Strategic Public Higher Education Financing

Background

Shifting demographics, enrollment declines, and increased competition for students have resulted in significant strains of the public higher education system.  Student enrollment has been declining in the past decade and is projected to continue to decline.  In addition, the Commonwealth has experienced persistent equity gaps, with rising concerns about the cost of education and the increase in debt burdens on students and families.  For these reasons, during its December 11, 2018 meeting the Board made a commitment to review whether and how the Board could address these issues with ”the development of an integrated financial planning process to ensure long term sustainability for the campuses and the system and affordability for the students.

During its September 22, 2021 Annual Meeting the BHE established the Finance and Administrative Policy (FAAP) Advisory Council and charged it with the responsibility to “consider, report and make recommendations to the Board of Higher Education on policy and strategic matters regarding fiscal, operational, administrative matters.” Within that context, the BHE asked the FAAP Council to conduct a strategic review of public higher education finance.  

Framework for Strategic Public Higher Education Financing

The proposed Framework for Strategic Public Higher Education Financing (the “Framework”) before the BHE for approval includes the following elements:

• Six key principles;
• An acknowledgement of a sense of urgency to act due to the limitations of the current financing system;
• Five key goals; and
• Five key design elements

Key Principles

The system for financing public higher education in the Commonwealth must fully support the following six key principles:

1. The System works for both students and institutions
2. The System advances student participation in high quality, affordable education
   • The system supports students from all backgrounds in participating in and affording high quality higher education
3. The System promotes equity in student outcomes.
   • The system supports bridging gaps in retention, graduation, and post-graduate outcomes (e.g., student success and employment) by student subgroup
4. The System is transparent and rooted in providing stakeholders with sufficient ability to plan.
   • The drivers of state funding are clear and well understood by institutions, students, parents and policymakers, allowing them to plan based on known parameters.
5. The System recognizes institutional context.
   • The System considers institutional mission, contexts, and regional geography, including diversity of student populations and district needs.
6. The System recognizes and invests in innovation and collaboration.
   • The System fosters innovation and collaboration to meet student success goals, including collaboration within segments, regions, and with outside stakeholders such as K-12 and industry

Sense of Urgency

The BHE concludes that the current system for financing public higher education in the Commonwealth does not sufficiently fully support the six key principles, and that it is time to move beyond the current system. The current system should be significantly changed, modernized and strengthened to better serve students and align with our systemic values.

Key Goals

The system for financing public higher education in the Commonwealth must address the following five high-level goals:

1. Make college more accessible and affordable for students.
   • Address barriers to participation for low-income and part-time students, including adult students.
   • Address burdensome debt levels for low- and middle-income students and families.
2. Bolster institution funding to support student success.
3. Ensure system-level capacity to foster innovation and collaboration.
4. Align incentives on cost sharing between the state and campuses.
5. Increase simplicity, transparency, and predictability for all.

Key Design Elements

The BHE endorsed five key design elements for the future of public higher education financing in the Commonwealth:

1. Increase financial aid, by at least doubling the current annual budgetary financial aid level, in ways that: make college truly accessible for our lowest-income students; require less debt for our moderate- and middle-income students; and draw back working adults to gain credentials they need.
2. Make and sustain a major new investment into our institutions’ annual state appropriations focused on providing institutions with more resources to support low-income students through a weighted-enrollment approach that provides additional funding for each of their low-income students.
3. Significantly expand of the Department’s funding capacity to catalyze innovation and collaboration in partnership with our institutions through the Higher Education Innovation Fund.
4. Codify the commitment to funding all three years of salary increases for each new collective bargaining agreement (CBA) and develop a fair and workable plan to better align incentives and cost-sharing between the Commonwealth and public higher education institutions on fringe benefit costs.
5. Provide more transparency, predictability, and balanced guardrails on total charges to students by both allowing all campuses to retain all tuition and fees, while also requiring that tuition be the primary component of student charges.

Reports

• Strategic Review of Public Higher Education Finance: Establishing a Baseline
• Strategic Review of Public Higher Education Finance: Comparative State Analysis
• Strategic Review of Public Higher Education Finance: Student Outcome Analysis

Presentations

• FAAP AC Strategic Review of Public Higher Education Finance: First Discussion of Policy Options, November 3, 2022
• FAAP AC Strategic Review of Public Higher Education Finance: Supplemental Analysis of Policy Options, November 16, 2022