Report: Tie State Funding to College Performance

Students across the country, like these at the University of North Carolina, face tuition increases. A new report suggests states change the way higher education is funded. (AP Photo/The News & Observer, Harry Lynch)

States should allocate scarce higher education funds based increasingly on how well colleges perform, including whether they bump up the number of degrees in science, technology, engineering and mathematics and graduate low-income and at-risk students, a new report from state budget officers said.

State spending on higher education is more erratic than any other major area of state spending and the current approach to funding public education needs to dramatically change, the National Association of State Budget Officers said in its report released Wednesday.

Despite deep funding cuts throughout the recession, state funds still account for more than half of the revenue for public colleges’ general operating expenses, according to the report, funded by a grant from the Bill & Melinda Gates Foundation.

Generally, higher education funding has gone up in good economic times and down in bad, but NASBO says a more predictable, more targeted approach is needed. The report also calls for limits on tuition and fee increases and greater cost efficiencies, such as requiring institutions to set aside some tuition revenue for infrastructure projects.

But state budget officials and college leaders too often “talk past one another” in discussing state finances, NASBO said. Leaving aside issues of what funding levels should be, the report said “the two sides should be able to agree about basic facts for how to account for funds in higher education, including accountability metrics for spending and performance.”

Accountability is the buzz word in higher education. In his State of the Union, President Barack Obama urged Congress to include affordability in determining which colleges receive certain types of federal aid. The administration also unveiled a new “College Scorecard” that compares schools on costs.

Tennessee and Indiana are among states currently tying funding to performance. New Mexico be­gan this fiscal year setting aside 5 percent of higher education appropriations based on course and degree completion, with additional funding for degrees awarded in science, technology, engineering, mathematics and health care fields, NASBO’s report said.

Last week, the Center on Budget and Policy Priorities reported that every state except North Dakota and Wyoming is spending less per student on higher education than they did before the recession.  Over the last five years, 11 states have cut funding by more than one-third per student, and two states — Arizona and New Hampshire — have cut in half their per student spending, according to CBPP, which advocates for policies affecting the poor.

As Moody's Investors Service reported earlier this year, public and political scrutiny of colleges and universities, both not-for-profit and for-profit, have escalated and that "the sector will remain under the microscope in 2012 and beyond."

NASBO says that scrutiny has already put the brakes on tuition hikes. On average, this year’s net tuition per student is projected to increase 2.7 per­cent, much lower than the annual average increase over the past five years of 6.7 percent.

Meanwhile, state lawmakers this session are looking into cost controls at the University of Minnesota following a Wall Street Journal investigation late last year that found the university added more than 1,000 administrators since 2001, increasing their ranks by 37 increase, more than twice as fast as teachers and nearly twice as fast as the student body.


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