 Good afternoon. Thank you all for coming. I'm Jason DeLyle. I'm the Director of the Federal Education Budget Project here at the New America Foundation. The Federal Education Budget Project is a nonpartisan authoritative source of information on federal education funding and our goal is to help heighten the quality of debate around education policy, particularly with the focus on federal funding. Many of you know that we have a blog, the Ed Money Watch blog. You can check that out on our website where we do regular articles and analysis on federal education funding. We also have a website with a whole bunch of data on student achievement funding and demographics for every school district in the country and every institution of higher education in the country. And we also publish research papers and convene panel discussions on important topics in education finance, which brings us to today's event. Over the past about a year and a half we've at the Federal Education Budget Project we've been doing some work on the federal stimulus funding under the American Recovery and Reinvestment Act with a lot of focus on the portion of that funding under the State Fiscal Stabilization Fund that states use to fund their higher education systems. There was a lot of focus on K-12 funding, a lot was said, a lot of research was done, there was a lot of reporting on that side of it, but not really what we thought wasn't enough on the higher education side. And so we've been working on this series of papers. And the last of the series, which came out late last year, some of these are out front, you can pick them up where you can get them off of our website, was a case study, a series of case studies on those states that used a fair amount of the State Fiscal Stabilization Fund to fund their higher education systems. And the case study focused on what they did with the funding and how they used it. And as we started to do some of that work, most of it done by Jennifer Cohen here at the Budget Project, we realized that this funding was, that funding was available for several years. And the states that availed themselves of it are sort of now facing a funding cliff. And so we thought it would be interesting to get a discussion going on what this sort of post-stimulus, post-recession, but still very much so difficult budget times world looks like for higher education finance. And so that's the sort of focus today of our discussion and I'd like to introduce first Jenny Cohen here from the Budget Project. She's a Senior Policy Analyst and she manages our entire database and writes on our blog and writes issue briefs on Federal Education Funding Policy. She's going to, like I said, she's the author of these papers and she's also going to moderate today's panel discussion, but first she's going to give you a little bit of some of the highlights of some of her, the work that she's been doing in this area. We also have Nick Johnson, who is the Vice President for State Fiscal Policy at the Center on Budget and Policy Priorities, Public Policy Institute here in D.C. He directs the Center's State Fiscal Project, which publishes reports on how state budget decisions affect families and communities. We have Dr. Paul Lingenfelder. He's the President of the State Higher Education Executive Officers, SHIO, for those of you in the know. SHIO is a key source of expertise and information on state higher education funding and policy. And we also have Dr. Stephen Jordan, who is the President of Metropolitan State College in Denver. Under his leadership, Metro State launched its first master's degree programs and experienced record enrollment growth. He has led nationally recognized efforts to reposition Metro State during challenging fiscal times, which makes him an ideal candidate for today's discussion. So I'll hand it off to Jennifer Cohen. Thank you, Jason. So I would first like to set the stage, tell you a little bit about the research we did and our conclusions in order to more properly frame the discussion that our wonderful speakers here will lead us in. So let me tell you a brief story in the interest of keeping this as interesting as possible. On February 17th of 2009, President Barack Obama, that probably is blocking my face, yes, President Barack Obama signed the American Recovery and Reinvestment Act with the intention of helping to re-stimulate an economy that had gotten bogged down a little bit. And in that bill, it included $100 billion in spending for education alone. This was a completely unprecedented amount of money. The annual federal education budget is usually between $60 billion and $70 billion. So $100 billion through one bill alone was huge. And it was to be spent over three years, 2009, 2010, and 2011. Now, of course, there's lots of things included in that $100 billion, the largest of which was the State Fiscal Stabilization Fund, which provided $48.6 billion to help states fill their budget gaps. And $39 billion of that was intended specifically for education. Now, everyone talked about what this money meant for K-12. You could open up the newspaper on any given day and see Colorado spending its money on this in K-12 or Florida spending its money on this in K-12, but almost no one talked about what this money meant for higher education. Now, to give you some details about the State Fiscal Stabilization Fund, effectively what it allowed and encouraged states to do was cut their education spending down to 2006 levels. So this was 2009, and they said states, we're giving you open license to cut your spending down to 2006 levels. And you can use this money to fill that gap up to the higher of 2008 or 2009 levels. So it was giving license quite literally to the states to cut spending for higher education and fill those gaps with the federal funds. The money was distributed, and this is important based on population as opposed to based on fiscal need. So this meant that some states that weren't experiencing great recessions got money that they didn't necessarily need. And some states that were experiencing really significant, significant cuts due to slowdown in revenues didn't get nearly enough to fill their gaps. Now, the money could be used for almost anything. They could use it for salaries and benefits. They could use it for new programs, anything like that, but they couldn't use it for new construction or for construction for non-academic buildings. So they could use it though for improvements to instructional facilities, those sorts of things. The federal government put out a ton of guidance on the use of these funds, but there were two things that the federal government said were most important about the funds. They were to be used to save and create jobs, and they should not be used for ongoing expenses. Now, it should strike everyone in this room that those are two sort of contradictory statements, because saving and creating jobs by paying salaries are inherently ongoing expenses. So from the get-go states faced sort of a conundrum in how they were going to use the funds. So in order to draw more attention to what happened in higher education with the use of these funds, we embarked on what ended up being a three-part series. Now, you'll see if you collected some of the paper that there, it says part one of four and part two of four. We ended up combining parts three and four together. So that is the whole set of papers, all three of them out there. Part three and four being what the case study states used the money for and then part four being what happens next and we combine them together. So just to assuage any confusion about that. So the first thing we did was look at how state spending for higher education shifted, both in dollar terms and as a proportion of total state spending. And what we found was pretty interesting. So what you're looking at here, and hopefully you can read the state's names here, is how much each state cut their higher education spending as a proportion of total state spending. So the percentage points that were cut in the year that they first implemented their state fiscal stabilization funds. So some states started using their state fiscal stabilization funds to fill gaps in higher education in 2009. So basically as soon as they got the money, they started to use it. And that on this graph are the gray bars. And then some states decided not to start using the funds until 2010 and those were the blue bars. So we could see here that some states sort of did the opposite of what we expected. Those are, this is the, there we go, these states down here. So they actually increased their state spending as a proportion of total state spending, even though they had the state fiscal stabilization fund dollars. And obviously they did it to varying extents. Oklahoma is the state down here and they increased between 2009 and 2010 their proportion of state spending on higher education by two and a half percent. Then we have all these states up here that did exactly what we expected to see. They cut their state spending on higher education as a proportion of total state spending by varying amounts. And Nevada here being the largest from what we saw cut their state spending by more than three and a half percentage points in a given year. Now we did also see some states that went sort of above and beyond what we expected. And those are the starred states here. We have Wyoming, Tennessee, West Virginia, Arkansas, New York, and Pennsylvania. They actually cut their state spending on higher education while increasing overall state spending. So they made a cut in higher education spending while increasing their total state spending overall. And those increases could have been in anything. It could have been in K-12. It could have been in Medicaid. That we weren't looking at specifically. But this is sort of the opposite. You'd expect them to be cutting state spending on higher education while also cutting overall state spending because theoretically it's a contraction here. But we didn't necessarily see that. So the next thing that we looked at is how did states actually choose to divide their state fiscal stabilization funds between K-12 and higher ed? Now it's important to know that this was made at a state by state basis, this choice. The state fiscal stabilization fund allowed states to decide that we will use this much of the money on K-12 in a given year and this much of the money on higher ed in a given year given their own sort of legislative priorities and what they saw fit to do with the funds. Now most people expect that the vast majority of the money got spent on K-12 and that's absolutely right. We see 30.8 billion. That's a lot of money. Over 2009, 10 and 11 got spent on K-12. But what few people realized is that more than $8 billion of that money was spent on higher ed. This is a huge investment in a given time period for federal funds in higher education. And so it makes you wonder what happened with those dollars. Now it is important to know that this was not an even distribution. Though interestingly, so 8.3 billion is about 20% of the state fiscal stabilization fund and that actually reflects the breakdown more or less at a state by state overall how they divide their state spending in education between higher ed and K-12. So usually it's they spend 70 to 80% of their funds on K-12 and 20 to 30% on higher ed. And so we see that pretty well reflected in this money here. But it's important also to know that some states spent all of their money on higher education. Colorado being a great example, they spent nearly all of their state fiscal stabilization funds on higher ed because their K-12 funds are constitutionally protected by the states who they couldn't actually legally cut their K-12 spending. So they had to do it all in higher ed. And then some states spent almost all of their funds or all of their funds on K-12 because that's where their legislature decided to spend the funds. But it is important to know that by virtue of spending the state fiscal stabilization funds on higher education, they were opening up their higher education system to cuts. That when they elected to use their state fiscal stabilization funds on higher ed, they pretty much said as the federal law allowed them to, we're going to cut our state spending in this area. So as Jason said, the final paper that we did was looking at eight different states to figure out exactly how they use the funds and what that meant for their institutions and then what it means in the future. So I just wanted to go through a couple of what I consider to be more interesting states that we explored. So the first state here is Colorado. What we're seeing in this graph is how, so the blue bar here is state general funds and the gray bar is the state fiscal stabilization funds that they used. So we're seeing here how the state cut their state spending in a given year and how they filled it with the state fiscal stabilization funds. Now what's important to know here is that this doesn't include tuition revenue. So if we'd included tuition revenue in this, you'd see a huge bar going up on each of these that includes tuition revenue. And over each of these years, Colorado increased their tuition significantly. In 2010 and 11, they increased their tuition by 9% more or less across the board, although it was an institution by institution decision. And then in 2012, they're expecting to see increases between 10 and 15% at a lot of institutions. So you are seeing massive growth in tuition revenue at the same time. Now what's interesting to see here is really just how much Colorado cut their spending. So in the first year that they implemented the state fiscal stabilization funds, they cut their state spending down to million, excuse me. And that is their 2006 spending level. So from the get go, they went down to the very floor that they could go to and they filled it with 151 million in state fiscal stabilization funds. So the first thing you're probably thinking is, well, then what gives in 2010? And what gives is that Colorado actually applied for waiver to the Department of Education that basically said, we don't have enough tax revenue to spend even 555 million in 2010. We're going to need to cut our spending more and fill it all with the state fiscal stabilization funds. And the Department of Education said, go ahead and do it. It seemed like they didn't have any other options. But what that meant for 2011 was because they spent so much money in 2010, there wasn't enough in 2011 to fully fill the gap. So in 2011, their institutions took a greater hit because there wasn't enough federal funding available. Now what is interesting about Colorado is that in 2010 and 2011, they spent their funds, they distributed their funds amongst institutions in a somewhat unusual way. So most states that we saw distributed their funds to their institutions based only on the proportion or share of state general funds. So if an institution got 20% of general funds in a given year, they'd get 20% of the state fiscal stabilization funds. Colorado probably looked at that and thought, well, that doesn't really cover all the nuances of funding for higher education. So they approached it in a three-tiered way. They distributed 50% based on share of general funds like all the other states. Then they did 50% based on the share of total spending. That total spending included tuition revenue. So it meant that institutions that had more tuition revenue than others would get a larger share of the funds. And then the last piece they did was they distributed a $10 million cut across their institutions based on enrollment growth. So meaning that institutions that faced more enrollment growth got a smaller share of the cut to help them accommodate for their growth in a number of students. Another interesting thing that happened in Colorado when we see this in a few states is that they had to shift direction mid-year. So in 2010, they were planning on spending slightly less than this in the state fiscal stabilization funds and then realized that they didn't have enough tax revenue even though they were already so far low. They were still short. And so they had to mid-year move some of the education stabilization funds intended for 2011 into 2012, causing also some trouble for their institutions who had to mid-year say, oh wait, you're changing our budgets and go back to the drawing board and figure that out again. The other state that I think is a little interesting is Louisiana. Now the first thing to note here about Louisiana is that this is their education stabilization funds that they spent in 2010 and 11. But you'll notice that they never were able to get up to their 2009 level. So this is a state where their state fiscal stabilization fund allocation did not or was not a sufficient enough amount level to get them up to their spending. Now it is possible that this was a choice made by the state legislature that they did have enough funds to get them there, but instead they decided to put those funds in K-12. So the important thing to remember as we're talking about all this is that there's a lot of decision making that happened at the state legislature and also in state governor's offices that influenced some of these outcomes. So they didn't plug and chug into a formula to get these distributions. It was decisions that were made and so they're not always the most rational decisions as we know. Now the other thing that happened in Louisiana was a little bit of budget manipulation. So in 2011 the legislature realized that they didn't have enough money to reach their maintenance of effort. So that's their 2006 level spending the floor that they could spend for state funding. And so they said, oh we know what we'll do we'll take money promised for 2012 so that was state funding that was supposed to go here and shift it into our 2011 budget. And the way they got around that is that they did a 10 percent tuition increase in 2011 and they just plopped that increased tuition revenue into 2012. So in the end the actual amount of money available in 2011 didn't change. It was just the source of the funds was switched around from being tuition revenue to being state revenue. You see these sorts of manipulations happening in a lot of states that the maintenance of effort provision was something the Department of Education took very seriously. So states had to get a little creative sometimes in finding ways to make that to reach that maintenance of effort provision and you see that in Louisiana here. Another interesting thing that Louisiana did which is worth mentioning is their legislature implemented the Grad Act which is the granting resources and autonomy for diplomas act. What the Grad Act essentially allowed institutions to do is if they reached certain metrics graduation rates retention rates those sorts of things certain outcomes they were then awarded the ability to increase their tuition as they saw fit. So in each of these years we see Louisiana institutions raising their tuition by between 8 and 10 percent in a given year and that's actually you'd see as I mentioned before in Colorado huge bars going up here for tuition revenue in each year and each year it's growing by 10 percent in addition. So we're seeing these states are also really filling their gaps through tuition revenue. So then the question remains how did the institutions actually use their funds and we identified five major ways that they use them. The most common being and I mentioned this before salaries and benefits. So some states actually required that their institutions use the money only for salary and benefits. They said here's your amount plug it into your into your salary and benefit account line and that's it you're done and the reason they did that is sort of interesting I think unintended consequences of federal guidance. When the federal government said you need to use the money to save and create jobs the state said great that's easy. It's also very easy to track and one of the things I'm sure you've heard about the American Recovery Investment Act is that it's one of the most closely examined distributions of federal funds ever. Every quarter states and institutions school districts everyone had to report to the federal government how much money they received what they used it for all of those things and when you just plug in chugs and new funding stream into your salary and benefits calculator it's really easy to track it just appears there in your spreadsheet. Doing other things are a little more complicated to track and also didn't fall under that umbrella of saving and creating jobs but we did see some other uses as well. So for example Louisiana allowed their institutions to determine the proportion of funds they would spend between salaries and benefits and need-based aid. So you do see some institutions oops sorry about that some institutions that have a access mission using more of their funds for need-based aid to help more students attend. That happened in Louisiana and also in Massachusetts some of their institutions used it for need-based aid. We also see capital improvements so as I mentioned before they couldn't use the money to build new buildings or to build football stadiums or swimming pools or what have you but some places did use the funds for capital improvements and investments. So for example Salem State in Massachusetts used the funds to improve facilities especially to make them more energy efficient thinking that these investments now would save the money over the long term. We also saw this in Wyoming. Wyoming actually divided their funds into two different pieces and the vast majority of the funds had to be used for capital improvements. So you see a lot of their institutions using it to update and renovate instructional facilities like new hoods and chem labs new floors and hygiene facilities those sorts of things. We've also seen investments in technology and this is another one of those paying it forward. If you invest the money now you can save money later. So we saw this also in Salem State in Massachusetts they digitized their records they brought in more library acquisitions that were digital so that they could save money in the long term. And then we also see delay in tuition increases now these were either indirect or very direct. So for example the University of Massachusetts before they knew they were getting the state fiscal stabilization funds implemented a $1,500 tuition or fee increase actually a tuition in the state of Massachusetts has been more or less the same since the 70s so instead they increased fees. So they implemented a $1,500 fee increase and then when they realized they got the funds they rebated their students $1,100 of that fee increase but only in state students. Another thing you see here very frequently is that out of state students more and more are shouldering the burden of cost because they're not as protected typically by the legislature for tuition. But overall we see that all of these expenditures more or less led to delays in tuition increases indirectly. So for example if they hadn't gotten the funds for salaries and benefits they would have had to raise tuition more than you see. So for example in North Carolina you see 10 to 15 percent tuition increases over the implementation of the state fiscal stabilization fund but folks there told us if they hadn't gotten the funds they might have had to raise tuition as much as 25 percent. So we are seeing that this situation would have been much more dire for students and moving forward now that the funds are no longer available they definitely will be. The other thing that you would have seen is huge cuts. So many institutions even as it were had to cut unpopular programs, lay off staff, things like that and those sorts of decisions would be much more broad. This is all under the assumption that absent the federal funds the legislatures would have made the same decisions that they made. So they would have cut state spending the same way that they had with the funds. However a lot of folks believe that legislatures would have made different decisions if the federal funds hadn't been available. So this is we're living in a very specific world a world where the decisions that were made were the decisions that were made and it's very difficult to hypothesize what would have happened absent those decisions. So next question and why we have our wonderful speakers here to tell us what happens next. So I would like to welcome up Nick Johnson from the Center on Budget Policy Priorities excuse me to tell us a bit about what he sees in the future for state revenues and expenditures. She knows that we're not sitting up here but each of our water bottles has a name plate. So good afternoon everyone really pleased to be with you all. So I'm going to start by giving a little bit of context to some of the things that just slides a little bit of context to some of the stuff that Jennifer's been talking about and then talk a little bit about what may be coming next and of course the short answer to what is coming next is I don't know and none of us knows but we'll we can maybe make some informed guesses in part by thinking about the context of the last few years. So I'm going to talk about the context in the in the sense of where does higher education funding fit in the context of state budgets and what's been going on over the last few years to the other determinants of state spending and then switch to talk a little bit about the road ahead and as most of you probably know most of the state budget goes to education and health care. The biggest single slice of state general fund spending this is state tax dollars only not including what states get from the federal government is K through 12 education followed by Medicaid and then higher education behind behind that and all other includes everything from aid to local aid to local localities pensions for public employees economic development parks and rec environmental protection and so on and and so if you look at state and local together which I'm not showing you here but state and local spending together education health care transportation public safety represents about 80% of state and local budgets together and it's important to think about that because then when the recession hit starting 2007 2008 state revenues start declining declines on average over 10% in state revenues from pre-recession levels by the time by the time they bottomed out the answer to the question of what did states cut in order to continue to balance their budgets every state has a balanced budget requirement of some sort what did they cut in order to to balance their budget the answer is you got to look at the whole pie and that's what states did they looked at at at everything and certainly higher education took a share of the hit as we'll discuss in a moment so going forward then I think the question is when if the recession caused such a big loss of state funding will the end of the recession will the economy's emergence will the fact that revenues are starting to come back a bit at the state level lead to a restoration of state funding so if we have the federal dollars which Jennifer talked about plug in the gap in the middle are we going to get back to where we were before so that's what I'm talking about for a little bit this year the fiscal year we're in has been the worst year for state budgets probably ever when state legislatures were writing their budgets last year here's what they were looking at they were looking at revenues that were still way below pre-recession levels they were looking at at the fact that the reserve funds had mostly been spent they were looking at the fact that the recovery act dollars not just the education the state fiscal stabilization fund dollars administered by the Department of Education but also 90 billion dollars in additional Medicaid funding had expired they were looking at the fact that Medicaid case rolls uh caseloads and participation in other public programs was still high because of high levels of joblessness so very tough various large continued gaps between uh the cost of services and the need for services and the amount of revenues that was available so you're looking at fiscal year 20 2012 the year we're in when they were writing the budgets for this current year 42 states with large budget shortfalls and some of them very big over 20 percent budget gaps which which essentially means if you're going to close that size of a gap with cuts alone uh that's on average every program takes a hit of over 20 percent looking ahead a little bit it gets a little better as we go into 2013 the budgets that uh that legislatures are looking at right now only 29 states are facing budget shortfalls and honestly these some of these are states with two-year budgets where they were where they closed they last year when they were in their budgets they simultaneously closed their gap for 2012 and for 2013 so we're this is a little bit of a look back a little bit of a look forward and so things are getting better revenues are definitely starting to tick up we are now merely six percent below pre-recession levels in terms of overall state tax tax revenues which is a lot better than being 12 percent below pre-recession levels that's just adjusted for inflation i'm not adjusting for anything else like the fact that there are hundreds of thousands more kids in k-12 needing education hundreds of thousands of more college students in public colleges universities millions of more people on medicaid and so on i'm gonna skip ahead a little bit it's just more depressing stuff you don't really need it uh so this is so we look back at fiscal year 2012 and really tried to dissect if you look at all the states how did they close those budget gaps which is a much harder exercise than you would think because the data you know it's they say if you've seen one state budget you've seen one state budget they are not very easy to compare and certainly decisions that they make are very easy to compare which i think tells you something about the challenge that the Jennifer faced in in writing this report so in 2012 which is when there was a lot state fiscal stabilization money there was the medicaid money from the recovery act available that federal assistance that emergency federal assistance you can't the black lettering and the blue uh slice of the pie is sort of sliding in together but i'll tell you it says the blue slice is federal assistance about a third of state budget gaps that year were closed thanks to the recovery act the balance of the gap was closed by mostly by spending cuts uh and to a lesser extent by taxes and fees uh raising uh don't talk more about those in just a second uh and to uh to eliminate extent other which includes everything from drawing down rainy font day funds to uh plain old budgeting and accounting gimmicks the the budget cuts as i said hit every slice of the pie healthcare states cut back access to medicaid benefits they trimmed eligibility for for medicaid services uh and providers healthcare providers hospitals doctors took very big hits and their reimbursement rates uh budget cuts hit seniors people with this programs for seniors and people with disabilities they hit k through 12 schools greatly we've seen a majority of states still last year were spending less per pupil adjusted for inflation than they were before the recession and uh the the the the blue number the the red numbers at the bottom 30 states did identifiable health care cuts that we could find 25 states made cuts in programs for seniors people with disabilities 30 states cut k through 12 this is just this is not including the cuts in this year this is a survey we did last summer um looking backwards from there the two biggest areas of hits were uh to college and universities the most widespread kinds of cuts cutting funding for college and universities and uh cutting funding for um state employees so freezing pay doing layoffs cutting pension benefits cutting retiree health and so on um all these state budget cuts have one other implication that's relevant to i think to the top of jennifer talked about which was the impact on the macro economy right uh the last year to calendar year 2011 state purchases state and local purchases of goods and services in the national economy declined by a greater level than in any year since 1944 that's a direct bite out of overall gross domestic product so a slowing effect on the growth of gdp since august 2008 state and local governments on that have cut a total of 650 000 jobs and are continuing to do so at a clip of 10 15 000 jobs per month according to the the bls data that comes out every month so even as private sector and employment is starting to you know starting to grow you're seeing it uh eaten away a little bit um by continuing cuts of the state and local sector which has a ripple effect on the economy and is and is slowing the recovery um the reason i mentioned that i'm going to skip this one for a second uh is the again the role of the recovery act then was to slow those cuts to fill in for those cuts so they didn't have as big a effect on gdp big effect on employment and this is from the new cbo report looking at the macroeconomic impact of the recovery act saying that on the whole it's saved two two million over two million jobs the the blue line is what the unemployment rate actually was and the yellow and and red lines are the range of estimates from different macroeconomic forecasters about what it would have been had the recovery act not been not been enacted and a survey of economists done by major economists done by the university of chicago found widespread agreement that yes the recovery act had a positive effect on the on the macroeconomy and a big part of what the way that worked was filling in these state budget gaps uh preventing the depth of cuts um in higher education in k through 12 and health care and everything else that otherwise would have been necessary so let me mention one other thing that states can do to balance their budgets which is to raise taxes and fees we looked at uh at at taxes and sort of tax like fees so motor vehicle fees we didn't look at higher ed we looked we we looked at higher education tuition increases but we think about that separately that's I think that that is more of a budget cut um although you know from a family's perspective it has much of the same impact um about 10 states did pretty big tax packages but a lot of those were temporary california new york maryland new jersey that are that are now expiring so though there was important revenue gains from from taxes but that's now expiring a lot of other states did smaller things either on the tax side or on or more in fees pretty widespread given the political changes in the elections of uh 2010 and particularly and then uh in in uh virginia and mississippi last year uh the the the record number of republican legislators elected and a lot of new governors coming in a lot of them basically taking no tax pledges the number of tax and fee increases has gone down so that's another source of pressure on state budgets so as we look ahead um there are a number of sources of pressures on state budgets that will continue even as the economy rubbers they still pension funds are still underfunded there's big those big budget gaps still have to be filled and a lot of the bad things that states did in their budgets have to be undone at great cost we estimate that it'll take a number of years before states even get back to pre-recession levels and then states are still saddled with tax systems that are widely criticized for being too narrow sales tax bases that are levied on services not goods that don't take into account the internet-based sales so a lot of challenges remain for state state budgets and I think the question that we have to ask is are we going to say see restoration are we going to see see see see sort of retrenchment back down to that these you know we're going to stay stuck in these essentially recessionary levels of funding for state services so on the plus side is the fact that the public is not happy about what has happened over the last few years I mean they're not happy about a lot of things they're not happy with the banks did they're not happy um um and they're very not happy about what state and local governments have done in terms of cutting the services um that they know are important to the long-term success of their communities so um and policymakers are listening so I'm gonna pick on governor rick scott from florida for a minute um but he's not alone a lot of governors who came in was sort of a cut spending uh mantra this year in their state of the state address were a lot softer here he's talking about k through 12 education actually posing with a school teacher but I think the same basic concept applies in any area flirtians truly believe that support for education is the most significant thing we can do to ensure both short-term both short-term job growth and long-term economic prosperity for our state uh and he and he had this this uh this school teacher up in the up in the gallery um so that's what he said in his state of the state address but then the question is what did he do in the budget he introduced um well after years of budget cuts at florida that had cut an amount that had cut about over $1300 per pupil in funding for k through 12 schools he restored $59 per pupil in funding it was about a billion dollars and he took that out of the Medicaid budget um while also proposing a whole series of tax cuts and so and then you know while we're seeing positive stuff out of the rhetoric we're seeing negatives out of in the actual dollars and so I don't you know that's that's the question is which way is it going to go we're still going to see sort of very very slow restoration of the funding that doesn't keep up with the overall growth of the economy or the the needs or are we going to see something um that's more in keeping with honestly where the I think the public mood is um a couple of other threats I think one is tax cuts continue I mean it's sort of amazing to think right I mean we are tax revenues as I said are still six percent below pre-recession levels and um you know slow growth forecasts and yet a number of governors are proposing major tax cuts and when I say major cut tax cuts I mean things like repealing the personal income tax entirely in both Kansas and Oklahoma that's what's on the table oh they do it over time but still that's 40 to 50 percent of those states general fund budgets um and so it's I mean it's just striking to see how many states want to use any new revenues to pay first for tax cuts and then anything else comes after that um and you know as the economy recovers the number of states that are at least considering cutting taxes are going to rise and that's every dollar in tax cuts comes out of something um and the other is um another major threat at the state level is that states are considering going a step further not just cutting taxes but then enacting constitutional or other ballot measures that lock in depressed levels of spending um uh capping the growth of state revenue so that you're essentially at uh uh pre-recession levels and then you're allowed only very slow levels of revenue growth that isn't enough to keep up with increasing numbers of college students increasing numbers of K through 12 students rising health care costs um that's on the ballot in Florida in November it's in a number of other states uh uh takes a variety of different forms it's it's modeled uh as the next two speakers know all too well on on what Colorado had for a number of years the so-called Tabor limit which was a very restrictive cap on spending um if enacted that this you know these measures would cause another challenge for the ability of states to finance higher ed um because they're gonna go to higher ed before they go honestly to cut a K through 12 uh and cutting um mandated health care spending and so on upon the final policy threat and then I'll wrap up is um what's gonna happen at the federal level I think I'll probably a lot of people in the room the next few speakers can speak more about this might have to do with cuts to federal aid for higher education but remember that what the federal government one of the big things that the federal government does is run programs through state governments about a third of the category of federal spending known as non-defense discretionary spending is in fact aid to states and localities and that's the category of spending that has already been cut as a result of the budget deal enacted last year and will be cut much much further if the so-called sequestration cuts take effect as they are scheduled to do next january this is all going to be part of the the big budget deals uh uh and debates that are going to come down the road next fall and in the lame duck session in early next next year but if broadly aid to states is cut states then will have to make decisions as they did with the recovery act what do we do about the laws of federal dollars do we find somewhere else in our budget own budget to cut to fill in for the loss of federal dollars so let's just say for instance of the federal government cut the WIC program a state um government might have to decide does it use its own dollars to fill in for the loss of federal funding to avoid cutting uh nutrition assistance to pregnant women and children or does it go somewhere else in its budget um so these you know the the federal pressures will filter through to uh say for higher ed in one way or another so it's been a challenging next few years things are definitely looking up i was told that my slides didn't betray very much optimism about the future i mean look you know there's no way to say it that the economy is looking up um um but i think we face some honestly some political threats that will um really shape uh higher education funding into the future so uh i really appreciate the opportunity to be here uh looking forward to your questions thank you very much and i'll pick up mine thank you nick and thank you jennifer for this opportunity i'm going to run through a lot of facts fairly quickly and try to wrap up with some interpretation and comment on what some of the policy issues are first of all here's a picture of state spending for a period of about 22 years and you can see that this is uh unadjusted for inflation it grew a lot and just about everything grew except public assistance this is not doing anything there we go i'll try a different button uh this is the share of a state general fund expenditures to different functions and uh if you look at the numbers quickly it's pretty clear that the only thing that's grown significantly is medicate which went from about eight percent to almost sixteen percent of state funding in a period of 19 years uh higher education funding as a percentage of state budgets went down uh k-12 went up some uh public assistance went down quite a lot this is a projection of um state and local budget deficits done by don boyd of the rockefeller institute and it was actually done in about 2005 sort of pre-recession and what this illustrates is the fundamental structural deficit driven by increases in health care costs uh the inelasticity of state revenue streams and growing demands for elementary and secondary and higher education primarily uh it's not a pretty picture the national average structural deficit according to boyd's analysis is 5.7 percent now i want to turn to the higher education picture and this is a 25 year view of state funding for higher education uh based on our annual state higher education finance study this is uh 2010 data fiscal 2011 data will be available in about two weeks and i'll give you a hint of what that uh what that'll look like i'm going to take a minute on this because uh it's pretty simple but also a little complex this line is enrollment growth and it went from about uh seven million students full-time equivalent to about 11 and a half million in that 25 year period the fastest growth rate in enrollment in a decade that we've seen since 1960 occurred in the last 10 years uh so the demand for higher education is substantial the blue bars are state support per student in constant dollars and the typical pattern has been for state support to decline when there's a recession which is what we had right here and to decline when there's a recession which we had right here but then to recover as there's as there's a recovery and the other thing that i think just got to remember this enrollment growth was pretty constant during the whole period of time so the early uh 2001-2002 recession saw very rapid enrollment growth substantial decline in in state funding per student in constant dollars although the interesting thing is in in unadjusted dollars it stayed at about 70 70 billion all three of these years didn't go down but it just couldn't keep pace with that enrollment growth then we had a recovery uh in 2008 state support was actually at 85 billion 86 billion dollars public institution which is quite a bit higher than it was here when it was 70 billion and then we got the recession of 2008 and we see here that enrollments continued to grow and substantial decline in uh in state support per student i gotta add that these numbers include the stimulus funds but in the grand scheme of things if you add tuition and the state funding together in 1985 we had about 140 billion dollars so if you take 40 billion dollars of stimulus and you spread it over three years uh you're talking real money but you're not talking about material money in this this big big picture scenario and the other thing to notice is this is constant dollar tuition per fte student and over this period of time constant dollar tuition revenues per fte student went from about 2,300 to 4,300 dollars uh if you look at did i lose a slide no i didn't i guess the other thing i think is important to understand is the enormous diversity among the states in in funding for higher education uh this shows uh for a single year adjusted for cost of living differences among the states and also adjusted for a variation in the enrollment mix uh what the funding was uh per student and you see it goes all the way from probably about 17,000 18,000 dollars in alaska down to whoops down to uh about 8,000 in california the other thing it's interesting is the the red uh is tuition revenue and the blue is state revenue and you can see the enormous variation in the states and the amount of a higher education budget that comes from tuition uh change from 2005 to 2010 uh this is the variation among the states so whenever you generalize about higher education funding in the united states uh you're distorting the picture you just can't generalize there's a lot of diversity here's the one i was looking for this is the secular trend in uh the shift of the burden from uh the public sources to students and their parents in in finance for higher education when you add together state support and net tuition revenues in 1985 uh tuition was about 23 percent uh 2010 it's uh 40.3 percent and this is recession we have a recession enrollment growth tuition goes up recovery enrollment growth tuition goes up recovery another recession the mother of all recessions we have another year like this uh this is another picture of the variation among uh the states in uh the tuition revenue as a fraction of the total educational spending we've got new hampshire and vermont over here where it's more than 70 percent uh Wyoming new mexico down here national average of 40 percent now let's shift to some other i think relevant indicators this is state need-based and non-need-based grant aid for undergraduate students and the period this is in in constant dollars the period is 1999 2000 to 2009 substantial growth in total aid per fte student in response certainly to those tuition increases and uh a substantial even larger growth in non-need-based aid but it's still a smaller fraction of the total this is uh state aid per fte student uh and this because a little deceptive because institutional aid is not in these numbers but this is state-based programs and you'll see a couple of states here where it's just enormous georgia this is the hope scholarship program uh where it's this huge it's almost always a merit-based scholarship program georgia south carolina tennessee wyoming or kind of a blend and then you have a group of states that have pretty substantial need-based aid programs and a lot of states that don't have much although there's institutional aid in some of those states uh this is a picture of uh public and non-public aid uh per hundred dollars of state support in simpler language uh this means that 10 percent of the state budget went to student aid okay and this is the trend line from 2001 to 2010 so for the nation as a whole it went from about 8 percent uh to student aid to about 11 percent of the total state budget went into student aid uh the other thing that's interesting is that the the lighter colored bar is the fraction of state aid that went to independent institutions and uh some people don't recognize that the states are supporting private higher education uh they certainly are the other thing i think that is significant is in the last few years that fraction of the state budget has declined uh as there's been more pressure on public tuitions here's federal student aid per fte in constant 2009 dollars uh the big story here is the growth of the loan program and uh that's really material uh these are tuition tax credits uh this is Pell grants in in constant dollars and you can see there's a material growth there and the others the other federal programs uh this is the big budget problem in the federal government uh this is uh Pell Grant expenditures uh this is the maximum Pell Grant you see the decline in constant dollars and then the recovery uh this is the average Pell Grant per recipient and this is the number of Pell recipients now that line doesn't look uh well it's growing but it's this one will make you give you a sense of how dramatically it's growing uh this is the fall enrollment line this blue line this is the number of Pell recipients it's red line and this is the percentage of fall enrollment that is Pell recipients so we have an enormous growth of uh Pell recipients as a fraction of of total enrollment and there are a lot of things driving that some of which are really good public policy issues and some of which are not and uh we can get into what I would speculate some of the not could be uh but we have some serious issues in the way we allocate resources for student aid now this is this is one of the policy issues that I think we really need to focus the country on uh this is an analysis pulled together by Tony Carnivali based on the uh longitudinal study of of students in America the bottom axis is a functional equivalent SAT score and these bars are uh socioeconomic status and the relationship between high socioeconomic status and degree completion is almost unbrokenly consistent at every level uh the part of this chart that I like to focus on is this one right here uh at a thousand to uh 1100 SAT equivalent that's one standard deviation above average you know this is the fat part of the distribution in our country in terms of academic aptitude and at that level if you're in a top quartile socioeconomic status by the time you're 28 years old you've got a bachelor's degree 65 percent of the time if you're at that level building your bottom SES it's a 15 percent degree completion ratio for a bachelor's degree and this is uh an enormous waste of human talent as well as an issue of social justice in the current year when we get our uh budget or our report we'll see that state support with uh the final little bit of uh stimulus funds help one minute great I didn't see you over there until now glad I'm not that far out of the line um enrollment grew and mostly everywhere in the country I thought I'd recall the number will be about two and a half percent up uh but because of the flatness in state support you're going to have tuition increases and you're going to have a decline in in the total spending per student in one state and I'm not going to say which state just now there's a pretty dramatic decrease in enrollments and I think that is related to fiscal constraint as well as as tuition increases where institutions are saying you know we cannot admit the students who want to come tuition continues to grow and support per student will drop again fiscal 12 uh state support was down 7.6 percent these numbers are already known nicks were pointed out how miserable the current budget year has been uh the thing was remarkable to be in fiscal 11 actually states replaced more stimulus funds money than than not to keep the total funding fiscal 12 they did not do that and I don't know all the reasons enrollments we don't know we won't know for a year we'll find out though and tuition I'm sure it's going to go up but we don't know so uh it supports per student it's going to go down it's probably going to be the ugliest year we've seen yet so I'm going to wrap up three wrong ideas about higher education funding if we come up with the right formula we'll know how much to spend and it'll provide all the incentives and we're getting a great performance uh second wrong idea is the only way to get improved performance is to spend more money uh that's that's a myth that we can tolerate and more and the second wrong idea is we can get the results we need without spending more money uh given the enrollment demand and the need of the society for higher education funding uh we're going to have to find a way to invest what it's going to take these are the questions I would suggest substituting what does the public need uh what can higher education do better with the resources they have now and Steve Jordan will tell you some of those things and finally uh where can we make strategic investments that will really help us meet the need so thank you very much well good afternoon it's a pleasure to be with you today left beautiful Colorado yesterday the winds were blowing about 80 miles an hour so we flew in here pretty easily you know it's really interesting to be from Colorado and to know that we've already added two terms to the lexicon of higher education uh fiscal policy the first is tabering you all know tabering that's the limitations that go in state constitutions and the second although you didn't realize it its sister term is teabowing which is presidents praying for a change in the fiscal situation so I'm I'm here to give you some examples of of that those institutions that may have done it a little bit differently because you've heard that that most of the institutions and certainly all of my colleagues in Colorado used the uh the our money to simply replace the general fund support that had been going to salaries and they used it up until it it disappeared and we were a slightly different example of of what to do and and I will say it was very strategic um and an intentionally strategic on our part and one of the reasons why as much of the data that you've seen up here what's interesting about looking at the lines is that every time you look at one of those lines about the average of state support per student or overall state support is that in every case there are institutions that are above and below the line and typically and I'm going to be speaking for those who are below the line and in talking about being uh one of those institutions that's below the line I'm also going to say that predominantly those are the institutions that are dealing with the very populations that the president and our state have said are so critical to get into and out of our institutions of higher education which is our our students of color uh and so what I hope will come out at the end is um some insights into what I think are real disconnects between our state and public policies and the instruments that we are using to achieve those policies so our institution like any other is committed to quality and value and certainly in these very uncertain fiscal times um it has caused us to have to take a look at what we are doing and how we are using our resources to maximize our ability to execute our mission we're a regional comprehensive institution um 97 percent of our students come from the seven county excuse me 97 percent of our students come from colorado 91 percent from the seven county metropolitan area and when you think about the fact that there are 40 public institutions in colorado two year and four year um we have 20 percent of all the colorado vet resident baccalaureate students so one fifth of all coloradans uh going for a baccalaureate degree come to our college and we have 10 percent of all this to colorado residents across all 40 institutions so um we have a um we clearly are a place uh which coloradans look to and what i'm going to talk about are the right sizing what we term right sizing efforts um which have made some national news on what we think was a unique approach to our budget reductions um jennifer spoke to the the way colorado applied it and and how we initially adjusted to the federal requirement of 0506 um which for us was a 10 million dollar reduction she then talked about the additional uh we went in for a waiver as a state and the formula that went into determining all of that you know it was interesting and i appreciate paul talking about formulas because um that formula which had all these intricate components on it was quite frankly scarlet who gives a damn because the requirement was that at the end of the time period they had to have it back to 0506 anyway so they they create this this intricate formula to do additional reductions to it when they knew everybody was going to have to go back to 0506 so we took the position from the get go based upon everything we knew about conditions in colorado and projections for the future that things were not going to get better that we were going to lose we were going to lose the amount of the reduction down to 0506 and the likelihood would be that we would take further reductions um after the stimulus process was over and so we chose to eliminate um our share of the of the reductions which was about a 20 percent reduction in our state support uh all at one time and we just then right at the beginning just said we're going to reduce it and we're going to use the our funds to figure out how we can do things differently how we can either use the our funds to generate more revenue for the college how we can use the our funds perhaps to um become more efficient and to substitute technology for labor um and how we might use them to make some at least minor shifts between the seniority of our faculty and and and and put aside some senior faculty bring in junior faculty and yet do it in a way in which we honor those senior faculty by giving them the opportunity to leave a legacy which we called a capstone project and I think I'm going to need to do this myself aren't I here we go so three we had three initiatives revenue generating right sizing and capstone so revenue generating projects we were um at the time we entered this process the single largest baccalaureate institution in the country that did not back we were the only baccalaureate institution in the country of 15 000 or more students who did not offer graduate programs and we had made a determination as a result of our initiatives around an attempt to become a Hispanic serving institution that we needed to get into master's level programs um and having visited hsis what we heard consistently from those hsis is that having undergraduate latino students in an upper division course with a graduate student created positive role models and encouraged those students to persist to graduation and maybe move on to get a master's degree so we'd made the determination that we were going to move into master's programs right at the time that this happened and everyone said to us my god how can you how can you implement graduate programs while you're cutting the budget and we made a decision that we could do it by making our graduate programs unlike the research universities where where they use the lower division courses to cross subsidize the graduate programs we were going to make our graduate programs 100% self support and create a model in which they would generate a positive cash flow and subsidize our undergraduate programs we've implemented three graduate programs and teacher education in accountancy and in social work uh we are finishing our second year um and um and we are at the point where we have this year will break even and we project next year we will make somewhere in the neighborhood of three hundred thousand dollars in profit on three graduate programs that we will use to uh subsidize undergraduate students the our funds were used to pay for the time for faculty to develop the curriculum and to develop the business models that would help us to generate that revenue the second concept was right sizing with technology you know there was a some great um academic work that was done in the early 1970s when higher education went through a significant downturn in enrollment not caused by fiscal reasons but caused by changes in demographics and uh there was a lot of work done on cutback management and fiscal stress in higher ed and that literature when you read it um at the end it points out that there was no substitute for labor when all these reductions occurred and its conclusion was that the reason there was no substitute of technology for labor was there was no revenue source well here we are now with all this our money coming in we have a limited time period in which we could use it and so we made a decision that we would use 3.7 million of our our uh stimulus money to do right sizing projects to do projects that would allow us to become more efficient or which will help us to generate more revenue so that when the money went away the people who were left would be more productive even though it would be a smaller workforce base so again we did a lot of we did we started off and we had 30 projects we started with over time we moved it up to 51 projects we've completed 47 of the 51 projects and they run the gamut from from projects like digitizing all our records so that for example when we started off most of our most of our records on transcripts from the years gone by were still paper records some of them actually housed in a cave at Lookout Mountain for protection and so it could take one student services person as long as a day to generate a transcript by digitizing we've reduced that down to three minutes now think about the savings you get in workload on individuals when you take a one person and change it from a one-day project to a three-minute project we used it to upgrade all of our records that related to grants contract contracting processes and to our foundation so that we could use those as ways to generate more revenue from alumni and to improve the ability of our faculty to do the grants processes and so we view this as a very significant and successful effort and our board has said that they have charged me now to go and look at a longer term projects with clear returns on investment that we can manage and make investments over the long term to continue this kind of process to to create savings over the long term and the third concept were capstone projects and this actually this idea came from our faculty themselves who said why don't we use some of the stimulus money to allow a senior faculty member to work on a project that literally to to surrender our tenure we will surrender our tenure immediately you go out and hire a junior faculty on the general fund that we're that that we're releasing up at a lower salary that the faculty senior faculty member signs a contract for a two-year period to do a specific project for us that will leave in essence a legacy for the college so for example one of our computer information systems professors developed an online advice advising program that reduced the business advising hold from 60 hours to 30 hours you know 100 percent essentially reduction in the time it takes to or 50 percent reduction in the time it takes to get advising done for a business student it also led to a change to add general studies level one courses as prerequisites for the business core another faculty member as her capstone project designed one of the master's programs in the field of addiction studies which has now been implemented so she has left but we have an ongoing legacy of a new of a new course within the master's program so what is the current situation in Colorado well as was mentioned earlier we were taken back to our 2005 level and this is where I want to begin to sort of talk about the disconnect between stated intent and and of what we want our policy to do and the instruments that we use because that what the feds essentially said to the state is that's your choice you can reduce it back to 2005 so Colorado did that without regard to what had happened on enrollments at any institution between 2009 and 2005 so many institutions had had declines in enrollments they got sent back to their 2005 level declines below their 2005 level they actually got a benefit my institution had a 10 percent increase in enrollment between 2005 and 2009 so we actually ended up fundamentally taking a bigger per student cut than anybody else and when you think about the student body that we have which is largely low income and the fact that all of our growth since I have been here have been in students of color who largely come from low income families who largely don't have histories in their family of of either going to college or persistence in college and so they're in need of additional support what we find is the very institutions where we ought to be making investments to achieve our stated public policy goals were actually disadvantaged compared to our research universities so since 2008 9 our funding from the state has dropped by 20 percent and if you actually took a look at our general fund for student today in current dollars not inflation adjusted dollars in our current dollars we're currently at the same place we were in 1983 we get roughly $2,000 a student from the state of Colorado I tell people that today in Denver if you're a parent with a young child it costs you $1,100 a month for daycare $1,100 a month so what we're saying is that one year of a baccalaureate degree is worth less than two months of daycare in the state of Colorado today even though that baccalaureate degree will yield more than a million dollars in income over someone without that degree since 2008 9 I should say since the year 2000 the state share of funding and the tuition share has flipped so in 2000 where it used to be 68 percent of the support now I'm not putting in research I'm not putting in auxiliary enterprise and I'm putting in I'm just talking about the direct cost of education the state in 2000 paid 68 percent of the cost of education today the student pays 68 percent of the cost of education so next year the general fund this next year we anticipate we're going to have a general fund cut of approximately somehow I won't buy the place I want to be there's the graph that we wanted to do next year we're going to have another general fund cut of about 1.6 million we won't know until the revenue projections come out in March about whether there will be additional reductions but since the governor built his budget around an assumption that a homestead tax exemption a tax benefit for the elderly would not be funded and the house state house of representatives which are republicans want to fund it it is highly likely that there will need to be another hundred million dollar reduction in the budget and people believe all of that will come out of the higher education and finally related to higher education for Colorado we are now one of those states that has had a lower court determination in the federal courts that our school finance act is unconstitutional but unlike the other states that have had that determination where their legislature could address the issue and make adjustments because of Tabor our legislature cannot make that determination so this is where we get to what we think the future looks like during the court case it was projected that the shortfall in k-12 funding could be as much as four billion dollars now for those of you in New York might not seem like a lot of money but since right now the entire k-12 funding for all of k-12 today is six billion dollars four billion is a pretty significant number we just had an election in November in which there was a ballot proposal for five hundred million dollars for just k-12 in higher education five hundred million one eighth of the four billion it was defeated sixty percent to forty percent so the likelihood if the if this case prevails through the supreme court the likelihood of the taxpayers running to the rescue of higher education are somewhere between slim and none which gets back to this reality of if we want to deal with the kinds of students what are we going to how are we going to rethink our priorities so we continue to have conversations with the state of Colorado we are moving into another round of performance contracts those comp performance contracts are built around four priorities in the master plan increasing degree attainment closing attainment gaps and by the way Colorado has the second highest attainment gap in the country between its majority population and its largest minority population the Latino population and we we happen to have one in four of of all Latinos in higher education in Colorado attend our institution one in three of all African Americans in Colorado attend our institution seventy six percent of our students are low income and sixty seven percent of that population are Pell eligible so it's not like we can move down a strategy of we're just going to raise tuition because there is no cost shift that's going to occur for us the tuition strategy is not a viable long-term strategy it is a short term strategy which we have been using to try to make up for the reductions we've had in the in the short term but for the long term that is not going to be a viable strategy which gets us back to why did we why did we pick the strategies we did well because our board has said we have to continue to maintain our mission who we serve and what we serve so they have said to me for the future that I need to create as many public private projects as I can create as many revenue streams as I can which will continue our mission to serve largely low income students all Colorado students out into the future it is the exact opposite of our sister university the University of Colorado which up until two years ago had a requirement that 60 percent of their freshman class had to be Colorado residents I meant already 40 percent were non-residents then they amended the statute to say well international students are excluded from the 40 percent so they're recruiting every international student they can to cross subsidize their students I just told you I have 97 percent Coloradans there is no cross subsidy for me so the question is how will public policy then if it really is interested in low income students and historically underrepresented students provide sufficient support to assure that they have an opportunity when we're at the low end of the funding stream when I say we I'm really talking about I think we're an example in general of community colleges and regional comprehensive institutions across the country because that is where these populations of students are going to the data is very clear they are not going to the research universities and so how are we going to change how we think about the execution of these instruments if you really want to achieve an outcome that's going to have those populations coming out and you know the interesting thing is that the education gap between the rich and the poor is increasing many of you may have seen this recent article in the New York Times that has talked about that that gap growing between poor and rich students substantially over the last several years so that's it be glad to respond to questions as a part of the panel just a few minutes here for questions I mean I had some prepared but I'd love to give you all an opportunity to ask your questions instead um Alex has the microphone here so yeah this gentleman here in the suit my very president Jordan all of you a great presentations I'm curious can you talk just a bit on the role of online education the extent to which is provided the pressure to provide it the cost you know how the business plan works in that regard sure first of all obviously every legislator think that's the panacea for reducing costs what we have found in our institution right now every semester one in four of our students is taking an online course and online course in an almost every case it is a convenience question for them because almost all of our students are working and average age of about 26 so for us we have focused most of our efforts around courses not around degree programs and in particular as we have done that what we have found in terms of our efforts around retention is that we have found that doing blended courses where where it's one week actually face-to-face and the next week by distance actually has resulted in better retention and overall graduation rates towards us so almost I would say probably 70% of the courses that we're developing now in that area are blended courses instead of going to pure 100% distance delivered courses. Hi my question is for Mr. Lingenfelter I just wanted to follow up on your comments about Pell grants I'm wondering what you see as the more positive public policy reasons for them and some of the things that you alluded to I'm curious what you think are the the less good reasons for them. We have as Steve I think very eloquently demonstrated we are not putting our resources behind our top priorities in a variety of ways I think certainly the shift toward merit aid does not have very much educational return. The problem in Pell grants I think is we have developed particularly in community colleges a delivery system that sort of emphasizes episodic part-time enrollment. I think in the most egregious cases we we have people who have real financial needs who are using Pell grants to pay living expenses and not making educational progress and we need to restructure the way we deliver education and provide enough support so students can actually enroll in a program and complete it in a reasonable period of time so we have much better retention and graduation rates and then we have because of distance education opportunities a substantial amount of indiscipline about quality assurance and I think you don't have much more than anecdotal evidence but I'm pretty sure where there's smoke there's fire that we're getting a substantial amount of unproductive Pell grant expenditures for students who are being exploited and are absorbing debt that they will not be able to pay and this is these are all both socially and economically misguided public policies. My name is Lee Yang. I suppose just kind of federal subsidies it's not going to work so far as I know there's no really addressing the problem let's say abuse how to trim the abuse or the fraud and how do you encourage a student to go to the higher education because a lot of PhD now is doing a janitor work and a lot of government contractors get higher pay than PhD so there's no point and if you are thinking of public private partnership that type of things currently there are probably social workers or health assistant that type of things seems to be increasing the employment but the problem now is those employment are being hired to do the wrong things to injure the patients or abuse and conspiracy of fraudulent criminal network to hurt the people's family and we are thinking about a criminal justice system their family resources are ripping away rather than have an educational knowledge knowledge environment so the federal budget didn't address just about me ma'am can we cut you off there I think we get the so the question it seems to me is about how do we encourage people to go to continue to see the benefit of a higher education in this less than optimal economy so what is the federal role in that I think I want to respond to the question of the relationship of education to the workforce 35 40 years ago when I was finishing graduate school 70 percent of the people working in this country had high school diploma or less and that was about 66 million jobs by 2007 we had 69 million jobs for high school diploma or less but we had 155 million jobs overall so all of the all of the growth in the workforce in in my professional career has been in jobs that have some post-secondary education and substantial growth in jobs that have a bachelor's degree or higher and the economic returns to education have been enormous in that period of time so we need federal policy that really invest in human talent and in developing people's potential and I don't think there's any other any other economic strategy that will have those kind of dividends I would make one comment about some changes in federal policy that I think could help for example I think many of you are probably familiar with the concept of the Hispanic serving institutions historically black colleges and universities native american serving institutions and the general criteria is that 25 percent of your undergraduate enrollment has to be from that ethnic population so so you know that works really great if you're an institution of say 2000 students and you have 500 latinos but if you're if you're an institution of 2000 and you have less students today than you had 40 years ago and you still have the same 500 students but you're getting a federal grant as an hsi and you're eligible for for other grants how is that actually helping to achieve policy an institution like mine we've increased by by 2000 latinos in the last five years and we've moved from 13 percent to 18 percent we've increased our african-american population by 12 percent but we get no assistance to help us to graduate those students or move them forward so the real question ought to be is how should federal policy be addressed for institutions that demonstrate that for three consecutive years or some time period that they have continued sustained growth in both numbers of students in these targeted populations and in retention and graduation rates seems to me a policy that did that kind of incentive to institutions would result in a much more positive outcome than simply saying if you're at a flat percentage then we're going to give you a grant do we have time for one more question i know folks have planes to catch and such we're good for one more great of the gentleman in the yellow shirt there may have been a mistake in any case um fred winter u.s. department of education um dr jordan we can talk as you've got a moment about the hsi and the hbcu programs i'd love to have that conversation with you um the president has made as the centerpieces of his higher education agenda college completion increasing the rates of completion in the united states and reduction in college cost um considering what we heard today i welcome your comments about how the cost reduction initiative might be best operationalized on the federal level well um you saw that um i think we were an example of someone who given the opportunity for a specified period of time to take a a a source of money and use it to leverage different ways to do business with the same or fewer people i think we came up with some creative ideas one of the most difficult things that we had in that process was um um as as you mentioned that our state kept changing our distribution of of uh our our money and and the state money uh over the two year period and when you set up like three programs like we did with discrete budgets and you made commitments and people keep changing your sources of funds it makes it very difficult to manage those processes but i think creating sources of funds that incentivize institutions to go about thinking about these creative kinds of ideas to self-generate more money or to be more efficient or more effective could be very helpful i it's been it was very helpful to us you know if you look at the um if you look at the trend in total educational spending on the charts that i showed you see cost reductions and you don't see much cost growth particularly in the in the public sector uh part of the problem in the national dialogue about uh cost reductions is that people talk about percentage increases on public tuitions that you know have have doubled in the last 25 years in real dollars but they've doubled from 2000 to 4000 or 4500 uh and we have a range of educational expenditures per student that go from in steve's case about 5000 dollars a student to 50 000 dollars per student and more uh and so our problem as a nation is that we spend uh extravagantly on the education of the most able frankly and uh stingily on the education of those who uh need the most assistance now we're not going to get everybody educated to exactly the same level but we've got an enormous challenge to get our workforce to a level of capacity and our citizenry to a level of capacity to cope with the 21st century and in order to do that we're going to have to put more money into the education of students that need extra support either financial or academic support in order to succeed and uh it it's not you know I ensure there are ways that we can uh become more efficient uh we need to become more focused in the way we organize academic programs uh we need to uh become more disciplined about the way we guide students through a curriculum uh we need to do some of the same things steve has done um but the big problem is not cost reduction the big problem is resource allocation in my view I think that just about wraps it up I'd like to thank all of our speakers for coming out today to especially who flew long distances to be here um if anyone has questions I'd like to ask hopefully some people can stick around for a few minutes otherwise thank you all so much for joining us um and please check out we'll be posting the video online if you want to go back and make sure you got something uh exactly as it was worded and uh we've been live tweeting the event too if you want to join us on the twitter discussion as well thank you