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Amendment 2 is the wrong solution to college funding crisis

Posted on October 25, 2016

The financial crisis confronting Louisiana’s colleges and universities is well known: Faced with chronic revenue shortfalls fueled by irresponsible tax cuts, Louisiana policymakers have responded by making deep cuts to state support for public colleges and universities, and having students make up the difference through tuition hikes.

Unfortunately, the solution that’s being proposed to voters in a Nov. 8 ballot measure – giving tuition-setting authority to university governing boards instead of the Legislature – is the wrong answer, as it has the potential to make higher education even less affordable for low-income students in Louisiana.  While public colleges and universities are in dire need of more funding to reach their full potential, the best way to do that is to reverse the cuts that have been made in recent years, not by putting more of the burden on college students.

 

Background

The Legislature has cut state support to Louisiana’s higher education institutions by 39 percent since 2008, the third-largest proportional cut of the 50 states and the largest dollar cut per student in the nation. Tuition has increased 80 percent over the same period, the second largest increase among states.

higher_ed_3

Source: LBP analysis of Board of Regents data, dollars adjusted for inflation

These changes have come even though Louisiana is one of only two states where the Legislature has the authority to set tuition, and the only state in the country where a two-thirds majority is needed to raise tuition.

The cuts have been devastating to colleges, particularly those that serve largely minority students and those that lack a broad statewide presence such as Louisiana State University and instead serve students from their geographic region. 

Instead of adequately funding higher education, the Legislature is proposing to make it easier for universities to raise tuition by eliminating the Legislature’s oversight and vesting tuition-setting power with unelected university governing boards.

Voters will have the final say on Amendment 2 in the Nov. 8 election.

The amendment is supported by higher education leaders, who say they need flexibility to respond to changes in state appropriations, and to price themselves competitively with other institutions in Louisiana and elsewhere.

Although tuition in Louisiana has spiked in recent years, a college education continues to be more affordable in the Pelican State than most other states. According to the Southern Regional Education Board, the overall cost of attending a four-year public university in Louisiana is the second-lowest in the South, behind only West Virginia.

There are two main reasons for this: First, the fact that Louisiana, alone among states, requires a two-thirds vote of the Legislature to raise tuition. Second, the popular TOPS scholarship program has provided full tuition to any Louisiana high school student who qualifies. That meant any tuition increases also raised the state’s cost of providing TOPS, which acted as a check on tuition. Still, TOPS does not cover school fees or room and board.

But the Legislature in 2016 passed a law that decouples TOPS from future tuition increases, meaning students – not the state – would pay the entire cost of any future tuition increases. While some students and families can afford to pay a little more for their education, low-income students who have less family support will be especially hard hit by tuition increases.

As LSU President F. King Alexander wrote in The Washington Post, states across the country are reacting to budget pressure by cutting support for higher education and letting tuition rise.

If nothing is done to stop our states’ strategy of distancing themselves from funding responsibilities for maintaining affordable public colleges and universities, Colorado will become the first state not to spend a single penny on public higher education as early as 2025. This means that Colorado children who are now in pre-K classes will have no affordable public college or university options in less than a decade. States that will soon follow include Louisiana (2027), Iowa (2029), Michigan (2030), and Arizona (2032).

 

Need-based aid badly underfunded

In today’s modern economy, some form of advanced education or training is not a luxury, it’s a requirement. While state support for higher education helps all students, it is especially critical for students from modest backgrounds, who must rely on loans to make up for any loss of state support. Starting in the Spring semester, students on TOPS scholarships will receive less than half the full award due to budget cuts, and the program faces an uncertain future.

Low-income students who don’t qualify for TOPS, yet still want to attend college, have faced an even tougher road in recent years. As tuition has steadily risen, funding for the need-based Go Grant scholarship program has been stuck at $26.4 million, which is about $37 million short of what’s needed to provide all eligible students a grant. Low-income students who do qualify for TOPS also lose out when Go Grants are underfunded. Low-income students who receive TOPS and Go Grants are 41 percent more likely to graduate than those who only receive TOPS.   

Even if each eligible student received a grant, affordability would remain a challenge. That’s because in order to spread the money around to more students, the state requires that Go Grant awards – in conjunction with other gift awards (TOPS, Pell Grants, scholarships from schools) – cannot exceed 60 percent of a student’s unmet financial need. If every student could receive the maximum $3,000 award (which often still doesn’t meet 100 percent of unmet needs) the program would need an additional investment of $110 million.

go-grants-underfunded

 

Conclusion

As the Public Affairs Research Council of Louisiana notes, the current two-thirds requirement has not kept tuition from rising during the past eight years – far from it, in fact. What it has done is provide an accountability mechanism by giving voters a say on the issue every four years.

It’s understandable that higher education leaders would ask for more flexibility, given the drastic budget cuts that campuses have had to endure since 2008. But this amendment is the wrong way to solve the problem, and is likely to leave future generations of college students with more debt after graduation.

By placing greater financial strains on students, it also could have the unintended consequence of dissuading students from low-income families from pursuing higher education in the first place – a trend that has already taken root in Louisiana, which is one of only six states that saw a decrease in college enrollment from 2009 to 2014.

A better solution is for the Legislature to re-invest in higher education, while continuing to sign off on tuition increases when appropriate. Additionally, the Legislature should ensure that low-income students are not disproportionately hurt by tuition increases by vastly increasing the amount of money that goes to need-based aid.

 

The other amendments

Three other constitutional amendments on the Nov. 8 statewide ballot would affect the state budget:

Amendment 3 would eliminate the corporate income tax deduction for federal income taxes paid, while triggering a 6.5 percent single corporate tax rate. This is sound tax policy that takes away a tax loophole that exists in just two other states. It is projected to yield a modest amount of additional revenue for the state, and will broaden the state tax base.

Amendment 5 would put windfall revenue from corporate and mineral taxes into a new rainy day fund. Historically, revenue from oil and gas extraction and corporate income taxes have been more volatile than other tax sources. Putting excess revenue away in a fund that could be tapped during budget downturns is good budget policy that would bring more budget stability over the course of boom and bust economic cycles, especially in the oil industry.

Finally, Amendment 6 is not good budget policy. It allows fund sweeps and diversions from protected budget accounts. This is the type of irresponsibility that led to the state’s ongoing fiscal challenges. A better way would be for the Legislature to raise adequate revenue to make the necessary investments for shared prosperity in Louisiana.

LBP takes no position on No. 1 (dealing with registrars of voters) and No. 4 (dealing with property tax exemptions for surviving spouses of people killed in military actions).

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