Joint Committee to Develop a Master Plan for Education

Affordability of A High-Quality Education System

Postsecondary Education

California's current postsecondary education finance structure is based upon historical practices rather than an analytic model. It reflects different levels of General Fund allocation per full-time equivalent (FTE) student that, in part, reflect the differential missions and functions assigned to each sector with the adoption of the 1960 Master Plan for Higher Education, and different costs associated with program mixes and levels of instruction (for example, community colleges are prohibited from offering instruction at the upper division or graduate levels).

Each of the three systems has developed additional capacity to generate fiscal resources independent of General Fund support, relying on contributions from alumni and wealthy patrons, as well as indirect funds generated from successful research activities of their faculty and other grants attracted by professional staff. The community college sector has less capacity to generate extramural funding and hence has a greater reliance on General Fund support.

Its inclusion in the Proposition 98 funding guarantees has also proved to be a disadvantage, in that the fiscal needs of the public schools have been given a greater priority in the distribution of Proposition 98 funding than the community colleges needs - an artifact reflecting the constitutional right to attend a free public school described in the Access section of this Plan as contrasted with the statutory promise of access to postsecondary education.

All three public postsecondary education sectors have had to struggle with the impact of increased student fees and institutional costs during periods of state economic exigency. California's continuous growth has also eliminated the prospect of providing free access to public postsecondary education, given other increasing demands on the General Fund. We believe that seeking to better determine how General Fund monies can be combined with federal and private funding to keep postsecondary education affordable to Californians who desire it and meet the costs of operations of public colleges and universities is an appropriate objective for this Plan.

Recommendation 49

The State should adopt policies to provide more stability for finance and to dampen the 'boom and bust' swings of state appropriations for postsecondary education.

In good financial times, the State funds the base budgets of public institutions according to certain agreements or annual negotiations, plus costs associated with projected enrollment growth. The State also provides additional support beyond this funding. In bad financial times, the State cuts base budgets by some negotiated amount, may reduce funds for additional enrollments regardless of demand, and allows student fees to increase substantially. This summary accurately describes funding of public postsecondary education over the past decade. Analysis, research, working group reports, and expert testimony offer no reliable alternative.

Once the State has satisfied its commitment to provide an adequate base of funding to meet the basic operational needs of its public colleges and universities, additional allocations should emphasize one-time expenditures that can, if necessary, be more easily reduced in times of financial stress. The State should examine the adequacy of its approach to funding public colleges and universities in several respects to ensure that resources are adequate to preserve high-quality teaching and learning opportunities at all levels.

As with K-12 financing structures, we believe the State should maintain a long-term objective for postsecondary education financing of aligning the allocation and expenditure of monies with the actual costs of providing the educational services for which they are spent. The Joint Committee recognizes that this objective may be more difficult to attain for postsecondary education, in that each sector has multiple missions and functions to carry out, and that the faculty, academic support, instructional materials, and facilities employed at each institution are utilized differently to meet each or all of these missions and functions. Hence, assigning a percentage of their time/usage to various missions would be complex.

However, the committee finds the proposition that the State should allocate funding to support lower division instruction at roughly comparable levels in all three public sectors of postsecondary education is attractive in several respects: it is consistent with our stance that quality educational opportunities should be available to all students enrolling in public colleges and universities and that state financing should reflect this commitment; it would provide substantial additional resources to community colleges, which serve students with the greatest range of preparation and learning support needs; and it might foster greater faculty collaboration and course articulation. However, pursuing this option could result in a substantial additional financial obligation for the State, which could threaten community college access during poor economic times and exert pressure to increase fees charged to community college students.

It has also been suggested that consideration be given to extending the California Quality Education Model (see Recommendation 44) to the postsecondary education sector. This suggestion is consistent with our vision of developing a coherent system of education, and would substantiate the recognition that education institutions serving greater proportions of students for whom additional services are necessary to enable them to reach common expectations require additional resources beyond the adequate base provided to every campus within each respective system. Such an undertaking would be substantially more complex than that required for developing a new funding model for public schools. These alternative approaches to financing postsecondary education may be appropriate for consideration, since they come closer to identifying the education components essential to quality education at the postsecondary level; but the financial implications of these approaches require that they be studied carefully before action is taken to implement any one of them. Examination of these options should also be accompanied by an analysis of their potential impact on student fee policy and financial aid requirements.

In a similar vein, disparities exist in state financing of California's public colleges and universities in several regards. First, definitions of what constitutes a full-time equivalent student (FTES) - the basis for student-driven funding allocation by the State - at the graduate level are not common for the California State University and University of California systems (15 units and 12 units, respectively), resulting in the generation of differential funding beyond that which occurs as a result of the differences in funding per FTES for each system. Second, the State engages in line-item financing of the central administrative office operations of the California Community Colleges, in contrast to its practice of providing overall system funding for the California State University and University of California systems - resulting in the Board of Governors' being financially precluded from effectively governing the community colleges. Finally, the University of California and California State University systems receive minimal support for applied research related to state policy priorities, such as effective teaching and learning practices, and have no reserve appropriated for research to address urgent state-determined priorities.

While much of the testimony and staff analysis on these points is interesting and, in some cases, compelling in nature, specific recommendations for long-term changes in postsecondary education financing are inappropriate at this time. Nonetheless, we believe that the following near-term actions should take place:

Recommendation 49.1

The State should establish the California Community Colleges' share of overall state revenues guaranteed by Proposition 98 to K-14 education at 10.93 percent.

Recommendation 49.2

The State should analyze the appropriateness of modifying the current 'marginal cost' approach for funding all additional enrollments in public colleges and universities, to account for contemporary costs of operations, differing missions and functions, and differential student characteristics that affect costs in each sector.

Recommendation 49.3

The State should make an annual investment for state-supported applied research by public postsecondary education institutions, to be held in reserve to allow the State to address issues of urgent public priority, as identified by the Legislature and the Governor. Such investment and allocation should be consistent with the missions of the postsecondary education sectors.

Recommendation 50

The Legislature and Governor should, after formal study of all relevant factors, determine and define how the costs of postsecondary education should be distributed among the State, the federal government, and students and their families, and thereupon design a new, fiscally responsible, and appropriately balanced student fee policy that would preserve access to higher education opportunity for all of California's students, particularly those from low-income and underrepresented groups.

California's traditional policy of retaining low fees for public postsecondary education should be re-examined in light of modern realities. The 1960 Master Plan for California Higher Education strongly endorsed low student charges, prohibited tuition (direct payment for instruction), and assumed that fees were the most important factor in steering young adults toward or away from college. That assumption discounted the impact of the costs of other factors, such as housing, transportation, child care, and various fees for materials, books, and supplies, all of which have been growing significantly.

Appropriate information is needed to guide any reform of the State's current fee structure and the development of any fee policy. Such information could also assist in determining how the costs of postsecondary education should be distributed among the State, institutions, the federal government, and students and their families. California has provided essentially tuition-free access to public post-secondary education, including very low fees for students enrolled in community colleges and comparativelylow fees for students enrolled in the California State University and University of California systems.

For a variety of reasons, including enrollment growth, economic uncertainty, and increased demand for limited General Fund dollars, the State should now consider a shift from a no- or low-fee system to a system of affordable fees, coupled with sufficient financial aid to assure fees are never a barrier to access for Californians seeking postsecondary education. California should strive for a fiscally responsible and equitable fee policy that would minimize and mitigate the creation of barriers to students from low-income and under-represented groups, and preserve access for all Californians. There is also benefit from state actions to limit substantial year-to-year increases in student fees, which research indicates have the greatest negative impact on students enrolling in community colleges.

Any change in fee policy should be complemented by a correlative change in financial aid policy that would recognize the overall costs of attending a postsecondary education institution in California. California should also continue its commitment to use state financial aid policies to encourage and enable students who want to pursue their postsecondary education goals at independent and private postsecondary education institutions.

Accordingly, we recommend the following actions:

Recommendation 50.1

The State should adopt a student fee policy aimed at stabilizing student fees, such that, to the extent feasible, fees would increase in a moderate and predictable fashion when needed, and should resist pressure to buy out student fee increases or reduce student fees at the California Community Colleges California State University, and University of California systems during strong economic times. The State should adopt distinct student fee policies designed to address the unique needs and considerations of California's 2-year and 4-year public institutions.

Recommendation 50.2

State policy should allow additional fee revenue collected by community colleges to remain with each college, without a General Fund offset, whenever fiscal conditions compel fees to be increased.

Recommendation 51

The State should maintain a need-based financial aid and scholarship program to assist students from low-income backgrounds to pursue their educational objectives in a California college or university.

Today, more financial resources are available to students than ever before to pay the costs of fees, room and board, and books, depending on students' financial circumstances and the kind of institution attended. These resources include federal and state need-based grants (Pell and Cal Grants), middle-income federal tuition tax credits, institution-based grant aid given by each college or university, and subsidized and unsubsidized loans to students or parents. The latter constitute a growing proportionof the financial aid available to students, and the type most often rejected by low-income students. California's Cal Grant program, the largest of its financial aid programs, originated as a scholarship program and has evolved over time into one that emphasizes both need and merit. Further expansion of this program should retain a high priority on the financial need of students, since meritorious achievement of students is recognized by admission to one of California's two 'selective' public universities or by admission to selective independent colleges and universities operating within the state.

Fiscal pressures resulting from a growing demand for General Fund support of public programs in a growing state, routine shifts in the strength of the state's economy, and steady growth in postsecondary education enrollment demand have fueled a shift from statewide practices of no or low fees to affordable fees. Notwithstanding these realities, California should continue its commitment to affordability for students enrolled in public colleges and universities. California should also continue its commitment to use its financial aid policies to encourage and enable students to pursue their postsecondary education goals at independent and private postsecondary education institutions. In addition, public postsecondary education institutions should be strongly encouraged to use institutionally based aid to ensure that low-income students enrolled in their campuses are not left with unmet need.

Accordingly, we recommend the following actions:

Recommendation 51.1

The State should continue to emphasize financial need in the award of state-supported student grants and should continue to fund the Cal Grant 'entitlement' as defined in SB 1644 (Statutes of 2000). The State should assure outreach and distribution of information regarding financial aid to students from low-income families and under-represented groups.

Recommendation 51.2

The maximum Cal Grant amount awarded to students choosing to attend independent postsecondary education institutions should be reviewed periodically, but at least once every five years and, as needed, adjusted to maintain the estimated average General Fund cost of educating a student at the public four-year institutions of postsecondary education, including the average authorized student fees charged by the California State University and University of California systems.

Recommendation 51.3

The State's financial aid policy should consider the role of institutional aid, maintaining flexibility in its use by higher education institutions, while holding the institutions accountable for its use in meeting the State's commitment to providing need-based financial aid.

Recommendation 51.4

The Legislature should regularly review, and where appropriate update, state financial aid programs in order to ensure that eligibility requirements are consistent with contemporary needs of students.

Recommendation 52

The State should review its methodology for determining and funding facilities in California postsecondary education, and, as appropriate for each segment, make changes to emphasize multiple-use facilities, comprehensive space planning, sharing of space among institutions, and incentives to maximize other sources of capital outlay.

The California Postsecondary Education Commission estimates that by 2010 enrollment demand will total more than 714,000 additional students over the enrollment accommodated in public colleges and universities in 1998, and that an addition 78,000 students will likely seek enrollment in regionally accredited independent California colleges or universities. If California seeks to accommodate that demand by the traditional approach of classroom-based delivery on permanent campus sites, the renewal and repair costs of capital facilities that will be needed in public postsecondary education will be more than state government will be able to afford, necessitating use of non-traditional approaches.[72] Widely accepted estimates suggest that the annual cost to maintain the existing postsecondary education physical plant is almost $700 million per year and that an additional $821 million per year will be necessary, under the traditional approach, to build needed facilities to accommodate enrollment growth in the public institutions.

An additional concern is that neither the demand nor the capacity to accommodate that demand will be evenly distributed throughout the state. A more recent CPEC analysis of future enrollment demand in 11 regions of the state examined historical participation rates of recent high school graduates and adult learners at public colleges and universities located within their communities as well as elsewhere in California. Based on that analysis, only the colleges located in Los Angeles County will have the capacity to accommodate the enrollment demand expected in Fall 2004; and by 2010, no region of the state will have enough capacity within the existing campuses to accommodate the expected enrollment demand in community colleges. Within the California State University system, only those campuses located in the central coast and south coast regions of the state will have sufficient capacity to accommodate the expected enrollment demand, mostly at the two newest California State University campuses, CSU Monterey Bay and CSU Channel Islands. By 2010, these two regions will remain the only regions in the state where the California State University will be able to accommodate enrollment demand; but the excess demand for the system as a whole will increase nearly four-fold between 2004 and 2010. [73] A similar analysis for University of California campuses is underway.

Use of technology is increasingly being considered as a viable means to enhance teaching and learning, squeeze efficiencies from administrative operations, and reduce inequities in access to current knowledge by students throughout the state. Technology advances, especially the integration of multimedia in home education and entertainment, are part of the ordinary life of today's children - children who ultimately will move through public schools and enroll in a college or university within the state. Their exposure suggests that technology should be considered as an integral component of facility planning and strategies to share educational resources between and among educational institutions in the state. The confluence of increasingly sophisticated information technology and increasing numbers of students comfortable with the use of technology should also serve as an incentive for educators to think in terms of developing new teaching and learning models, mediated by technology, that are better than,rather than 'as good as,' traditional teaching and learning approaches.

While access to technology and use of the Internet have increased nationally, they have not increased for all groups. According to a recent report, the difference between Internet use in White households using the Internet and non-White households increased from 13 percentage points in 1997 to 20 percentage points in 1998. [74] The lowest level of access to computers and use of the Internet was found to be among poor, and Black, students living in rural areas. While higher income narrows the racial divide in access to and use of technology, it does not entirely eliminate the 'digital divide' for students in that socio-economic level. State facility planning must consciously take these facts into account as it seeks to assure access to various types of technology for all students and educators in the state.

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