State Budget Officers Call on States and Colleges to Fix Higher-Ed Finance

Another report has concluded that the financial model for higher education is broken. The difference this time is that the report calls on both state lawmakers and campuses to share in the burden of fixing the problems.

The National Association of State Budget Officers, a nonpartisan group of state-government officials, released its analysis of higher-education finance on Wednesday, along with several broad policy suggestions. The Bill & Melinda Gates Foundation paid for the report and helped cover the cost of convening more than 40 state budget officers at two meetings to discuss how states could use the budget process to achieve better results from higher education.

State budget officers often identify higher education as one of the greatest challenges for state government, said Scott D. Pattison, the association’s executive director.

As in several other reports, the state budget officers found that the way states and colleges pay for higher education is unsustainable: Costs of higher education have grown too far and too fast; state appropriations are and will continue to be limited; and the steady growth of enrollment is expected to continue.

Many of the policy suggestions are also not surprising, including rewarding colleges for meeting performance benchmarks on retention and graduation.

But several suggestions would require much more openness and cooperation between states and colleges—in particular, ending the tuition set-aside that most institutions use to pay for need-based financial aid. In this case, some states would need to increase need-based grants to students so that the colleges could set tuition without having to include help for low-income students. Ending the set-aside practice could, the report says, help colleges lower the sticker price of tuition and lessen the confusion among students and families about how much it will actually cost to attend.

More difficult for colleges is the report’s call to end the practice of paying for small upper-level and graduate-level courses with what are essentially the profits of large and less-expensive lower-level courses. That could allow more colleges to focus on undergraduate retention and completion. Most students who drop out of college do so after their freshman year.

The report also presents some recommendations that will be difficult for state lawmakers, such as providing some stability in higher-education appropriations, including increasing support for institutions in return for limiting the growth in tuition.

Mr. Pattison says both sides will have to compromise. “What we’re hoping to do with the report is create some dialogue,” he said. “We think change is essential.”

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