DEPARTMENT OF HIGHER EDUCATION EXECUTIVE BRIEFING COLORADO HIGHER EDUCATION FINANCING STUDY The Commission initiated a funding study in July of this year that proposed to review national funding models for higher education. The National Center for Higher Education Management Systems (NCHEMS), a well-established private nonprofit organization dedicated to assist higher education improve their management capability, agreed to lead this study. Each institution contributed to the cost of the study and participated in the effort. The study was precipitated by a consensus among higher education administrators, Commissioners, Governing Board members and legislators that there was a need for an independent assessment of the overall state of higher education funding in Colorado in order to refine the College Opportunity Fund program and address inequities or inconsistencies in funding. NCHEMS’ key recommendation is to move the funding discussions for higher education away from a cost model to a revenue-driven model. The fundamental question NCHEMS posed was how to determine whether institutions were adequately and equitably funded: i.e., each institution has adequate resources for the unique missions and resulting program offerings that affect cost. NCHEMS identified two sets of national models: one that uses costs, formulas and pieces of the structure of higher education to negotiate funding and the other that uses benchmarks developed through comparative institution analysis taking into consideration revenue in addition to costs. Based on NCHEMS’ strong recommendation to utilize a model that benchmarks data and revenues, they developed comparable institutional benchmarks for each public higher education institution in Colorado. Using a revenue- driven model calculates the total of general tax funds and tuition and fees provided for operation of higher education. This model is not intended to be based on actual costs and does not take into account relative tax bases, governance structures, or history of funding. This model is not intended to serve as a distribution/allocation model. Further work must be conducted collaboratively with all stakeholders before decisions are made on proper allocation models. Attachment A defines the criteria used by NCHEMS to select the benchmark institutions and shows each institution’s benchmark/peer groups. In almost all cases, institutions wish to continue analyzing and refining peer selections. Each institution except the Community Colleges has a set of peer groups that reflect the criteria used – e.g., size, program type, role and mission and geographic setting as shown in Attachment A-1. The Community Colleges are broken into four groups and compared within these groups as shown in Attachment A-2. The first set of calculations shows that Colorado higher education institutions receive only approximately 63.3% of the funding of their peers. As a comparison, a review of K- 12 education funding shows K-12 schools in Colorado are funded at 92% of the national average. Importantly, the study shows which institutions have been disproportionately under-funded and provides critical data on tuition revenues relative to general fund dollars against comparable institutional benchmarks. Although the findings of the NCHEMS study may not be surprising to those familiar with the state of higher education funding in Colorado, the Commission, legislature and institutions now have data necessary to develop a cohesive and comprehensive funding plan to bring Colorado institutions up to at least the average level of benchmark funding. Stakeholders also can and should take these data and findings and conduct further analysis to determine the best mechanism for addressing inequities in funding levels within the state system. The information presented in the study will also assist stakeholders in determining how to better allocate funds to the College Opportunity Fund stipend, fee-for-service contracts, and financial aid in order to drive state priorities and provide greater predictability to institutions for budget planning purposes. In addition, the study should facilitate a discussion regarding the proportion of educational costs that should be borne by taxpayers (stipend, fee-for-service and financial aid) versus students and families (tuition and fees). A review of the proportion of revenues coming from state sources shows that as state funding for higher education declined, reliance on tuition and fee revenue increased. It is important to remember that the comparison of tuition and fees to the benchmarked institutions must be separated by resident and nonresident students since nonresident tuition rates are four to five times higher than resident rates at some institutions. For example, at the University of Colorado Boulder, the resident undergraduate full time tuition rate is $4,554 and the nonresident undergraduate full time tuition rate is $22,450. Attachment B shows the percent of funding Colorado institutions receive compared to their benchmark institutions. In order to fund all state institutions at the same level as the average – not the highest – peer benchmarks, it would require approximately $848M in revenues in today’s dollars; Colorado is even slightly farther behind in general fund revenues. Attachment C is a series of charts showing the proportion of revenues (tuition and fees, general fund and total revenues) as percent of funding by type of institution – research, four-year and community colleges. Attachment D shows each institution as a percent of their peer/benchmark institutions. Each institutional chart shows the dollar revenues of peer comparisons and Colorado institution. Attachment E shows nonresident and resident tuition and fee rates (not revenues) to clarify the difference in collections these rates can have. These rates are not intended to be benchmark figures and further analysis and work on the figures are necessary in order to establish appropriate tuition rate benchmarks. However, the preliminary information demonstrates that a disproportionate amount of the tuition rate increases has been shifted to out-of-state residents over the last several years. Importantly, the data shows that there is little flexibility in terms of increasing tuition rates and revenue for out-of-state students whereas some flexibility exists in the market to increase tuition rates and revenue for in- state students. Attachment A NCHEMS National Center for Higher Education Management Systems 3035 Center Green Drive, Suite 150 • Boulder, Colorado 80301-2251 Fax: (303) 497-0338 Website: www.nchems.org CRITERIA FOR SELECTION OF PEERS In selecting peers for the Colorado institutions, the following criteria were employed: 1. Similarity of Mission. Before more fine-grained criteria were utilized, some broad indicators of institutional mission were employed. These included: a. Control-only public institutions were considered as peers. b. Land-Grant Status-Because of the special set of services provided by landgrant institutions (Agricultural Extension, Agricultural Research, etc.), peers for Colorado State University (CSU) were selected from among other landgrant institutions. Land-grand institutions were excluded from consideration as peers for the other Colorado institutions. c. Presence of a Medical School-Because medical schools are so expensive, their presence within an institution can significantly affect overall institutional operating costs. As a consequence, institutions with embedded medical programs were excluded from consideration as peers for Colorado institutions. The same logic applies to veterinary medicine. As a result, only land-grant institutions with vet med programs were included as peers for CSU. d. Research Involvement-The extent to which institutions have research as a significant component of their mission is a defining institutional characteristic. Therefore, for universities having a research mission, the amount of research being conducted was considered in the peer selection process. This is the only selection criterion for which fiscal data were utilized. e. Levels of Instructional Offerings-Because more advanced educational offerings tend to be more costly, an effort was made to match Colorado institutions with other institutions having similar emphases. • Doctoral-granting institutions matched with other doctoral-granting institutions. • Masters-granting institutions matched with other masters institutions, with attention to the proportional on graduate versus undergraduate programming. • Two-year institutions matched only with other two-year institutions. 2. Size. Colorado institutions were matched with other institutions of generally similar size. This factor is especially important for smaller institutions for which comparisons with other institutions not large enough to benefit from economies of scale are critical. 3. Program mix. Because the costs of offering some programs are considerably higher than those associated with others, institutional emphasis on high-cost programs was included as a selection criteria. • For four-year institutions, consideration was given to emphasis on health and engineering programs. • For two-year institutions, emphasis on health, trades, and technical programs was considered. Procedures In selecting peers: 1. Funding was considered as the independent variable in the process. All peers were picked "blind"-that is, on the basis of mission, size, and program characteristicsbefore any data on finances were compiled and reviewed. 2. Every effort was made to select "actual" peers, not aspirational peers. 3. The universe of institutions incorporated into the selection process was national in scope. A reasonable list of true comparison institutions could not be created if the search were limited to contiguous (or regional) states. However, an effort was made to include regional institutions wherever possible. Links to Attachments A1 and A2 (Peer Institutions) 4-Year Institutions Adams State College Colorado State University at Pueblo Fort Lewis College Mesa State College Metropolitan State College University of Colorado-Colorado Springs Western State College Research Institutions Colorado School of Mines Colorado State University University of Colorado at Boulder University of Colorado at Denver University of Colorado Health Sciences Center University of Northern Colorado 2-Year Institutions Group A Front Range Community College Pikes Peak Community College Group B Colorado Northwestern Community College Lamar Community College Northeastern Junior College Otero Junior College Group C Arapahoe Community College Community College of Aurora Community College of Denver Pueblo Community College Red Rocks Community College Group D Morgan Community College Trinidad State Junior College NCHEMS PEERS - Adams State College Data Source: NCHEMS NCES Finance Dataset, 2004-05 Prepared by: Linda Keep (303) 497-0314 Date: 9/7/06 Institution ADAMS STATE COLLEGE ARIZONA STATE UNIVERSITY AT THE WEST CAMPUS ARMSTRONG ATLANTIC STATE UNIVERSITY AUGUSTA STATE UNIVERSITY BOWIE STATE UNIVERSITY CAMERON UNIVERSITY CHICAGO STATE UNIVERSITY COLORADO STATE UNIVERSITY-PUEBLO COLUMBUS STATE UNIVERSITY CUNY MEDGAR EVERS COLLEGE CUNY YORK COLLEGE DIXIE STATE COLLEGE OF UTAH FARMINGDALE STATE UNIVERSITY OF NEW YORK FITCHBURG STATE COLLEGE FRAMINGHAM STATE COLLEGE GOVERNORS STATE UNIVERSITY INDIANA UNIVERSITY-NORTHWEST INDIANA UNIVERSITY-SOUTH BEND INDIANA UNIVERSITY-SOUTHEAST LOUISIANA STATE UNIVERSITY-SHREVEPORT SUNY EMPIRE STATE COLLEGE TEXAS A & M UNIVERSITY-CORPUS CHRISTI UNIVERSITY OF ARKANSAS AT FT SMITH UNIVERSITY OF HOUSTON-CLEAR LAKE UNIVERSITY OF MICHIGAN-FLINT WASHBURN UNIVERSITY WESTERN CONNECTICUT STATE UNIVERSITY WORCESTER STATE COLLEGE NCHEMS PEERS - Colorado State University Data Source: NCHEMS NCES Finance Dataset, 2004-05 Prepared by: Linda Keep (303) 497-0314 Date: 9/7/06 Institution COLORADO STATE UNIVERSITY AUBURN UNIVERSITY MAIN CAMPUS IOWA STATE UNIVERSITY KANSAS STATE UNIVERSITY MISSISSIPPI STATE UNIVERSITY NORTH CAROLINA STATE UNIVERSITY AT RALEIGH OKLAHOMA STATE UNIVERSITY-MAIN CAMPUS OREGON STATE UNIVERSITY PURDUE UNIVERSITY-MAIN CAMPUS TEXAS A & M UNIVERSITY THE UNIVERSITY OF TENNESSEE UNIVERSITY OF CALIFORNIA-DAVIS VIRGINIA POLYTECHNIC INSTITUTE AND STATE UNIV WASHINGTON STATE UNIVERSITY NCHEMS PEERS - Colorado State University-Pueblo Data Source: NCHEMS NCES Finance Dataset, 2004-05 Prepared by: Linda Keep (303) 497-0314 Date: 9/7/06 Institution COLORADO STATE UNIVERSITY-PUEBLO CHRISTOPHER NEWPORT UNIVERSITY COASTAL CAROLINA UNIVERSITY CUNY YORK COLLEGE FAIRMONT STATE UNIVERSITY LOCK HAVEN UNIVERSITY OF PENNSYLVANIA MISSOURI SOUTHERN STATE UNIVERSITY MISSOURI WESTERN STATE COLLEGE RAMAPO COLLEGE OF NEW JERSEY SHEPHERD UNIVERSITY THE RICHARD STOCKTON COLLEGE OF NEW JERSEY UNIVERSITY OF SOUTH CAROLINA UPSTATE NCHEMS PEERS - Fort Lewis College Data Source: NCHEMS NCES Finance Dataset, 2004-05 Prepared by: Linda Keep (303) 497-0314 Date: 9/7/06 Institution FORT LEWIS COLLEGE CHRISTOPHER NEWPORT UNIVERSITY CONCORD UNIVERSITY EASTERN OREGON UNIVERSITY EVERGREEN STATE COLLEGE MASSACHUSETTS COLLEGE OF LIBERAL ARTS RAMAPO COLLEGE OF NEW JERSEY ST MARY'S COLLEGE OF MARYLAND SUNY COLLEGE AT PURCHASE THE UNIVERSITY OF VIRGINIA'S COLLEGE AT WISE UNIVERSITY OF HAWAII AT HILO UNIVERSITY OF MINNESOTA-MORRIS UNIVERSITY OF NORTH CAROLINA AT ASHEVILLE