SADOW: We’re Spending Our Higher Ed Dollars On A System Spread Too Thinly

Today is a big day in Louisiana higher education, a sector sliced many times in recent years by planned and surprise budget cuts, with for most institutions the reporting of enrollment figures (a couple of days late because of Hurricane Isaac closures) that will determine its revenue picture for the remainder of the year. Yet any good news (that is, enrollment increases, meaning more revenue) for institutions only will delay the day of reckoning coming to Louisiana higher education as a whole unless major policy changes occur.

Although the report from the State Higher Education Officers Organization came out six months ago, recent interviews concerning data from its State Higher Education Funding 2011 edition demonstrate that education policy to date has not significantly changed the headwinds Louisiana higher education faces. Some of the larger trends affecting it the Louisiana State University Board of Supervisors has heard recently. But the specific ills as they apply to this state’s higher education system remain unaddressed and therefore unresolved.

Much moaning and groaning has circulated concerning funding of Louisiana higher education, as the state in total has retracted over a half a billion dollars, or about a fifth of its total state subsidization, since 2008. Tuition increases have made up a good portion of the difference, leading to another lind of carping about students (and taxpayers, through the Taylor Opportunity Program for Students) paying more, but institutions and governance boards still complain that not only are further significant cuts positioned to bring apocalyptic results to their sector, but that increases in state subsidization only may improve quality delivery.

The problem for that line of thinking is, in comparative perspective, even at this reduced level Louisiana is one of the largest public sector supporters of higher education in the nation. As of last year, in terms of full time equivalent student enrollments, among the 50 states Louisiana ranked 11th highest in state support at $7,309 (national average: $6,290). Over the past five years, at an increase of 7.2 percent per year, that was the fourth-highest increase in state support behind three other oil-rich states (national average: -12.5 percent). Most stunningly, at an average of $77 per year, no state has increased state spending on higher education per student more than Louisiana since 1986.

Part of this can be explained by the rate of increase, just over 10 percent, in Louisiana of FTE enrollment over the past five years has been the fourth lowest (national average: 16.9 percent). And the supposedly detrimental increases in tuition place the state fifth lowest among all the states in terms of increase over the past five years, yet despite increases of nearly 30 percent in that time the actual FTE revenue from tuition has gone down 18 percent, the most by far of any state – in part because it’s still fourth lowest in tuition. Combine state support and tuition, and actually total higher education revenue FTE for Louisiana barely dropped – and that was a relative overall increase as nationwide there was a 2.3 percent decrease.

In other words, as many in Louisiana higher education warn the sky is falling because of tight fiscal conditions and tuition increases, the fact is compared to other states that do better jobs in a number of areas such as retention, graduation, and in quality delivery, Louisiana taxpayers pump in more money than in most at a higher rate of increase than almost anywhere else and still don’t ask a lot for tuition compared to most at a rate of increase slower than almost anywhere else. Overall, in the balancing the of two, the state ranks 37th in total revenues per full time equivalent student.

Out of all of this comes a paradox – nationally, tuition represents about 43 percent of all revenues generated, but in Louisiana that now across all universities has gone over 50 percent. So if state support is relatively high and tuition relatively low, then why has tuition such a high part of the total mix? Because the emphasis always has been to get as many warm bodies in classrooms as possible given an overbuilt system as a way to shore up finances to support it.

Remarkably, the number of students attending baccalaureate-and-above institutions of the state’s is almost identical last year to that of 1994-1995, with slow population growth and increased emphasis on community colleges explaining that. This points to the real explanation of the numbers: in its current form, the system spreads resources too thinly, creating overdependence on tuition that especially creates downward revenue pressures on the four-year schools.

One might think, therefore, if any additional funding is going to come higher education’s way, it needs to come from tuition. Yet overall revenues from tuition actually have been declining recently, likely because of three things: increased TOPS utilization that transfers the source of revenue from tuition to state support, the growth of community colleges with their lower tuition rates, and struggles with retention rates where students stay on average shorter periods in higher education. As it rises, some pricing out of the market (probably not much, given TOPS, the wealth of lending and grants involved backed by both the state and federal government, and relative inelasticity of demand) also will impact tuition as a source of revenue.

Still, compared to other states, return seems low for high costs, and the cutbacks to universities are real with paring of programs, increases in class sizes, and fewer sections being offered, in part because of hiring into few open tenure-track positions and a great increase in the use of adjunct faculty. Unfortunately, the relatively generous state support per FTE gets wasted on too much duplicative infrastructure, and tuition hikes seem only to be bringing revenues increases to lower-level schools as, along with increased admission standards, some students substitute attending four-year schools for two-year ones.

Once again, this points to a solution of paring the four-year schools, through mergers (where they make sense), making them into community colleges, or even closures. Failure to do so creates a pair of unappetizing scenarios, where the citizenry gets hit with tax increases and/or cuts in other services to continue subsidization of this inefficiency, or most if not all schools slowly starve to death, creating a vicious cycle where reductions impact service delivery in a way that discourages enrollment, losing it to out-of-state, private, and proprietary schools, and the system collapses in on itself that would force retrenchment on even less favorable terms than if done sooner.

It’s a risky gamble to expect improved secondary education and utilization of community colleges eventually to get demand to catch up to supply at the four-year college level, alleviating the crisis without some system change, in the hope that state finances can support the overbuilt system awhile longer without neglecting other needs, or that tuition increases (along with TOPS reform to make it more of a reward and less of an entitlement with a low bar to qualify) can prove enough to keep the system afloat. And given the lag time systemic changes requires where years pass before benefits get realized, delay could be catastrophic.

Hopefully, today’s enrollment numbers will buy some breathing space. The wisest use of that time is to start the process of realignment of higher education.

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