IMPACT OF BUDGET CUTS ON POSTSECONDARY EDUCATION

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					                     PRESENTATION TO
HOUSE AND SENATE APPROPRIATIONS AND
                 REVENUE COMMITTEES


  IMPACT OF BUDGET CUTS
     ON POSTSECONDARY
             EDUCATION

                                       DR. RICHARD CROFTS

                                       JANUARY 14, 2009
           Kentucky Postsecondary Education Enterprise




8 public universities, 16 community colleges and   600,000 college and university alumni.           1,869 public postsecondary education buildings
technical, 20 regionally accredited, nonprofit,                                                     with more than 47 million gross square feet.
independent colleges and universities, and         $183 million in federal Pell grants,
numerous other postsecondary options.              $486 million in federal loans, and over          29,000 full-time faculty and staff employed at
                                                   $180 million in state financial aid in 2006.     Kentucky’s public universities and colleges in
212,000 undergraduate students and 27,000                                                           2006.
graduate and professional students in 2007.        $4.2 billion in total revenue generated by
                                                   Kentucky’s public universities and colleges in   $327 million in extramural R&D expenditures
49,700 total degrees and certificates awarded;     2007.                                            combined at the University of Kentucky and
18,600 bachelor’s degrees in 2007.                                                                  University of Louisville in 2006.


                                                                                                                                                     2
Overview
           General Fund Support and Budget Cuts

           Impact on Institutions and CPE

           Additional Consequences of Budget
           Cuts

           Progress on Strategic Goals

           Why it Matters




                                                  3
  General Fund
      Support
                                            Kentucky Public Postecondary Education Institutions
                                                    Net General Fund Appropriations
                                   $1,100


                                   $1,050


                                   $1,000

                        Millions                                   $1,084
                                    $950
                                                                                   $1,026
                                                                                                   $1,006
                                    $900           $941

                                    $850
                                               FY98 Inflation    FY08 Original   FY09 Enacted   FY09 Governor 
The FY09 proposed                                Adjusted                                         Proposed
mid-year 2% cut to
institutional         Note: The General Fund appropriations above do not include debt service and the
                      UofL hospital contract. For FY09 enacted and FY09 proposed, it also does not
General Funds         include $60 million to support the fourth round of “Bucks for Brains” as well as
equates to a total    $7.5 million in translational research for UofL.
cut of $78 million,
or 7.2%, from FY08
original.

                                                                                                                 4
     General Fund
           Support
     Per Full-Time             Kentucky Public Postsecondary Education Institutions
Equivalent Student                  Net General Fund Appropriations per FTE
             (FTE)
                     $8,000


                     $6,000


                     $4,000        $8,388
                                                     $7,449            $7,053            $6,911
                     $2,000


                         $0
 The FY09
                                FY98 Inflation     FY08 Original     FY09 Enacted     FY09 Governor 
 proposed 2% cuts                 Adjusted                                              Proposed
 to institutional
 General Funds       Note: The General Fund appropriations above do not include debt service and the
 would equate to     UofL hospital contract. For FY09 enacted and FY09 proposed, it also does not
 about $500 less     include $60 million to support the fourth round of “Bucks for Brains” as well as
                     $7.5 million in translational research for UofL.
 state funding per
 FTE student than
 a year ago.


                                                                                                        5
      Kentucky
 Postsecondary
     Education
   Budget Cuts

                                                                                       Total Cuts
                                             FY08       FY08       FY09       FY09
                     Kentucky Public                                                     FY08
                                            Original   Mid-Year   Enacted   Proposed
                     Postsecondary                                                     Original to
                                                         Cut        Cut        Cut
                     Education System       Net GF                                       FY09
                                                        (-3%)     (-2.3%)     (-2%)
                                                                                       Proposed

                     EKU                     $80 M     $2.4 M     $2.1 M     $1.5 M     $6.0 M
                     KSU                     $27 M     $0.8 M     $0.6 M     $0.5 M     $1.9 M

With the FY09        MoSU                    $48 M     $1.4 M     $1.2 M     $0.9 M     $3.6 M
proposed cuts, net   MuSU                    $56 M     $1.7 M     $1.4 M     $1.1 M     $4.2 M
General Funds to     NKU                     $55 M     $1.7 M     $1.1 M     $1.0 M     $3.8 M
Postsecondary        WKU                     $85 M     $2.6 M     $1.9 M     $1.6 M     $6.1 M
Education would      UofK                   $335 M     $10.1 M    $8.4 M     $6.3 M     $24.8 M
be down a total of   UofL                   $169 M     $5.1 M     $5.8 M     $3.2 M     $14.0 M
$89 million, or      KCTCS                  $229 M     $6.9 M     $2.5 M     $4.4 M     $13.8 M
-7.2% at the
                       Total Institutions   $1.084 B   $32.5 M    $25.2 M   $20.5 M     $78.3 M
institutions and
                     CPE                     $61 M     $1.9 M     $6.5 M     $2.1 M     $10.6 M
-17% at CPE.

                                                                                                     6
         Impact of Enacted Budget Cuts on
     Kentucky Public Postsecondary Institutions




Comprehensive Regional Universities (Net General Fund reduced by $19 million from FY08 to FY09)

      • Reduction of approximately 200 faculty and staff positions.

      • Closure or reduction in number of academic programs and course offerings.

      • Reduction in deferred maintenance.

      • Reduction in student services and opportunities at regional or extended campuses.

      • Reduction in travel.

      • Delay information technology upgrades.

      • Reduction in student financial aid.



                                                                                                  7
             Impact of Enacted Budget Cuts on
         Kentucky Public Postsecondary Institutions




University of Kentucky (Net General Fund reduced by $18.5 million from FY08 to FY09)
      • Reduction of approximately 188 faculty and staff positions.
      • Delayed new undergraduate and masters programs.
      • Reduction of student services.
      • Delayed IT upgrades.




                                                                                       8
         Impact of Enacted Budget Cuts on
     Kentucky Public Postsecondary Institutions




University of Louisville (Net General Fund reduced by $10.9 million from FY08 to FY09)
      • Reduction of numerous administrative positions.
      • Reduction in educational programs.
      • Reduction of student services.
      • Reduction of the number of sections of general education courses.




                                                                                         9
         Impact of Enacted Budget Cuts on
     Kentucky Public Postsecondary Institutions




KCTCS (Net General Fund reduced by $9.4 million from FY08 to FY09)
     • Reduction of 240 in faculty and staff positions.
     • Reductions and limitations on programs, course offerings, and services to students and
       businesses.
     • Elimination of full academic programs on one or more campuses.
     • Enrollment capped in one or more programs.



                                                                                                10
                                            CPE's General Fund Appropriation of $52.6 M 
Impact of Budget                                          Revised 2008‐09
    Cuts on CPE                              Research & 
                                                                                 Statewide 
                                              Economic 
                                                                                Coordination
                                 Student  Development
                                                                                    16%
                                Assistance      17%
                                    & 
                                Educational 
                                 Support
                                   10%


                                                                                  Adult Education 
                                                                                    Instruction
                                                                                       45%
                                Academic 
                                 Support
                                   12%




After three rounds                                         Revised FY09
                     Category                                                               Impact
of cuts, CPE’s                                                 (Cut)

revised FY09         KY Adult Education                      ($1.5 M)     Reduced Statewide Programs & Services

General Fund         Academic Support                        ($1.4 M)
                                                                          Reduced KPEN bandwidth and electronic
                                                                          libraries and materials by KYVC/KYVL
appropriation is
                                                                          Reduced science and technology
currently down       R&D                                     ($2.0 M)
                                                                          investments by KSTC
14% from its         Student                                              Eliminated or reduced a number of
                                                             ($1.0 M)
original FY08 base   Assistance/Support                                   initiatives

of $61.1 million.    Statewide Coordination                  ($.5 M)      Reduced CPE staff by 15%



                                                                                                                  11
     Impact of                 Kentucky Public Postsecondary Education
   Governor’s               Impact on Institutions                 Impact on CPE

    Proposed             Decrease personnel, freeze on     Further reduce funding for Kentucky
Mid-year FY09            open positions, and limit         Adult Education by about $1 million.
                         faculty and staff salary          Slow down of internet access and
         Cuts            increases.                        decreased statewide access to
                                                           electronic libraries and materials.
                         Defer much needed
                                                           Significant loss of new science and
                         maintenance on campus
                                                           technology investments.
                         facilities and asset
                                                           Further reduce CPE staff needed for
                         preservation.                     effective statewide coordination.
                         Decrease student financial aid.
                         Postpone or eliminate
                         technology upgrades.
                         Limit or eliminate various
Kentucky’s               academic and support
Postsecondary            programs and services.
                         Loss of contingency funds to
Education System is
                         support strategic investments.
fully committed to the
                         Close extended campuses.
reform goals, but each   Reduce faculty and staff
additional cut reduces   development and travel.
the chance for           Cap on enrollments.
continued success.

                                                                                              12
                       Personnel
                          Freeze hiring and delay recruitment of new hires.
Cost Containment          Increase number of adjunct / visiting faculty members.
             and          Spread workload over fewer staff.
                          Hire student workers.
Cost Management
                       Academics
       Strategies         Close programs or combine course sections.
                          Reduce library hours.
                          Solicit donors to support student costs (tuition, textbooks, etc.).
                          Eliminate tuition waivers for employees and select students.
                          Establish President Advisory Committee on Efficiencies and Savings.

                       Research and Community Development
                          Reduce opportunities for faculty and students.
                          Limit start-up costs for new faculty
                          Limit faculty and staff travel and number of vehicles.

                       Services
Various strategies        Using technology (e-Billing, e-Invoicing, etc.).
                          Initiate new tuition billing process.
have been                 Explore new joint purchasing agreements.
effectively used by       Outsource services (copying, printing, payroll, etc.).
institutions to           Increase use of Web-based applications.
                          Provide free bus service to employees and students.
minimize the impact
of the previous cuts   Utilities and Infrastructure
                          Renegotiate vendor contracts (health, insurance, etc.).
($57.8 million) on        Postpone technology upgrades.
educational quality       Delay deferred maintenance.
and reform goals.         Restructure bonded debt payments.
                          Publicize simple energy reduction actions.

                                                                                                13
        Internal
                          Increase scholarships and financial aid.
   Reallocation
     Strategies           Redistribute indirect costs from external
                          grants and federal funds.

                          Hire new faculty members with lower
                          starting salaries.

                          Combine faculty and staff duties and
                          responsibilities.

A college or              Redistribute resources from less mission
university’s ability to   critical areas.
internally reallocate
funds provides an
opportunity to move
                          Conduct curriculum audit to identify
forward on strategic      strong/weak areas.
initiatives that it
typically might not be    Reorganize student financial aid programs.
able to afford.

                                                                       14
      State                                 Kentucky Public Postsecondary Education
                                    Net State Appropriation and Tuition Revenue FY98 to FY09
     Versus                                          (Adjusted for Inflation)

    Student         $1,200

      Share         $1,000

                             $800
                                                                                                                     Net State
                $ Millions                                                                                           Appopriations
                             $600

                             $400                                                                                    Tuition and
                                                                                                                     Fee Revenue

                             $200
The state
versus the                     $0

student share
has declined
from 67% to
48% from                      Source: Total Public Funds Per FTE (Adjusted for Inflation), Council on Postsecondary Education
FY98 to FY09.

                                                                                                                                 15
    Presentation to              Six of presentations
                              Overview Goals of House         Bill 1 (1997)
   Kentucky’s                 Higher education reform: progress and goals
         Transition
   2020 Vision
     Committee on     1)      Role of adequately board; system to enhance
                           Seamless, coordinating fundednational reputation economic
                           prosperity. of the agency (consultancy, quality control,
                              Mission
         Education
                      2)       Top 20 advocate, program provider)
                           UK:convener,public research university.
                      3)      Organization of our resources
                           UofL: Premier metropolitan research university.
                              DTN plan
                      4)   Regional universities: Access to quality degrees and
                           nationally recognized programs of distinction.
                      5)   Community and technical college system: access to two-
                           year course of studies designed to transfer to BA programs,
                           workforce development, and remedial and continuing
                           education.
                      6)   Efficient and responsive system that provides educational
                           services to adults in quality and quantity comparable to the
                           national average.
Achieving the
                                           Senate Bill 1 (2000)
goals will create
the most dramatic     Acknowledges adult literacy as a fundamental barrier to every
economic              major challenge facing Kentucky and calls for a multi-faceted
transformation in     strategy to address the low level of education of Kentucky’s adult
                      population.
Kentucky’s history.

                                                                                           16
 Kentucky Postsecondary Education: Progress toward Strategic Goals
                                                                                                                    2020
 Strategic Goal                                     1998                  Current              Change
                                                                                                                  (Target)
 G.E.D. Diplomas Awarded (2008)                     11,128                 10,307                 -7%               15,000
 G.E.D. College Going Rate (2008)               19% (in 2004)                21%           2 percentage pts          36%
 H.S. Graduates (2006)                              40,800                 42,200                 3%                48,000
 H.S. College Going Rate (2006)                      55%                     61%           6 percentage pts          74%
 Undergraduate Enrollment (2007)                   161,000                213,000                32%               323,000
 Transfers (2007)                                   4,100                   4,500                10%                11,300
 FTFT Freshman Retention (2007)                     71.4%                  74.4%           3 percentage pts       Nat’l Avg.
 Six-Year Graduation Rates (2006)                    37%                     47%           10 percentage pts         56%
 Associate Degrees (2007)                           5,100                   7,800                53%                8,400
 Bachelor’s Degrees (2007)                          14,600                 18,600                27%                34,000
 Graduate & Prof. Degrees (2007)                    5,318                   6,966                31%              Nat’l Avg.
 R&D Investments (2007)                          $145 million           $363 million             150%              $1 billion

 Full-time Faculty and Staff (2006)                 24,900                  29,100               17%                 TBD

 E&G Room Square Footage (2007)                 13.7 million SF         17.8 million SF          30%            30.7 million SF

                                               17.1% (in 2000)             20.0%
 Educational Attainment (2007)                                                             2.9 percentage pts     Nat’l Avg.
                                              (70% of U.S. Avg.)      (73% of U.S. Avg.)

                                                   $22,000                $30,800
 Per Capita Income (2007)                                                                        40%              Nat’l Avg.
                                              (82% of U.S. Avg.)      (80% of U.S. Avg.)

 Quality of Life Index Rank (2006)                    40                      43                   -3             Nat’l Avg.

Sources: CPE Comprehensive Database, KY DOE, HigherEdInfo.org, US Census, BEA, & LTPRC                                            17
   Strategic                          Annual Percent Change in Kentucky Public Postsecondary
                                                 Net General Fund Appropriations
   Planning
                         16%

                         14%

                         12%

                         10%

                          8%

                          6%

                          4%

                          2%

                          0%

                          -2%

On average, total         -4%

state support has           FY99     FY00    FY01     FY02    FY03      FY04       FY05   FY06   FY07   FY08     FY09


kept pace with
                                                                     Fiscal Year
inflation, but the
growth has been
unpredictable        Note: Net General Fund equals gross General Fund minus debt service and UofL hospital contract.

which makes it
difficult to plan.
                                                     The 50 States
            Why it             Relationship between per capita income and college degrees

           Matters




The single factor
with the greatest power
to explain differences in
per capita income
between states
is the percentage of
college graduates.
      Milken Institute, 2002


                                                                                            19
            Why it              Recession Impact:                    Recession Recovery:
                               Traditional Response                     Best Practices
           Matters
                             Higher education and state         Make commitment to college
                             financial aid become lower         access and affordability.
                             funding priorities due to          Develop and explore new student
                             competing budget demands.          aid and access strategies.
                             State’s role in student            Balance tuition increases with
                             financial aid policy diluted due   need-based student financial aid.
                             to increased institutional
                             discounting.                       Reaffirm state’s role in providing
                             Higher education more likely       student financial aid.
                             viewed as private good and         Present a clear and consistent
During the                   cost of education rises.           message about importance of
                             Shifting more low income           financial access.
recessions of the
                             students to lower cost             Foster and support higher
past 25 years,
                             institutions.                      education leadership.
percentage declines                                             Focus on students.
in higher education                                             Improve awareness of higher
funding have grown                                              education’s contributions to
larger and it has                                               economic and community
taken longer to                                                 development.
recover.                                                        Emphasize collaboration,
   Center for the Study of                                      communication, and credibility.
   Education Policy, 2006

                                                                                                     20
                     PRESENTATION TO
HOUSE AND SENATE APPROPRIATIONS AND
                 REVENUE COMMITTEES


  IMPACT OF BUDGET CUTS
     ON POSTSECONDARY
             EDUCATION

                                       DR. RICHARD CROFTS

                                       JANUARY 14, 2009