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.

after parkland

Tennessee governor proposes $30 million for student safety plan

PHOTO: Marta W. Aldrich
Gov. Bill Haslam speaks with reporters Tuesday about his budget amendment, which includes $30 million for a school safety plan.

Gov. Bill Haslam on Tuesday proposed spending an extra $30 million to improve student safety in Tennessee, joining the growing list of governors pushing similar actions after last month’s shooting rampage at a Florida high school.

But unlike other states focusing exclusively on safety inside of schools, Haslam wants some money to keep students safe on school buses too — a nod to several fatal accidents in recent years, including a 2016 crash that killed six elementary school students in Chattanooga.

“Our children deserve to learn in a safe and secure environment,” Haslam said in presenting his safety proposal in an amendment to his proposed budget.

The Republican governor only had about $84 million in mostly one-time funding to work with for extra needs this spring, and school safety received top priority. Haslam proposed $27 million for safety in schools and $3 million to help districts purchase new buses equipped with seat belts.

But exactly how the school safety money will be spent depends on recommendations from Haslam’s task force on the issue, which is expected to wind up its work on Thursday after three weeks of meetings. Possibilities include more law enforcement officers and mental health services in schools, as well as extra technology to secure school campuses better.

“We don’t have an exact description of how those dollars are going to be used. We just know it’s going to be a priority,” Haslam told reporters.

The governor acknowledged that $30 million is a modest investment given the scope of the need, and said he is open to a special legislative session on school safety. “I think it’s a critical enough issue,” he said, adding that he did not expect that to happen. (State lawmakers cannot begin campaigning for re-election this fall until completing their legislative work.)

Education spending already is increased in Haslam’s $37.5 billion spending plan unveiled in January, allocating an extra $212 million for K-12 schools and including $55 million for teacher pay raises. But Haslam promised to revisit the numbers — and specifically the issue of school safety — after a shooter killed 14 students and three faculty members on Feb. 14 in Parkland, Florida, triggering protests from students across America and calls for heightened security and stricter gun laws.

Haslam had been expected to roll out a school safety plan this spring, but his inclusion of bus safety was a surprise to many. Following fatal crashes in Hamilton and Knox counties in recent years, proposals to retrofit school buses with seat belts have repeatedly collapsed in the legislature under the weight the financial cost.

The new $3 million investment would help districts begin buying new buses with seat belts but would not address existing fleets.

“Is it the final solution on school bus seat belts? No, but it does [make a start],” Haslam said.

The governor presented his school spending plan to lawmakers on the same day that one House committee was scheduled to consider whether to give districts the option of arming some trained teachers with handguns. That bill, sponsored by Rep. David Byrd of Waynesboro, easily cleared its first legislative hurdle on Feb. 28 and has since amassed close to 50 co-sponsors in the House.

Editor’s note: This story will be updated.

More money

What Colorado’s booming economy might mean for the state education budget

More money is forecast to appear below the gold dome (Denver Post photo).

Gov. John Hickenlooper wants to put an extra $200 million into education next year and another $100 million in the 2019-20 fiscal year, but a lot of that money could go to offset hits to districts from anticipated reforms to the state’s pension program and reductions in local tax revenue.

The proposal comes in response to new economic forecasts released Monday that show Colorado having more money than previously expected.

Legislative economists predict that lawmakers will have a whopping $1.3 billion or 11.5 percent more to spend or save in 2018-19 than is budgeted in 2017-18. The forecast from the governor’s Office of State Planning and Budget predicts similar increases in revenue. After meeting the reserve requirement of 6.5 percent, Colorado will have an additional $492 million in reserve for this fiscal year, and even with a higher reserve of 8 percent proposed for next fiscal year, the state would have an additional $548.1 million in 2018-19. 

It’s normal for the forecasts to be slightly different because the economic analysts often use slightly different assumptions. In this case, the governor’s office predicts that the additional revenue will be more spread out over this fiscal year and the next one, while legislative economists think more of the money will be coming in next year. That difference means the legislative forecast shows the state potentially hitting the revenue limits imposed by the Taxpayer’s Bill of Rights, despite lawmakers making more room under the cap just last year, while the governor’s forecast does not.

These are the numbers that the Joint Budget Committee has been waiting for to finalize its recommendations for the 2018-19 budget year. Republicans and advocates for more transportation spending have already seized on the numbers to support a plan to ask voters to approve new debt to pay for road construction and dedicate up to $300 million a year to pay off that debt.

Of course, these forecasts are also inherently speculative – and legislative economists warned these forecasts contain even more uncertainty than usual.

State Rep. Millie Hamner, the Dillon Democrat who chairs the Joint Budget Committee, summed up the message as one of caution about dedicating too much of the new revenue to ongoing expenses. The more that gets committed, the harder it will be for the state to meet all of those commitments in future years.

Those who want to see Colorado spend more on K-12 education have pushed back on the Republican roads bill out of fear that the commitment could make it harder to send more money to schools in the future.

The governor’s budget director Henry Sobanet recommended treating much of this new money as “one-time” funds that should go to “one-time” uses. In a letter to the Joint Budget Committee, he laid out a plan.

In the case of roads spending, he’s recommending an extra $500 million for road construction in 2018-19, but only $150 million in 2019-20. And in the case of education, he’s recommending an additional $200 million in 2018-19 and an additional $100 million the following year.

However, this extra money might not show up in classrooms – or rather, it might show up in a lack of cuts rather than new money.

The governor’s budget request already called for a reduction in the budget stabilization factor of $100 million. That’s the amount by which Colorado underfunds K-12 education compared to the requirements of Amendment 23. In this budget year, it’s $822 million, after a mid-year adjustment. Some of the extra money could go toward reducing it even further.

However, Sobanet said he envisions most of it going to offset reductions in local property tax revenue that will be caused by a provision of the Colorado constitution that governs the ratio between residential and commercial property tax revenue.

It’s also possible that school districts could end up having to pay more toward some sort of agreement on changes to the Public Employees’ Retirement Association, or PERA. The final form of reforms to PERA is far from certain.

“Another downgrade in the residential assessment rate means more state share to keep total per pupil spending up,” Sobanet said. “We know that since the December announcement of property taxes and since we know PERA might be on the table for something, let’s set aside some resources and make sure we can handle this.”