SPECIAL REPORT ON COLLEGE AFFORDABILITY: How other states outpace Michigan

By Judy Putnam

As Michigan goes through another round of tuition hikes and lawmakers debate whether to ax the state’s major scholarship program – making that four-year degree even harder to pay for – ideas are bubbling up in other states to keep a lid on costs, from “no frills” universities to legalizing and taxing video poker.

Michigan is falling behind when it comes to making college affordability – not a good trend for a state needing a highly educated and talented work force to rebuild its economy.

State support per public university student is now well below the national average, ($5,289 at Michigan’s top colleges vs. $7,149 nationally, according to the Delta project. See sidebar). In addition, Michigan students are paying a dramatically larger share of the costs of their education than they did just a few years ago, even when financial aid is taken into consideration.

Suzanne Walsh, a senior program director at Lumina Foundation for Education, an Indianapolis policy group that promotes college access, says Michigan and other states have to face up to the fact that their coffers may not be refilling any time soon, if ever, and competition for those dollars – from health care for an aging population for example – is intense.

“We really do have to think in new and different ways,” she said, adding that all states are struggling “to find the right model.”
Keeping costs down is one strategy to making college affordable. Walsh cited these innovations:

Western Governors University – founded by the governors of 19 western states — has no classroom expenses because it is an online university. Last fall, Time magazine dubbed the private 11-year-old venture “the best, relatively cheap university you’ve never heard of” with tuition about half that of traditional universities ($2,890 flat rate for a six-month term.)

Southern New Hampshire University, a private college in New Hampshire, has created a “no frills” degree. The university charges $25,000 a year in tuition at its main campus in Manchester, which boasts many amenities, including a rotating climbing wall at the state-of-the-art gym. But the cost is $10,000 a year at a satellite “no frills” campus 20 miles away in classes taught by some of the same professors, according to the Boston Globe.

Similarly, Pennsylvania Gov. Ed Rendell proposed earlier this year that the state come up with a “no frills” campus. Rendell also launched the idea of legalizing video poker and taxing it to provide a new higher education funding source, which is being debated in the Pennsylvania Legislature. Rendell has said it could eventually produce more than a half-billion dollars a year for universities.

One state with a broad plan to cut costs is Maryland, where the University System of Maryland has asked its students to take some credits online, in service learning or in private study to cut costs and maximize classroom space, Walsh said. Maryland also requested that professors spend more time on instruction and launched other cost-cutting proposals, saving $100 million over the past five years, according to the annual report for USM. In exchange, tuition will be frozen for the fourth year in a row this fall while state appropriations increased more than 15 percent over a three-year period, according to the Maryland governor’s office.

Travis Reindl, a Washington D.C.-based higher education analyst who tracks state-level policies, said such efficiency strategies help Maryland, as well as other states such as Missouri and Ohio, to keep the lid on tuition because state policymakers maintain state funding in exchange for sacrifices from the universities.

“The bottom line is still is there are states, even in this difficult economic time that are reaching agreements,” he said. “There’s a little bit of give and take on both sides of the fence.”

Michigan, however, ranked next-to-last among the 50 states for percentage change in higher education state appropriations from 2004 to 2009, according to Grapevine, an Illinois State University project that tracks appropriations to higher education. And annual tuition hikes have been routine this decade, averaging more than 10 percent a year between 2000-01 and 2007-08, according to the National Center for Education Statistics.

Gov. Jennifer Granholm asked universities to freeze tuition next year, but without a budget deal in place, university boards are moving ahead with tuition hikes. Michigan State University plans to increase tuition 5.2 percent next year and 4.9 percent in 2010, while the University of Michigan passed a 5.6 percent increase for the fall.

In contrast, Missouri Gov. Jay Nixon, after three years of tuition hikes averaging 7.5 percent, negotiated a “no cuts, no tuition hike” deal for next fall that uses federal stimulus money to maintain higher education state funding. Nixon recently announced that no public college or university in Missouri will raise tuition this fall.

In Ohio, it was a combination of cost-cutting and increased higher education appropriations that brought tuition hikes averaging 9 percent a year for a decade to an end two years ago, said Eric Fingerhut, chancellor of the Ohio Board of Regents. Tuition has been frozen for the past two years. Higher education spending by the state has increased nearly 10 percent over the past two years while other areas have suffered cuts. (Tuition at Ohio State University is $8,679 a year, compared with $10,880 at Michigan State University and $11,659 at the University of Michigan in the upcoming year.)

Fingerhut said in addition to reining in tuition, Ohio is working to make sure that all higher education coursework transfers to all other schools so students can package their degree in a variety of ways.

“We’re increasingly emphasizing those low-costs options so students have a choice in spending less money,” he said.

Students in the Columbus area, for example, can attend Ohio State University, where four years of tuition costs nearly $35,000 for a four-year degree, or they can choose community college and Columbus State University for a degree at less than $15,000, Fingerhut said.
Fingerhut, a former state senator, said showing how universities are working to cut costs and help students afford tuition is key to winning support from lawmakers to protect or invest in higher education in tough budget times.

“Unless they think higher education has a clear and effective plan, they’re not going to make that investment,” he said.

In Michigan, however, showing how higher education will become more efficient statewide is more difficult because Michigan’s 15 universities have autonomy, granted in the state Constitution, from the rest of state government. Michigan has no higher education board, commission or department. Michigan lawmakers and governor do, however, still hold “the power of the purse,” points out Reindl, the higher education analyst.

Jane Wellman, executive director of the Delta Project on Postsecondary Education Costs, Productivity, and Accountability, a Washington D.C.-based nonprofit education policy group, says autonomy has helped build strong universities but hurts when it comes to a public policy agenda and oversight of the annual $1.5 billion public investment in the 15 universities.

“While it’s healthy for the institutions at one level, there’s no mechanism for putting together a public agenda about how higher education can best meet the public’s needs,” she said. “The fact is there isn’t any kind of entity for doing this in a nonpartisan, neutral, analytical way. Michigan could use that.”

Mike Boulus, executive director of the Presidents Council, State Universities of Michigan, which represents the 15 presidents and chancellors, said the governance of Michigan’s universities works.

“We think that the Constitutional structure that gives us our independence is the principle reason for the success of the public universities. It gives each university the authority to govern their own affairs while making them publicly accountable,” Boulus said.

Boulus said Michigan’s affordability problems stem from winning the “race to the bottom” when it comes to state support for public institutions.

“It’s a dubious distinction,” Boulus said. “We have not kept pace with the country relative to supporting a very important economic engine for the state, and we haven’t been doing it at a time when the need for college education is the greatest.”

Colleges basically have two sources of revenue – state support and tuition. When state support goes down, there’s pressure on tuition to go up. In 1973, state support paid for 75 percent of the universities’ general fund; last year, state support accounted for just 33 percent.
Most agree that more money for Michigan universities is not on the horizon, given the current economic crisis. Michigan faces huge deficits, which are expected to grow in 2011, when state relief in the form of federal stimulus dollars runs out. Some tax reform is under discussion in Lansing, but most of the focus has been on providing business tax relief.

One idea has been proposed (but has gotten little traction) from Reps. Alma Wheeler Smith, D-Salem Twp. and Rebekah Warren, D-Ann Arbor, to increase the income tax from 4.35 percent to 5.5 percent to pay for universal preschool and college for Michigan students.

University of Michigan Professor of Higher Education Edward St. John said Michigan missed its chance to address funding in 2004, when Granholm appointed a broad-based commission of lawmakers, business and labor leaders and university officials to recommend ways for Michigan to double the number of college graduates. But the Cherry Commission, led by Lt. Gov. John Cherry, avoided the thorny problem of how to pay for higher education.

“That was a drastic mistake,” St. John said.

The Detroit News recently reported that the number of degrees and certificates awarded has only increased by 4.4 percent over four years.
John Austin, vice president of the State Board of Education and former policy director for the Cherry Commission, said Michigan has made progress but agrees that Michigan has to address financing.

“We have done some things with our limited resources,” said Austin, who is a Brookings Institution fellow. “What we have not done is fundamentally rearrange our priorities to … help more people get a higher education and support our learning and research institutions to be engines of job creation.”

Austin said the state’s rigorous mandatory high school curriculum, the ACT for all high school students, the No Worker Left Behind program that promises two years of college for workers in need of training, the $4,000 Promise Grant to students who pass the Merit Exam or complete two years of post-secondary education, and new Promise Zones designed to kick-start Kalamazoo Promise-type scholarships around the state are all important steps that were rooted in the Cherry Commission.

UM’s St. John also criticized Michigan’s financial aid policy, which he said fails to target students needing help the most. Michigan’s system is heavily merit-based. According to the National Center for Higher Education Management Systems, Michigan ranked 29th among the states for the state aid targeted for low-income families in 2008.
Michigan began a Merit Award under former Gov. John Engler, using money from a tobacco lawsuit settlement fund. The Merit Award, up to $2,500 per student, was granted to college-going students who passed the state’s standardized test, regardless of income. Though popular, the program was criticized for giving money to wealthier students who did better on the tests because of their advantaged backgrounds.

Granholm fought hard to change the program, turning it into the $4,000 Promise Grant, that also awarded persistence by including students who didn’t pass the high school tests, but who went on to two years of post-secondary education.

The Senate-passed higher education budget for next year, however, eliminates the scholarship, to help close the budget gap. The scholarship is expected to cost $140 million next year to cover those who have already qualified.

St. John said in tough times like these, the Promise Grant should be scrapped with the money diverted to help the neediest students.
He said the state could look to Indiana, where an 18-year-old program called the Twenty-first Century Scholars, has been credited with improving the state’s lagging educational attainment. Students eligible for free or reduced-price lunches are asked to sign pledges in middle school promising to stay off drugs and alcohol and finish high school with at least a 2.0 grade point average.

In return, Indiana covers the cost of up to four years tuition. Indiana has experienced a giant leap in the numbers of kids headed to college, rising from 28th in the country to tenth best, according to a University of Michigan research report on the program.

How can Indiana afford the program? It’s pricey — $26.5 million on the scholars program, which supplements a broader $186 million needs-based program — all from the state’s general fund. (Michigan, a bigger state, currently spends $130 million on needs-based programs, including $56 million for the Tuition Grant Program for students in private colleges). Indiana insiders say the popularity of the scholars program keeps it protected even as cuts are felt elsewhere.
Other states are making progress with similar promise-style grants while budget woes are battering others.

The Georgia HOPE scholarship was the model for promise-type scholarships, motivating students to do well in school. Funded by the Georgia Lottery, it has helped more than 1 million students since 1993, and has no income eligibility (the same as Michigan’s Promise Grant).
It spurred other programs around the country, with some, like Michigan’s, being eyed for cuts in the down economy. In Colorado, a $15 million merit-based Colorado Scholars program serving high-achieving students regardless of income was axed during recent budget cuts.

But in Oklahoma, a 2007 law guarantees funding “off the top” of the general fund for the Oklahoma Promise that helps with tuition for students from families earning less than $50,000. That puts the program first in line for funding among the state’s priorities.