeting public needs, responding to state policy priorities, and poised to address foreseeable future needs. Policy leaders--governors and key legislators--should review such findings with care. Elected and appointed higher education officers and their staffs in most states are, as we and others have found, reasonably satisfied with the status quo, and are likely to prefer it over any proposed alternative. This bias toward the "devil that is known," can keep leaders from asking hard questions that produce unwanted answers and may suggest the need for difficult action now to resolve a problem that will arise only in the future.16 Even more troublesome for college and university faculty and administrators is the prospect of confronting adaptive problems that require responses from outside the system's existing repertoire. Clark Kerr notes:

One must be impressed with the endurance and the quiet power of the professoriate, and particularly of the senior professors, to get their way in the long run--and that way at all times and in all places is mostly the preservation of the status quo in terms of governance and finance.17

As we learned from our study, current faculty and administrative leaders may argue that all problems can be resolved with adequate financial support while concurrently believing that needed resources will not be forthcoming.

In many states, an initial assessment of higher education performance in meeting current and projected challenges is likely to reveal several gaps, as we found among the states we studied. More students are expected than can be accommodated by existing institutions as they currently operate. Or employers believe that job applicants lack sufficient skills and that existing institutions do not offer them. Or the mix of state-subsidized programs may be skewed toward the preferences of the most prestigious institutions--that is, toward over-investment in graduate programs and research and away from undergraduate and occupational needs. There may be an over-abundance of less-than-distinguished graduate programs. Or there may be evidence of problems such as these, but insufficient information to define their seriousness with precision. Many states that face this gap in information are unable to assess the capacity of their state's public and private higher education in relation to current and future public needs--or even to agree on the appropriate information on which to base such an assessment. Such a finding in itself may point to policy or design problems, or both.

Next Steps: Connecting Problems with Solutions
Many problems that arise at the intersection of state government and higher education are technical issues that are routinely, often informally, resolved. The policy questions we are concerned with here, however, center on the strategic or adaptive capacity of a complex system to respond in the future to societal needs that neither fit neatly into the current pattern of institutional responses nor reflect the preferences of most academic professionals. These issues are not routine. They require the attention and response of a state's highest policy makers, not by imposing simplistic answers, but by creating conditions that marshal the knowledge and influence of educational leaders and experts to help the public reach informed judgments about the shape and direction of their future interests.

If an initial assessment of the performance of and projected challenges facing higher education suggests a lack in capacity (as reflected in unmet needs or insufficient information), deeper probing becomes essential. We suggest two areas for such probing: the incentives and disincentives fostered by the state policy environment, and the allocation of responsibilities as determined by system design. For purposes of policy analysis in a particular state, it is also helpful to consider the most pragmatic effects of these in day-to-day governance and administrative practices, i.e. in the work processes. We can thus distinguish the tools available through the key work processes as a distinct and third level of enquiry. If a higher education system is to accomplish more than its aggregated campuses could do individually, it is in these three areas that solutions can be developed. In examining higher education's performance relative to present and future state needs, problems and solutions appear at one or more of these three levels of analysis, and in the interactions among elements of all three.

Balancing Institutional and Market Influences
In each state we studied, policy direction at all three levels--policy environment, system design, and work processes--had an impact on performance, though the substance of these influences varied across the study states. At each of these three levels, public policy should seek to balance the influence of the market and the influence of institutions in ways that promote the general welfare. Societal and institutional interests are not necessarily inimical. Most of what is valued by institutions and academic professionals serves the public welfare--academic freedom, high quality instruction, competent graduates, and excellent research, for example. But educational professionals and institutions have their own interests that may not always reflect the common good. Derek Bok says it well:

No good book was ever written on command, nor can good teaching occur under duress. And yet, conceding this, the fact remains that left entirely to their own devices academic communities are no less prone than other professional organizations to slip unconsciously into complacent habits, inward-looking standards of quality, self-serving canons of behavior. To counter these tendencies, there will always be a need to engage the outside world in a lively, continuing debate over the university's social responsibilities.18

The interests of institutions are usually articulated in views of quality that are expressed primarily in terms of inputs--staffing ratios, funding and salary levels, selectivity in admissions, support of research and graduate programs--and processes, such as shared governance. The public interest may well include many of these inputs and processes, but it concerns primarily the outcomes or performance of colleges and universities, and the impact of these on both individuals and society.

The goal of state policy, then, is to use state authority to achieve public priorities by balancing the interests of institutions and educational professionals with broader societal concerns. Balancing these interests does suggest the presence of tension. Human societies are dynamic and the social structures that serve them must change as well. States that uncritically preserve policies and systems that were created to respond to a different set of priorities may be indulging either the self-serving tendencies of institutions or the most immediate demands of the market at the expense of emerging needs of greater long-term consequence.

As state policy makers attempt to strike an appropriate balance between institutional interests and market forces, they have a wide array of options to achieve their objectives, as outlined by the four policy roles we have described: providing resources, regulating, consumer advocacy, and steering. For instance, states can restrict or encourage competition; they can create new providers, such as the Western Governors' University; they can offer incentives to new or existing private or non-profit programs of higher education; or they can seek to protect the student markets of existing institutions by impeding the entry of new providers. States can fund students directly on the basis of merit or need or both, or they can fund institutions. They can support institutions on a "maintain the asset" basis, on the basis of performance, or on the basis of performance and competition. They can act as the principal owner and operator of institutions (the maintenance approach). Or they can act as a consumer in the marketplace, purchasing instruction and research from the public and private institutions that meet state access, quality and cost requirements. They can create centralized or federal governance structures, or they can leave each college and university to the exclusive guidance of its own board. They can regulate or create systems and agencies to manage and administer colleges and universities; they can have procedural accountability through extensive rules and control mechanisms; or they can hold institutions accountable for results and outcomes.

While all of these policy-effecting options are exercised in some form somewhere, most states employ a particular combination of options that has resulted from ad hoc responses to economic conditions or political problems that appeared at an earlier time in the state's history. Few states explicitly use policy to balance market and institutional interests to assure the right combination for their current priorities. We hold that greater awareness of options at all three levels of policy direction will lead to more intentional use of public policy to pursue specific priorities, as well as to more systematic and useful policy analysis.

1. The Policy Environment: Macro Policy Level
Each state's broadest policy level--policy environment--includes a wide range of factors and conditions that current state leaders inherit as well as affect: the relative authority of the executive and legislative branches of state government, the capacity of the state to support higher education, the proportion of state budgets devoted to higher education, the status of institutions that are constitutionally protected or are exempted from taxes, prohibitions against direct financial support of non-public educational institutions, the relative emphasis upon appropriations to institutions versus direct state support to students, the existence and roles of private as well as public colleges and universities, and the ways public finance is shaped by the initiative process, including constraints upon tax revenues or expenditures. Even less malleable elements at this level are the state's political culture and traditions, as well as demographic and economic factors that affect higher education, government and the market.

The structural or governance aspects of the policy environment may direct state policies toward institutional preferences or toward responsiveness to external forces, characterized in this study as the market. Constitutional status, for instance, substantially insulates some institutions from state procedural controls, as well as from the market. Another example might be state policy that dedicates substantial portions of state financial support to portable grants to students. Such a policy would strengthen the influence of the market and enhance institutional responsiveness to students.

Constitutional status in Georgia, California and Michigan insulates some or all institutions from state procedural controls. A state policy like the Georgia HOPE scholarships allocates major financial support to students, strengthening both the market for educational services and institutional responsiveness to student demands. Georgia combines a governance model that is characterized by constitutional protection, with student financing that seeks to stimulate market sensitivity. In other words, Georgia is balancing institutional and market influences to encourage performance that is responsive to its policy priorities.

2. The System Design Level
In its system design, a state determines the shape and capacity of its higher education system, the assignment of specific responsibilities for achieving higher education goals, and the lines of authority and accountability between state government and institutions. System design policy direction is shaped by and interacts with the macro level (or state policy environment) above, which includes constitutional limitations on revenues or appropriations and institutional or system constitutional status. System design also gives shape to the work processes or policy direction level below it, including: defining who is responsible for collecting and reporting information about performance, prescribing the framework for budgeting, allocating responsibilities for monitoring program quality and redundancy, and specifying arrangements for collaboration across institutional boundaries.

Historically, each public college or university had its own governing board, and each dealt directly with state executives and legislatures.19 Over time, the number of campuses increased, as did the number and seriousness of statewide issues. Likewise, state governments grew and became more bureaucratic (we do not use the term pejoratively). As the task of managing state higher education became more complex, most states attempted to simplify and coordinate management responsibilities by aggregating or consolidating individual campuses into overall system designs. For the seven states in this study, we have characterized the system designs resulting from these historical processes as unified, segmented, or federal.

Georgia has established a unified system with a single statewide board. Other states have maintained institutional boards, but all except a very few interposed a state higher education agency between the colleges and universities on the one hand, and the governor and legislature on the other. In these states, some, but not all, institutions may be grouped under a multicampus board.

Segmented state systems are usually found where the state policy environment tends to favor academic professional interests and to isolate higher education from market forces and from government regulation. No effective state agency has substantial responsibility for all higher education, and multiple governing boards are each responsible for one or more institutions. In the four segmented structures in this study--Michigan, California, New York and Florida--the state agencies' authority over work processes appears insufficient to affirm those market forces that are seen as adverse to the interests of higher education institutions. The Michigan higher education system provides the primary current example of virtually total segmentation.

In the two states in this study that have federal systems, Illinois and Texas, the state agencies appear to have sufficient authority over all four of the work processes to achieve reasonable balance--on an ongoing basis--between the interests of the institutions and the imperatives of the market.

System design is affected by the number and type of public institutions and the missions assigned to each, and it in turn affects how the private sector intersects with the public institutions. In states like California and Florida, where large numbers of students are required to complete their first two years of postsecondary study in a community college, the overall system of higher education operates more efficiently than in states such as Georgia, where two-year institutions are less effectively used. Evidence on the efficiency of utilizing the private sector is less clear, but including the private sector in higher education planning, as in Illinois, enhances student choice and limits the tensions that can otherwise flare between public and private institutions, as in New York. Where two- and four-year institutions are components of the same system, as in New York and Georgia, governing boards attend to articulation concerns. Where they are not, as in Florida and California, legislatures must find ways of requiring institutions with different missions to work together. Federal systems like Texas and Illinois have the capacity to address articulation issues, but may use that capacity reluctantly in the interests of avoiding confrontations with influential state officials and higher education leaders.

3. The Operational or Work Processes Level
Work processes include the important day-to-day practices and procedures of governance and administration: information management, budgeting, program allocation, and articulation and collaboration. Through these operational tools or levers of public policy, elected and appointed leaders strengthen either market or institutional influence.

Information Management. The lack of information about a system of higher education--particularly about institutional and overall statewide performance--weakens both market and state influence, and renders accountability difficult. Information can be collected and made available in ways to strengthen market forces if it is directed toward clients or consumers and their decisions--as in Illinois. Or information can be collected for purposes of regulation, as in New York, which may be in the interests either of the market or of some or all institutions.

Budgeting. The methods a state uses to allocate financial support of higher education can be nearly as important as the amount of that support. Block grants or base budgets that are uniformly adjusted for all colleges and universities are the most deferential to institutional, academic interests. On the other hand, budgets that are adjusted on the basis of institutional performance (e.g., student retention or achievement of specified outcomes) seek to influence institutional behavior in the direction of public priorities. And budgets that require institutions to compete for public support on the basis of explicit public policy objectives seek to stimulate greater responsiveness to the market. In the latter cases, the market is affected by state-established priorities and by public dollars that flow to support those priorities. State student financial aid programs represent the most aggressive market strategy because these programs move the locus of decision-making that determines the flow of state dollars outside the institution. There are many variations and combinations of these approaches.

Program Planning. How are the missions and programmatic allocations of colleges and universities established? How much choice is available for students? What, if any, are the constraints against redundancy and unnecessary program duplication? Is the use of private institutions or out-of-state institutions encouraged or discouraged? How is the match between public needs and available programs determined, and by whom? The policy mechanisms to respond to these questions can, at one extreme, be market-driven, encouraging competition. Or, at the other extreme, they can be institutionally driven, encouraging proliferation of high-cost programs that reflect faculty preferences (often characterized as mission creep). Most states regulate the establishment of new programs, and some extend this control to termination of existing ones. States can authorize or refuse to authorize institutions to operate within their boundaries, including private, nonprofit institutions. Some differentiation of mission--a regulatory function--is probably needed to assure a range of choices in the student marketplace. Yet excessive regulatory power can stifle competition, encourage cartel-like behavior, raise prices and costs, and diminish student choice.

Articulation and Collaboration. States can defer to institutions on matters of collaboration and articulation, or they can establish policies, incentives and accountability to facilitate these processes. The absence of actions fostering collaboration tends to restrict student mobility and discourage institutional cooperation. Ineffectual articulation policies defer to the preferences of those who ultimately grant degrees, primarily faculty of baccalaureate-granting institutions.

Aligning Policy Direction across the Three Policy Levels
Usually, neither problems nor solutions are found exclusively at any one level of policy direction. At each level, state policy makers respond to incentives and disincentives using whatever tools they are given by the system's design and associated work processes. In the short term, it is relatively easy for governmental and higher education leaders to influence matters at the work processes or operational policy level. This is one reason why solutions at this level are attractive--for example, revising a budgetary formula or giving a state agency additional authority. Tools at the operational policy level are legitimate and important ones that should be employed when appropriate. But it is essential that all work processes be informed by an appropriate system design and consistent policy directions. If they are not, inconsistency among the work processes can produce policy frustration and gridlock. Over the long term, it is the alignment of the four work processes with the state policy environment and with the system design that makes them effective or ineffective in leveraging performance.

Compared to the operational level, the system design level is more difficult to employ as an element of policy direction. We have already noted that higher education leaders almost uniformly prefer their current system design, however configured, over any possible alternative. The same can be said of most legislators. Changing a system design inevitably creates winners and losers. A number of programs and campuses of the State University of New York, for instance, would have been losers had the system been forced to respond effectively to the governor's budget cuts. Ultimately, the New York State Senate made sure all campuses survived. At the City University of New York, professional values and the unions that represented them were outraged by the chancellor's strategic endeavor to reduce the number of duplicative programs, and to align faculty numbers in specific fields with student interests. In California, a changing environment for higher education has so far evoked only those campus-replicating responses that each public segment had long held as a normal part of its individual repertory. Cross-segmental responses were conspicuous by their absence.

To say that changing a state's system design is difficult is not the same as arguing that it is impossible. Illinois partially dismantled its "system of systems" during our study as part of its effort to free individual institutions from what policy leaders saw as excessive and unnecessary regulation. Texas altered its institutional alignments to give several smaller, more isolated colleges and universities the protection and political clout of belonging to a large and powerful university system. Missions were also changed in Texas to allow institutions serving significant numbers of Latinos to offer a wider range of graduate programs. We do not believe it was coincidental that our examples of design change came mostly from the federal systems. Segmented and unified systems incorporate many principles of bureaucracy, especially tendencies to disregard environmental change and to focus on stability. Federal systems such as those in Illinois and Texas are designed to be more dynamic. To a greater extent than segmented and unified systems, federal ones allow for flexibility towards the societal environment and the possibility of change.

One of the most difficult problems for state public policy is inconsistency or misalignment of the three policy levels. Misalignment may arise from state attempts to solve a problem at one policy level by measures more appropriate to another. Tools appropriate at the operational policy level--for example, tinkering at the margins of budgetary formulas--would not achieve the desired result if the problem were at the system design level. Nor would they be effective in the presence of constitutional constraints that perpetuate inadequate funding. Misalignment may also result when state government adapts policy incentives aimed at enhancing the influence of market forces without altering the design of a higher education system that has grown accustomed to heavy regulation. Although faculty members are at the leading edge of scholarly and scientific inquiry, their institutions have sometimes been shielded from the marketplace and from state regulation by independent governing boards, sometimes bolstered by constitutional status. One traditional rationale for institutional independence was based on a long-held consensus that professional academic interests and the public interest were identical. Under this consensus, American higher education prospered and served the nation and states well for much of its history.

Recently, however, evidence of the erosion of this consensus is apparent in controversy over the costs and prices of higher education, student qualifications for admission, the appropriateness of institutional partnerships with corporate interests, and the appropriate role of technology in the delivery of instruction. With the erosion of consensus, states are increasingly at risk of having policy environments, system designs and work processes misaligned, working at cross-purposes. At the work processes level, for example, a state may offer financial incentives to encourage institutional responsiveness to the instructional needs of a more diverse group of students while the macro policy and system design levels encourage a continuing professional and institutional quest for traditional symbols of prestige. States that fail to address their systemic alignment will approach higher education reform through a series or package of discrete endeavors. Such approaches run the risks of misalignment and inconsistency. And, of most practical importance, they are unlikely to achieve the desired system performance.



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