Interim Joint Committee on Appropriations and Revenue


Budget Review Subcommittee on Primary and Secondary Education


Minutes of the<MeetNo1> 3rd Meeting

of the 2010 Interim


<MeetMDY1> October 28, 2010


Call to Order and Roll Call

The<MeetNo2> third meeting of the Budget Review Subcommittee on Primary and Secondary Education of the Interim Joint Committee on Appropriations and Revenue was held on<Day> Thursday,<MeetMDY2> October 28, 2010, at<MeetTime> 10:00 AM, in<Room> Room 154 of the Capitol Annex.  This was a joint meeting with the Budget Review Subcommittee on Postsecondary Education.  Representative Arnold Simpson, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Vernie McGaha, Co-Chair; Representatives Ted Edmonds, Carl Rollins II, and Kent Stevens.


Guests:  Dennis Taulbee and Sarah Levy, Council on Postsecondary Education; Clyde Caudill and Wayne Young, Kentucky Association of School Administrators; Jim Thompson, Education and Workforce Development Cabinet; Tracy Goff-Herman, Kentucky Department of Education; and Marcie Lowe, Education Professional Standards Board. 


LRC Staff:  Greg Rush, Linda Ellis, and Marlene Rutherford.


Approval of September 23, 2010 Minutes

A motion was made by Representative Meeks to approve the minutes of the September 23, 2010 meeting. It was seconded by Representative Flood, and the minutes were approved without objection.


College Completion – Council on Postsecondary Education

Mr. King said that the most significant outcome of education is employability. National data from the Bureau of Labor Statistics indicates that the levels of unemployment correspond in inverse proportion to levels of education. The more people that are highly educated, the more likely they can enjoy full employment through their lives. Other benefits include higher income; employability means higher tax revenues, greater rates of voting and volunteering in communities, better health, lower poverty, and lower costs for government assistance programs. There is a new emphasis to encourage more Americans to become more highly educated. President Obama’s leadership is stimulating an array of activities and programs now underway. Some are being driven by the National Governor’s Association, national foundations, and associations. Kentucky is participating in several of these activities. In the development of the Council on Postsecondary Education’s new strategic plan, college completion and student success are at the core of the work campuses will be focused going forward.


The total degrees and credentials awarded in both public and private independent institutions have increased 100 percent from 1999 to present. This is due substantially to the reform legislation of 1997 and House Bill 1, the implementation of important legislation affecting financial aid, and a growing understanding of the importance of postsecondary education.


The completion rate for a bachelor’s degree of full-time, first-time baccalaureate students who entered a public or independent university in 2003 and who began at a four-year campus and completed the degree at a four-year campus, although it could be a different four-year campus than the student started in, is twenty-nine percent of those who are college-ready at their entrance. The graduation rate for a college-ready student completing a bachelor’s degree in five years is at fifty-three percent, and the completion rate for students completing the degree in six years is sixty-one percent. College-ready students were ready to begin taking credit generating courses immediately. Many students enter college under-prepared and need some developmental or remediation courses before taking credit generating courses. He said that the graduation rate for students who enter college prepared is about twice as high as those entering under-prepared. Sixty-eight percent of first-time, full-time students had completed or were still working at obtaining a bachelor’s degree in year seven. This indicates that although students have had to stop taking classes or drop out of college entirely due to family or financial reasons, they are still working to achieve the degree which is a very positive sign.


The numbers are similar for students entering the Community and Technical College System (KCTCS). Completion rates are lower because many students will stop or drop out of college but many students will go to a community college and then transfer out to a four-year campus. Mr. King pointed out that the completion rates discussed above at a four-year school do not include those students who have transferred from a two-year campus to a four-year campus.


In response to a question by Chair Simpson concerning whether students obtaining two- and three-year technical college certificates were included in the statistics. Mr. King stated that the statistical information provided include only associate degree student completion rates.


The average six-year graduation rate of public universities in Kentucky increased from thirty-six percent in 1997 to forty-six percent in 2009. The national average increase is forty-eight percent in 1997 to fifty-six percent in 2009. These percentages included only first-time, full-time students seeking a bachelor’s degree who start and finish at the same university and do not include transfers within the system. He pointed out that the gap of those students in Kentucky graduating in 1997 compared to the national graduation rate has narrowed in 2009 by two percentage points which indicates Kentucky is making progress, although slowly.


In response to a question by Chair Simpson as to when or why the goal for a degree changed from four to six years, Mr. King said that eligibility for federal assistance under PELL describes a full-time student as a student that takes twelve credits rather than fifteen which is the number of hours required to complete a degree in four years. The average number of credit hours on an annual basis is about twenty-five and needs to be thirty hours. Also, as access to college has expanded, people with lower incomes who never thought they could go to college are now able to attend. The financial pressures are significantly higher and students are working their way through college and taking fewer credit hours.


Chair Simpson also asked whether any state has embarked upon a course that would attempt to address the issue of encouraging students who are able to complete their postsecondary education in four years. Mr. King said that students need to select a major as soon as possible. The longer students avoid selecting a major costs them a semester or two to take the necessary prerequisites. Campuses are encouraging students to select a major early in their college career. Students are also being encouraged to take more credit hours and all campuses have reduced the required number of hours to earn a bachelor’s degree down to 120 hours, with a couple of exceptions for appropriate programs that require more hours. He said there had been some discussion of tying financial aid or larger state subsidy to the number of hours a student takes to create disincentives for students to be taking 130 or more hours before graduation. There is also an issue when students change majors. All campuses recognize the importance of encouraging students to finish sooner.


In response to a question by Chair Simpson as to what percentage of students are impacted by the availability of necessary courses, Mr. King said that because of the availability of online courses the argument that a student cannot finish in the required time because they cannot get access to a needed course is greatly diminished. The fact that a student may not be able to get into a class on campus does not mean a student cannot get that particular course, because of the proliferation of online programs.


Mr. King stated that degree and credential production has increased from 22,059 in 1999 to 46,053 in 2009. Net total public funding per full-time equivalent for operating aid and the gross tuition and fees revenue per full-time equivalent constitutes the cost of educating a student on an annual basis. In 1999 it was $14,976 and in 2009, after adjustment for inflation, it had decreased slightly to $14,732. The general fund appropriations since 1999 have decreased while the tuition and fees revenues have increased. Campuses are operating more efficiently, and since 1999 have doubled the degree and credential output while funding has decreased by approximately $200 less per student.


Mr. King noted that state support for financial aid prior to education reform had increased from $38 million in 1999 to $189 million today. Kentucky per capita is one of the more generous states for student financial aid, which does not include federal financial aid or institutional aid supported at each campus by philanthropy and tuition revenue.


In response to an inquiry by Representative Flood regarding Kentucky Educational Excellence Scholarships (KEES), the Kentucky Tuition Grant (KTG), and the College Access Program (CAP), Mr. King said the disbursements for KEES, KTG, and CAP, do not elevate the cost per full-time equivalent from the net general fund appropriation and gross tuition and fees revenue but would offset a portion of the tuition on a per full-time equivalent basis. He also noted that not all aid goes to tuition and students are able to use it for other purposes. Representative Flood also asked if one of the contributing factors for the doubling of degree and credential output is due to financial aid, and Mr. King replied that financial aid was a major factor. He also said there had been steady growth from 2006 to 2010 although due to a sizable increase in enrollment particularly at the community colleges, the amount of aid available is essentially gone. In fiscal year 2010 the available resources for the CAP program were used to provide assistance to over 40,000 students but there were 74,000 students who qualified for assistance that could not be funded due to the lack of resources.


Representative Richards asked how much more students are having to work or parents having to pay and Mr. King stated there was a steady increase in the amount of debt that students were incurring. Some students use access to student loans for other things. In the data where students are stopping or dropping out the most frequently cited issue is financing. Mr. King said that recently a survey was conducted by the Gates Foundation of college dropout students and that a very high proportion of those students dropped out because the students had jobs that obligated them to more than twenty hours per week and the competing pressures of job versus higher education overwhelmed them. Representative Richards also asked whether there is an adequate program for savings for college where parents and grandparents can contribute. Mr. King indicated that the recent problem is that the current program has been tied into the stock market. Mr. King indicated that the amount of money budgeted for KEES and the various programs is a function of an estimate from the lottery each year, which is normally underestimated. In the past, if the amount of money the lottery took in exceeded the estimate, that excess went into the General Fund.


Representative Rollins indicated that he believed that both last year and this year KEES was fully funded and that CAP and KTG did not receive full funding and that not all lottery proceeds went to scholarships. Greg Rush, LRC staff, stated that the CAP and KTG were frozen at fiscal 2010 levels and KEES was funded at the projected requirement from Kentucky Education Association and that there is language in the budget that indicates that any other money is used to support higher education in the state but not specifically for scholarships. He said he would check on the 2008-2010 budget, but that he believed similar language was contained in that budget as well.


Mr. King stated that the recommendation of the task force as it pertained to funding for scholarships was to capture the difference between the estimate from lottery proceeds and the actual amount, and apply that amount in the following year as additional available funds, which averaged approximately $10 million per year. He also said that the larger numbers on financial aid reflects close to 85 percent of students who do not pay “sticker price” for that aid and are benefitting from the combination of federal assistance and all the state and institutional support. For students in the lowest income quartile, regardless of what type of campus they are attending, will receive more aid than what the costs are on average. Students in the second quartile are out-of-pocket about $800 to $1200 per year to attend college or a community college. The third and fourth income quartiles pay about $2500 to $2800, and students in the highest income quartile pay out-of-pocket about $3000. These amounts do not include room and board.


Representative Rollins stated that in the past higher education was seen as the ticket to the middle class, but because students now have so much debt upon graduation and are not able to obtain a job upon graduation to pay off the debt, that is no longer true. There needs to be a program developed so that students do not have to work so much in college but at the same time not incur so much debt.


Mr. King said that institutions could be more diligent in explaining what the long- term responsibilities will be on the back end when taking on debt and possibly be more stringent on what the money can be loaned for.


Chair Simpson asked if it would be practical to have as a component of the orientation process that students can complete a degree in four years and if so there are certain financial advantages and that you can secure loans but understand that the money will have to be paid upon graduation and will ultimately affect the student's quality of life upon leaving college because of the debt.


Representative Stevens asked if another term for “not college ready” could be developed and stated his opinion that every student is ready for some class. Mr. King indicated that he would look into another description to relate to students.


Representative Henley asked Mr. King to look into a current movement of “education for profit.” He referred to a lecture by Dino Curris on for-profit education and the role the federal government has played in fostering that movement. He said closer attention needs to be given to vocational schools in elementary and secondary education.


Accreditation and Licensing – Council on Postsecondary Education

Prior to the presentation on the accreditation and licensing of the Council on Postsecondary Education (CPE), Representative Richards asked Mr. King if the CPE would look into the savings program for students planning for college to determine if the program is adequate. He said he was aware that the savings program was not publicized to parents and students properly, and that many parents and grandparents are not aware that there is such a program. Mr. King indicated he would look into the matter.


Ms. Levy said that the purpose of licensure is to protect the citizens of Kentucky against colleges that engage in fraudulent practices, unfair competition, or substandard educational programs. The Council has licensure authority of all colleges except in-state public colleges which are established in other statutes and for-profit colleges offering below bachelor degrees which are licensed by the Kentucky State Board for Proprietary Education. The licensure activities include licensing new colleges; changes to existing licenses if a college wants to add a new academic program; data collection, collecting enrollments and degrees granted data; colleges go through an annual maintenance and renewal process with the Council; and, they facilitate consumer complaints against licensed colleges. The Council has experienced an increase in the number of colleges since educational reform, from 39 colleges in 1991 to 64 in 2010, both in-state and out-of-state. There are three times as many out-of-state institutions now operating in Kentucky since reform. There are 2,298 academic programs, 1,178 in-state and 1,120 out-of-state, and thirty-five percent or $66.5 million of state financial aid goes to the licensed colleges.


Ms. Levy stated that there is a greater need for consumer protection due to degree and diploma mills and counterfeit operations as well as technology and internationalization causing an increased risk of fraud. This has been addressed by revising regulations to address online operations by defining operating or soliciting in those regulations; for example, an online operation that comes into Kentucky to solicit Kentucky students to attend online which triggers licensure, and that operation would have to be licensed by the Council in order to recruit those students. The revised regulations have allowed the Council to administer cease and desist orders to institutions that are recruiting students but not going through the proper licensure process.


Industry oversight is revealing more complex applications and programs particularly with the online operations. The Council is performing site visits with consultants as well as coordinating licensure with other state agencies such as the Education Professional Standards Board and the Board of Nursing. Out-of-state programs are required to go through those agencies in order to become licensed by the Council.


Ms. Levy said there was a new law in 2008 that changed the way institutions were eligible for students to participate in the Kentucky tuition grant program. Currently licensed out-of-state colleges who are not able to obtain Southern Association of Colleges and Schools (SACS) accreditation because they are not primarily located in Kentucky or are outside the SACS region, in order to be eligible for Kentucky tuition grants they have to undergo a Council on Postsecondary Education review based on accreditation criteria that mirrors SACS which begin in 2011.


In response to a question by Representative Flood concerning the University of Phoenix, Ms. Levy pointed out that the Council does not accredit but license the institution. The University of Phoenix is licensed to offer certain programs online. They are not allowed to offer their education programs in Kentucky because they are not approved by the Education Professional Standards Board. The University of Phoenix is regionally accredited, although not by the SACS, because they are located in Arizona they are accredited by their regional Higher Learning Commission.


In response to a question from Chair Simpson of whether Kentucky can mandate accreditation in order for these institutions to educate Kentucky students, Ms. Levy stated that Kentucky does mandate accreditation because you cannot discriminate by requiring accreditation from certain regions. Currently accrediting agencies are recognized by the U. S. Department of Education. There are two accreditation agency categories, one being regional and the other national. The SACS is a regional accrediting agency. Of the sixty-four institutions currently licensed in Kentucky, thirty-one are SACS accredited and forty-seven are regionally accredited. The national accrediting agencies are more specialized, such as the American Bar Association, if a law school. She pointed out that under the Council’s licensing program it is not established for interstate commerce purposes but that the Kentucky tuition grant program statute is limited to regional accreditation, and if the institution is not in the SACS region under the new law the institution would need to undergo a Council on Postsecondary Education review based on accreditation criteria that mirrors SACS.


In regard to the Kentucky tuition grant, Chair Simpson asked if students enrolled in for-profit colleges or universities such as the University of Phoenix participate in the program. Ms. Levy stated that there are only three institutions of the sixty-four licensed that are applying under the tuition grant statute which are all non-profit. Chair Simpson asked Ms. Levy to look into whether students at for-profit universities are barred from participation.


Chair Simpson asked if Kentucky students can be protected by out-of-state degree mills. Ms. Levy stated that the regulation contains a provision for truth in advertising, in the event a student has been misled by a licensed institution, who would file a written complaint with the Council on Postsecondary Education which would be reviewed and a response requested from the institution in writing. Typically, the institution would indicate how the complaint had been resolved with the student, or it would submit evidence that contradicts what had been alleged by the student in the complaint. Ms. Levy also said that there had been no situation in which a complaint was proven; but, in the event it did occur, there is a licensure standard that would result in a need to review the institution, and the President has the ability to suspend or revoke a license. Within the last ten years there have been no suspensions or revocations that Ms. Levy was aware of; however, there was a situation where the institution voluntarily closed before its license was revoked.


Ms. Levy said that the Kentucky Board of Proprietary Education licenses for-profit institutions only offering below bachelor degrees, such as institutions offering associate degrees. If, in the future, the institution wanted to begin offering a bachelor’s degree it would no longer be licensed by the Board of Proprietary Education, which reports to the Governor, but would then come under the Council’s licensure provisions and every program offered would be licensed.


In response to a question from Representative Rollins concerning the Kentucky Tuition Grant for schools not SACS accredited, Ms. Levy said that students will be affected next year but the Council is currently doing site reviews.


President King said many of the recent issues have arisen surrounding the for-profits and the apparent abuse of some of the advertising and practices used to lure students largely to get access to federal financial aid, which is an issue of concern to many in higher education. The Council on Postsecondary Education is becoming more vigorous in management of these responsibilities.


Representative Rollins stated that many private colleges have become entrepreneurial in offering classes when it is convenient for students, and degree completion programs in different formats.


In response to a question by Chair Simpson concerning the transfer of credits between community colleges, whether regional or research universities would not accept transfer of credits from for-profit institutions, and whether there are any requirements on the for-profits to disclose that there may be a situation where the credits may not be accepted by public universities, Mr. King said that it would depend on the university, and in some instances they would. It is quite variable based on whether or not there are existing articulation agreements between the private institutions, whether for-profit or non-profit, and the public four-year campuses, and an assessment of the quality of their programs. He said that there is no obligation for the for-profit schools to disclose that credits may not be transferred, and that is part of the underlying problem. These institutions commit to students that the credits or degrees they earn are fully transferrable, when in fact they may not be, or that the degrees such as a two-year nursing degree will be accepted in the workplace, when in fact they are not recognized as adequate training. He said many of the schools involved in this activity are not licensed by the Council on Postsecondary Education but are within the jurisdiction of the Board of Proprietary Education. He did not know if complaints are addressed or resolved at that level. The Council on Postsecondary Education is concerned that a portion of the Board of Proprietary Education is made of up of the presidents of the colleges that are being regulated and that was a concern of the students that would not result in a fair and impartial airing of their concerns.


Chair Simpson asked how other states treat these types of schools and if they have separate governance structure. Ms. Levy responded that it varies among states.


There being no further business, Chair Simpson called for a motion for adjournment. Representative Richards made the motion, which was seconded by Representative Henley, and the meeting was adjourned at 11:35 AM.