Reconstructing higher education: operating a public system of colleges and universities with less money may require a fundamental redesign.

Colvin, Richard Lee ; Hinton, Forrest

We have long been proud of our colleges and universities, and rightly so.

During the 20th century, the United States created the model of the modern research university that became the envy of the world. We invented the community college and built systems of high quality, low-cost public institutions that made higher education accessible to soldiers returning from the war, baby boomers, low-income students, immigrants and racial minorities.

Twenty years ago, the nation topped the world in the percentage of adults age 25 to 34 with college degrees. Our elementary and secondary schools might have been cause for concern but, with students from around the world wanting to enroll, our colleges and universities were above reproach.

No longer. Today, the United States ranks 10th among developed nations in the percentage of young workers holding a postsecondary credential or degree. It's not that today's young people are less educated than their elders. Rather, it's that other nations are doing all they can to boost college participation and attainment and have surpassed the United States.

President Obama--backed by leading foundations, many economists, other politicians and education experts--argues the nation's long-term economic competitiveness depends in large measure on increasing the percentage of the American workforce holding postsecondary credentials or degrees.

But the recession battered the public purse as well as private pocketbooks. Public colleges and

universities, which educate the vast majority of Americans, will have to take on the president's historic challenge with no near-term prospects of large revenue increases.

State appropriations per student fell in 30 states between 2005 and 2010, according to a report by the State Higher Education Executive Officers. Tuition increases covered the loss of state funds in only 12 of those states, leaving the higher education systems in 18 states with less revenue overall. Higher education was spared from much deeper cuts in 2010 thanks to extra funds provided through the federal American Recovery and Reinvestment Act. ARRA funds, however, are running out and fiscal year 2012 is expected to be much worse.

Pennsylvania Governor Tom Corbett, for example, wants to slash support for his state's higher education system by $271 million or 54 percent even though a consulting company hired last year to find efficiencies identified only $1.5 million in potential cost savings.

"Without sitting down--almost with a blank piece of paper and saying we start over again, there's not much left on the efficiency side," says John Cavanaugh, the system's chancellor.

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Other hard-hit states include Oregon, Washington and Georgia, which raised tuition for University of Georgia students by 46 percent over the past two years. Georgia also is restricting its popular Hope Scholarship program, which covers tuition and fees, to only the most highly accomplished high school graduates. The Center on Budget Priorities, a liberal Washington, D.C., policy research organization, projects that at least 17 states are considering "large, identifiable cuts in support for state colleges and universities with direct impacts on students" in 2012.

Neither the demand for increased post-secondary credentials and degrees nor the budget pressures are going to abate soon. But policy analysts and others who have long called on higher education to make fundamental reforms to reduce costs while maintaining high quality programs and boosting graduation rates see the situation as an opportunity, rather than a tragedy. They say now is the time for legislatures to push colleges to make wider use of online instruction, re-examine degree requirements and give incentives to students to finish more quickly and to colleges to help them. They also need to ease the transition from community colleges to universities, re-examine spending on athletics, and even consider reducing health benefits and salaries.

Rather than undertake such efficiency and cost-saving measures, however, most colleges and universities are responding to this fiscal downturn as they have in the past: lobbying states for more money, raising tuition and shrinking their offerings, even as more students than ever want to enroll.

CALIFORNIA'S EXPERIENCE

Since the 1960s, California has been a pioneer in providing high-quality, low-cost education to all comers. The experience there provides a good example of the formidable challenges facing higher education.

Confronted with a $25.4 billion budget deficit, Governor Jerry Brown earlier this year pushed through nearly $11 billion in spending cuts, affecting services to children, the poor, the sick, the elderly, the mentally ill and college students. Support for the state's three systems of higher education was cut by $1.4 billion, a number that could double for fiscal year 2012 unless voters agree to extend $12 billion in temporary tax hikes. But Republicans in the Legislature so far haven't agreed to put that question on a ballot.

In response to across-the-board cuts, campuses are considering reducing library hours, imposing fees and charging students to use a campus computer. Adjunct teachers have lost their jobs. The number of required courses in some majors may be reduced. Faculty have been furloughed. The percentage of out-of-state students, each of whom pays an extra $23,000 in tuition, will be allowed to grow.

Mostly, though, the systems will offset the cuts by turning away students and raising tuition. The community college system expects to turn away 400,000 students next fall because of fewer classes. CSU and UC plan to reduce their total enrollments by at least 18,000 students. There are more than 400,000 students on the 23 campuses of the CSU system. The UC system has nearly 200,000 students on l0 campuses.

University of California boosted tuition and fees by 32 percent in 2009, sparking protests, and an additional 8 percent in 2010. The California State University system's fall tuition will be 15 percent higher than a year ago.

Despite the likelihood of even deeper cuts in state funding and additional tuition increases, UC Chancellor Mark G. Yudof in March said no tenured professors would lose their jobs, even though personnel costs, including those of compensating tenured professors, make up nearly three-quarters of the system's core budget.

"Almost everything else would be up for grabs," he said.

WORKFORCE SHORTFALL

The Western Interstate Commission for Higher Education, a Colorado-based education policy organization, estimates that by 2025, 55 percent of the nation's jobs will require at least an associate degree; currently, less than 40 percent of American workers between 25 and 34 years old would qualify. President Obama wants to boost that percentage to at least 60 percent.

An analysis by the National Center for Higher Education Management Systems estimates increasing college completion to that level would cost an additional $33 billion a year, and twice that if the cost of health benefits continues to rise at the current rate.

It's highly unlikely states will be willing, or able, to foot that bill. The alternative, the fiscal experts argue, is for lawmakers and governors to work with college administrators and others to redesign public higher education systems around the needs of their states and then give colleges incentives for meeting them. If, for example, as in many states, the proportion of Latino students completing postsecondary programs is low, colleges should be given financial incentives for increasing it.

But higher education funding decisions in most states are not made strategically. Colleges and universities and their governing boards are left to deal with the budget cut compromises and their implications, usually with little guidance.

Patrick M. Callan, president of the National Center for Public Policy and Higher Education, says state colleges and universities are reactive. They "pretty much spend more when they have more, cut when they have to and replace the revenues with tuition."

"What this environment ought to do is make it really clear that every dollar has to be looked at to see if it is being spent to promote access, completion and quality," he says. "And that's something we've been the least good at."

But the state of Tennessee is going to try. It took the first step by crafting the Complete College Tennessee Act of 2010. The legislation sets specific targets for increasing student retention and graduation rates and then ties higher education institutions' funding to whether they meet those targets.

"They're thinking of money less as an institutional support and more as an investment," Callan says.

In addition to Tennessee, Indiana, Ohio and Pennsylvania are using funding incentives to increase higher education productivity, or, in other words, reduce the cost per degree given. Indiana, for example, will distribute $123 million based on the colleges' results this year.

"You need to have enough at stake so that the universities have enough incentive to pay attention," says Indiana Senator Luke Kenley. "This might be the best time to implement this since we have fewer dollars, and universities are searching for new efficiencies."

THE ONLINE ALTERNATIVE

Indiana also is getting national attention in education and policy circles for its push for online learning. Through an executive order last year, Governor Mitch Daniels created what he calls the state's "eighth public university," the Western Governors University Indiana, at no cost to the state.

The Indiana virtual campus is an outpost of the successful all-online college established in 1997 by the governors of 19 Western states. WGU awards 50 accredited degrees in teaching, health care, business and information technology. It is able to do so inexpensively because the university has no tenured faculty members and no physical campus.

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WGU Indiana is a key element of the state's strategy for increasing the number of bachelor's degrees awarded by 10,000 annually, keeping college affordable and serving a portion of the 750,000 adults in the state who have taken some college courses but not earned a degree.

"We're serving students who aren't served well by the [current] state systems," says Robert Mendenhall, the president of WGU. "These are working adults, mostly low-income, many who are minority. A lot of them are rural students."

In Washington, a bipartisan bill to bring WGU to that state is meeting resistance, especially from some college professors, who oppose expanding online courses that could diminish the need for tenured faculty.

"As the bill started moving and picking up, there's now a clear force of faculty from the universities who have come out against the legislation," says Senator Jim Kastama, who supports WGU.

BACK TO BASICS

The growing emphasis of online education is pushing colleges in 21 states to join with The National Center for Academic Transformation to fundamentally redesign their introductory and remedial courses. Participating academic departments will be able to teach more students at lower costs by using computer-based instruction and online forums to supplement or replace classroom lectures. This spring, 38 redesigned basic-level math classes will be part of a pilot project at community colleges across the nation as part of the center's Changing the Equation program.

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In California, the UC system is just beginning to experiment with large-scale online learning, announcing in April that it would take out a $2 million loan to pilot several online undergraduate courses by the start of 2012.

Yet, even for states that have made major changes to higher education in recent years, more transformative innovations may be on the horizon. An analysis by the National Center for Higher Education Management Systems conducted for the Lumina Foundation on Education found that increasing the student-faculty ratio by 10 percent would save $10 billion annually over the next 15 years. Reconfiguring faculties and responsibilities could reduce the cost of instructional salaries by another $3.6 billion a year. Slimming down benefits packages, eliminating some extracurricular activities, creating institutional collaborations and offering incentives for students to take fewer courses not needed for graduation also would significantly cut costs.

CONFRONTING CHANGE

But other changes would be easier. Community college students in California, for example, can take as many class credits as they want and some take advantage of that to keep going to school for years without ever planning to finish a credential program or transfer. Such students take up seats that first-time students who want to finish and join the workforce could be occupying. The nonpartisan Legislative Analyst's Office found that simply capping the number of credits at 100--far more than the 60 required for transfer to a four-year college--would save $250 million, more than half the amount the governor proposed cutting and would lead to more students receiving degrees.

Charles Reed, chancellor of the California State University system, understands that more must be done. He has long argued that colleges should operate year-round instead of shutting down for the summer, faculty should teach more classes and take fewer sabbaticals, and students should be required to take fewer classes so they can complete a degree in three years.

"The current funding and operating models of public higher education are not sustainable," Reed says. Legislators should push for innovation, but, he adds, "do it in a careful way so they don't throw the baby out with the bath water because the economy and jobs and competitiveness are really based on the higher education the workforce gets."

Steve Boilard, director of higher education for California's Legislative Analyst's Office, agreed. "We've been trying to say, 'Don't allow the disruption created by this crisis to be temporary and then go back to business as usual when the money comes back.'"

But, he says, "that seems to be the game plan: Brace ourselves for this and then get back to the old days."

Richard Lee Colvin is executive director of Education Sector, an independent nonprofit think tank that challenges conventional thinking in education policy. Forrest Hinton is a research associate with the Education Sector. The Lumina Foundation, cited in this article, is a supporter of the Education Sector.