School Finance

Tuition, debt dominate higher ed budget hearing

Key legislators signaled concern about tuition levels during a budget hearing Thursday, even though state colleges have promised to keep 2014-15 increases below 6 percent.

Colorado college campus montage
From left, Colorado State University in Fort Collins, the University of Colorado-Boulder and the Auraria Higher Education Center.

Institutional debt was the other focus of the daylong hearing before the Joint Budget Committee, an annual marathon at which college leaders get to pitch their institutions to the people who write the annual state budget.

The upcoming 2014-15 budget year looks to be a good one for the state higher education system, at least in comparison to the recent past.

Lt. Gov. Joe Garcia, who also heads the Department of Higher Education, touted the Hickenlooper administration’s proposed $100 million increase in higher education spending for 2014-15.

“This a request for a serious reinvestment in higher education,” he said, calling it the largest “in anyone’s memory” but adding the increase is “dwarfed by the cuts of the last decade.”

The administration’s proposal presumes that college and university governing boards won’t raise 2014-15 tuition by more than 6 percent. A 2010 tuition flexibility law gave institutions the power to raise tuition by up to 9 percent a year for five years. Larger increases are allowed if approved by the Colorado Commission on Higher Education. That law expires in two years. Tuition increases have averaged about 10 percent a year over the last few years.

Governing boards “have all agreed that they will use this money to mitigate their tuition increases,” Garcia said. “Most of them said it won’t be that high.” Individual institutions promised as much in their written responses to committee questions.

But that didn’t necessarily reassure lawmakers.

Impact of 6% tuition hike
  • $257 at community colleges
  • $345 at Metro
  • $430 at Adams, CSU-Pueblo, Fort Lewis, Mesa, Western, UNC
  • $559 at CSU-Fort Collins
  • $621 at CU-Boulder

Source: JBC

“I gain no comfort in this 6 percent deal” because larger increases are possible in future years, said Rep. Frank McNulty, R-Highlands Ranch. “To me it’s a bait and switch. … We need to increase the state’s commitment to higher education … and not rely on things like a handshake agreement to limit tuition increases for one year, which by the way happens to be an election year.” (Democratic Gov. John Hickenlooper is expected to see reelection next year.)

Denver Democratic Sen. Pat Steadman, JBC vice chair, was worried about the tuition flexibility law, wondering if it should be repealed early.

Garcia responded, “This year I would not encourage this body to change the existing statute.” He suggested that policymakers take the next year to study and discuss the issue, including whether the legislature wants to get back into the complex and politically tricky business of setting tuition, as it used to do.

“It’s time to revisit that conversation, either now … or next year,” Steadman said.

College debt worries aired

The other serious issue raised at Thursday’s hearing was the debt load being carried by some state colleges.

Chart shows where colleges rate on evaluation of financial health. (Click to see larger version.)
Chart shows where colleges rate on evaluation of financial health. (Click to see larger version.)

During a briefing last week, JBC staff analyst Amanda Bickel laid out an report that showed six out of 10 state institutions were “in relatively weak financial health” as of 2011-12, primarily because of high debt loads. She cited Adams State University in Alamosa and Western State Colorado University as particularly troubled.

As state construction funds dried up in recent years, colleges increasingly turned to issuing bonds, some to be repaid by student fees, to renovate and construct buildings. “Both Western and Adams have spent aggressively on cash-funded new construction in recent years, Bickel wrote.

On a 0-10 scale, Bickel listed Adams and Western as below 0. She recommended that policy makers continue to monitor the financial health of state colleges, keep a closer eye on bonds that are backed by the state and discuss whether small colleges should be taken over by larger systems.

Thursday’s hearing provided the first opportunity for college leaders and JBC members to discuss the issue face-to-face.

Interim President Brad Baca told lawmakers, “We do recognize that Western faces some challenges. … We are highly leveraged. … We can’t deny that.”

But he said that Western’s trustees have increased university reserves and that rising enrollment and student fee income also will help. “I feel very confident [that] we’re positioned to not be in any danger of missing any payment.”

“The actions we’ve taken over the last two years are working,” said trustee chair Todd Wheeler.

Trustee Gregg Rippy, a former legislator, also warned against combining Western with a larger system. Creating independent boards several years ago was “one of the best things” the legislature’s done for higher education, he said.

JBC member Rep. Cheri Gerou, R-Evergreen, was sympathetic but said, “We need a little bit more help from you, and a firm action plan would be great.”

Adams leaders were even more bullish about their plans to increase enrollment and stabilize finances.

“The rumors of our demise are greatly exaggerated,” said President David Svaldi. “Small rural institutions struggle.”

Noting that Adams had a decade of enrollment declines before creation of a strategic plan several years ago, Svaldi said campus upgrades were necessary, and “The risk of doing nothing was greater than the risk of borrowing in a time of historic low interest rates.”

Metro’s Jordan raises ticklish issue

While Hickenlooper’s proposed budget is seen as a welcome boost for higher education, it would distribute money to colleges based on an existing formula that’s the product of past political compromises among the state’s often-fractious colleges and universities.

Chart shows estimated per-student state support under the 2014-14 higher ed budget plan. (Click to view larger version.)
Chart shows estimated per-student state support under the 2014-14 higher ed budget plan. (Click to view larger version.)

Among other things, the formula doesn’t fully compensate colleges for enrollment growth, long a sore point for President Steve Jordan of Metro State University, which has been one of the faster growing campuses.

Jordan raised that issue Thursday, arguing that the formula needs to be fixed before a planned college performance funding system kicks in later this decade. (See this EdNews story for background on that plan.)

That needs to be done “so there will be a level playing field,” Jordan said.

Sen. Nancy Todd, D-Aurora, agreed with Jordan, saying Metro and the community colleges “are at the bottom of the barrel” in per-student support from the state.

Gerou was less sympathetic, telling Jordan that other colleges also have financial needs and “the world does not revolve just around Denver. … You may feel like you’re suffering right now, but I don’t think you’d trade places with Western State or that you’d trade places with Adams State.”

Jordan merely replied that he believes there needs to be similar per-student funding among similar institutions.

Average per-student support from the state would be $4,976 under Hickenlooper’s budget plan, but Metro and the community colleges would receive only about $3,000 per student.

Attempting to change the college allocation formula during the 2014 legislative session would be politically difficult, but JBC chair Rep. Crisanta Duran, D-Denver, asked Jordan for more information on the issue. She asked him for “a specific plan” on how the formula could be improved. “That information would be very helpful.” Duran’s District 5 includes the Metro campus.

Thursday’s hearing was just the second step in a long process leading to legislative approval of a 2014-15 state budget in late April. Among other steps, updated state revenue forecasts that will be issued next week and in March will affect the budget debate, both for higher education and other state programs.

School Finance

IPS board votes to ask taxpayers for $315 million, reject the chamber’s plan

PHOTO: Dylan Peers McCoy

Indianapolis Public Schools officials voted Tuesday to ask taxpayers for $315 million over eight years to help close its budget gap — an amount that’s less than half the district’s initial proposal but is still high enough to draw skepticism from a local business group.

The school board pledged to continue discussions in the next week with the Indy Chamber, which released an alternative proposal last week calling for massive spending cuts and a significantly smaller tax increase. The school board rejected the proposal as unrealistic and instead voted to add a much larger tax measure to the November ballot.

If the school board and the chamber come to a different agreement before the July 24 meeting, the board can change the request for more taxpayer money before it goes to voters. Some board members, however, were dubious that they would be able to find common ground.

“While I appreciate the fact that we want to continue to negotiate, I’m pretty sure that I’m at rock bottom now,” said school board member Kelly Bentley. “That initial proposal by the chamber is, unfortunately in my mind, it’s insulting. It’s insulting to our children, and to our neighborhoods, and to our families.”

Chamber leaders, whose support is considered important to the referendum passing, were skeptical about the dollar amount. In a press release, the group said the district was “taking another step towards seeking a double-digit tax increase.”

“We’re concerned that our numbers are so divergent,” said chamber president and CEO Michael Huber in the statement. “We need to study the assumptions behind the $318 million request; clearly the tax impact is significant and the task of winning voter support will be challenging.”

During the board meeting, which lasted more than two hours, district leaders discussed why schools need more money and why the chamber report is unrealistic. They also took comments from community members who were largely supportive of the tax increase.

Joe Ignatius, who mentors students through 100 Black Men of Indianapolis, said that he has seen the benefits of more funding from referendums in other communities.

“This should be a no brainer, to invest in our future for the students,” Ignatius said. “Don’t think about the immediate impact of the dollars that may come out of your pocket but more the long-term impact.”

If the district goes forward with its plan, and voters approve the tax increase, the school system would get as much as $39.4 million more per year for eight years. A family with a home at the district’s median value — $75,300 — would pay about $3.90 more per month in property taxes. (Since the initial proposal, the district reduced the median home value used in calculations on the advice of a consultant.)

The district plan comes on the heels of months of uncertainty. After the school board abandoned its initial plan to seek nearly $1 billion for operating expenses and construction, district officials spent weeks working with the Indy Chamber to craft a less costly proposal. Last month, the board approved a separate referendum to ask taxpayers for about $52 million for school renovations, particularly school safety features.

But the groups came to different conclusions about how much money the district needs for operating expenses.

The chamber released an analysis last week that called for $477 million in cuts, including eliminating busing for high school students, reducing the number of teachers, closing schools, and cutting central office staff. The recommendation also included a $100 million tax increase to fund 16 percent raises for teachers.

District officials, however, say the cuts proposed by the chamber are too aggressive and cannot be accomplished as quickly as the group wants. The administration and board members spent nearly an hour of the meeting Tuesday discussing the chamber plan, why they believe it’s methodology is wrong, and the devastating consequences they say it would have on schools.

Even if the $315 million plan proposed by the district passes, it will come with some sacrifices compared to the initial plan. Those cuts could include: reduced transportation for magnet schools, field trips, and after school activities; school closings; increased benefits costs for employees; and smaller pay increases for teachers and employees.

The district did not make a specific commitment to how much teacher pay would increase if the amount asked for in the referendum is approved, but Superintendent Lewis Ferebee said the funds would pay for consistent raises.

“We would be at least addressing inflationary increases and cost of living, but we hope that we can be higher than that,” said Ferebee. “It would depend a lot on what we are able to realize in savings.”

The school board’s decision to rebuff the chamber’s recommendation puts the district in a difficult position. The chamber has no official role in determining the amount of the referendum, but it could be a politically powerful ally.

Last week, Al Hubbard, an influential philanthropist and businessman who provided major funding for the chamber analysis, said that if the district seeks more money than the group recommended, he would oppose the referendum.

The total tax increase would vary for each homeowner within district boundaries. The operating increase would raise taxes by up to $0.28 for every $100 of assessed property value, while the construction increase would raise taxes by up to $0.03 per $100 of assessed property value.

School Finance

Facing tax opposition, Indianapolis leaders may settle for less than schools need

PHOTO: Alan Petersime

One day before the Indianapolis Public Schools Board is expected to approve a ballot measure to ask taxpayers for more funding, district officials appealed to a small group of community members for support.

Fewer than 40 people, including district staff, gathered Monday night at the New Era Church to hear from leaders about the need for more school funding. School board members plan to vote Tuesday on whether to ask voters to approve a tax hike to fund operating expenses, such as teacher salaries, in the November election. But just how much money they will seek is unknown.

The crowd at New Era was largely supportive of plans to raise more money for district schools, and at moments people appeared wistful that the district had abandoned an early plan to seek nearly $1 billion over eight years, which one person described as a “dream.”

Martha Malinski, a parent at School 91 and a recent transplant from Minneapolis, said the city appears to have a “lack of investment” in education.

“Is the money that you are asking for enough?” she asked.

Whatever amount the district eventually seeks is likely to be dramatically scaled down from the first proposal. Superintendent Lewis Ferebee has spent more than seven months grappling with the reality that many Indianapolis political leaders and taxpayers don’t have the stomach for the tax increase the district initially sought.

“We are trying to balance what’s too much in terms of tax burden with the need for our students,” said Ferebee, who also raised the possibility that the district might return to taxpayers for more money if the first referendum does not raise enough. “If we don’t invest in our young people now, what are the consequences and what do we have to pay later?”

After withdrawing their initial plan to seek nearly $1 billion over eight years, district officials spent months working with the Indy Chamber to analyze Indianapolis Public Schools finances and find areas to trim in an effort to reduce the potential tax increase. But the district and chamber are at odds over how aggressive the cuts should be.

Last week, the chamber released a voluminous list of cuts the group says could save the school system $477 million over eight years. They include reducing the number of teachers, eliminating busing for high schoolers, and closing schools. The chamber has paired those cuts with a proposal for a referendum to increase school funding by $100 million, which it says could raise teacher salaries by 16 percent.

District officials, however, say the timeline for the cuts proposed by the chamber is not realistic. The analysis mostly includes strategies suggested by the district, said Ferebee. But steps like redistricting and closing schools, for example, can take many months.

“Where we are apart is the pace, the cadence and how aggressive the approach is with realizing those savings,” he said.

Not everyone at the meeting was supportive of the administration. Tim Stark, a teacher from George Washington High School, asked the superintendent not to work with charter high school partners until the district’s traditional high schools are fully enrolled. But Stark said he is still supportive of increasing funding for the district. “It is really important for IPS to get the funds,” he said.

The chamber has no explicit authority over the tax increase but it has the political sway to play an influential role in whether it passes. As a result, Indianapolis Public Schools officials are working to come to an agreement that will get that chamber’s support.

A separate measure to fund building improvements was announced by the district in June and incorporated into the chamber plan. That tax increase would raise $52 million for building improvements, primarily focused on safety. That’s about one-quarter of the initial proposal.