Interim Joint Committee on Education


Subcommittee on Postsecondary Education


Minutes of the<MeetNo1> 2nd Meeting

of the 2003 Interim


<MeetMDY1> August 4, 2003


The<MeetNo2> 2nd meeting of the Subcommittee on Postsecondary Education of the Interim Joint Committee on Education was held on<Day> Monday,<MeetMDY2> August 4, 2003, at<MeetTime> 10:00 AM, in<Room> Room 149 of the Capitol Annex. Representative Mary Lou Marzian, Co-Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Jack Westwood, Co-Chair; Representative Mary Lou Marzian, Co-Chair; Senator Gerald Neal; Representatives Hubert Collins, Bill Farmer, Frank Rasche, Charles Siler, and Kathy Stein.


Guests:  David Prater and Terri Jo Reed, University of Kentucky; Martin Cothran, Family Foundation; Mike Ridenour, Lexington Chamber of Commerce; and Wayne Young, Kentucky Association of School Administrators.


LRC Staff:  Jonathan Lowe and Lisa Moore.


Representative Marzian introduced Dr. Joe Marks, Director of Educational Data Services, Southern Regional Education Board (SREB).  She referred members to the handout in their packet, entitled “SREB Trends in Postsecondary Education Affordability.”  Dr. Marks said the handout provides key information that was derived from the SREB Fact Book on Higher Education and features facts regarding Kentucky.


Dr. Marks said the goal for his presentation was to cover the question of whether postsecondary education was becoming more or less affordable.  He said there are three sub-questions for states to determine the answer:  1) Are tuition and fees (prices) higher or lower when adjusted for inflation; 2) Are tuition and fees (prices) a bigger or smaller “bite” of family incomes; and 3) Have state scholarships and grants kept up with the federal Pell Grants? 


Dr. Marks said 15 SREB states have seen higher tuition rates over the past five years, while only one state has a lower tuition rate.  He said the change in tuition and fees for four-year colleges and universities from 1996-1997 to 2001-2002 after adjusting for inflation include:  1) A 17 percent increase nationally; 2) The regional increase for the 16 SREB states was 28 percent; and 3) Kentucky’s increase was 21 percent.  Dr. Marks said the average sticker price for a student in Kentucky to attend a four-year college in 2001-2002 was $2,800, which ranks Kentucky 10th out of the 16 SREB states in affordability.


Dr. Marks said the change in tuition and fees at public two-year colleges in Kentucky after adjusting for inflation was 20 percent, which was less than the tuition increase for the four-year colleges and universities, but still places Kentucky right in the middle rankings for the 16 SREB states.  He said the two-year college tuition rates in Kentucky have increased more than the United States average in the SREB region, though they remain below the national average.


Dr. Marks said tuition and fees are taking up a bigger bite of family incomes in 15 of 16 SREB states when comparing the 1996-1997 to 2001-2002 academic years.  He said tuition and fees at a public four-year college equaled 29.9 percent of the median annual income of families in the lowest fifth of incomes nationally – up 3.9 percentage points.  Dr. Marks said in Kentucky, the increase was four percentage points – to 26.8 percent of the median annual income for families in the lowest fifth.  He said this is below the national average of 30 percent.


Dr. Marks said tuition and fees at a public two-year college equaled 15.3 percent of the median annual income of families in the lowest fifth of incomes nationally – up 1.1 percentage point.  He said in Kentucky, the increase was 1.9 percentage points – to 13.9 percent of the median annual income for families in the lowest fifth.  He said the change for the two-year college was less nationally, regionally, and in Kentucky because the tuition and fees are lower than the four-year college, so percentage levels are lower.


Dr. Marks said large percentages of first-time college students now rely on student financial aid.  He noted more than 75 percent of students nationally now rely on student financial aid, while ten years ago the figure was more like 55 percent.


Dr. Marks said a national survey conducted in 2001 shows that nationally, 76 percent of full-time, first-time students seeking undergraduate degrees at public four-year colleges received some form of student financial aid, as did 61 percent of first-time freshmen at public two-year colleges.  He said in Kentucky, the percentages were 90 percent at four-year colleges and 76 percent at two-year colleges.


Dr. Marks said nationally, 42 percent of full-time, first-time students seeking undergraduate degrees at public four-year colleges took out loans, as did 12 percent of first-time freshmen at public two-year colleges. He said in Kentucky, the percentages were 40 percent at four-year colleges and 11 percent at two-year colleges.  Dr. Marks said in Kentucky, the median loan amounts were $2,800 for freshmen at public four-year colleges and universities and $2,100 for those at two-year colleges. 


Dr. Marks said the vast majority of student financial aid is still federal financial aid.  He said seven out of ten financial aid dollars are federal dollars.  He said the Pell Grant program is the largest need-based grant program run by the federal government.  Dr. Marks said state scholarships and grants have kept up with Federal Pell Grants in ten SREB states and have not in six SREB states.  He said nationwide in 2001, states provided 79 percent as much money in student aid as went to their states’ students through Pell Grants.  He said in the SREB region the figure was 65 percent.  Dr. Marks said Kentucky provided 61 percent as much – representing a large increase over the 32 percent provided in 1996.


Dr. Marks said nationwide in 2001, 59 percent of state student financial aid was distributed through need-based programs; 19 percent in non need-based programs; and 21 percent in programs whose type is not reported.  He said in Kentucky 60 percent was based on need, 29 percent was not based on need and 10 percent was not reported by type.


Dr. Marks said the balance between state and local funding and tuition and fees funding for college budgets has changed.  He said colleges have come to rely more on revenue from tuition and fees as growth in appropriations supporting postsecondary education have declined, ceased or reversed.


Dr. Marks said there has been fairly dramatic changes in the last 15 years in the balance between funding from state and local governments and funding from tuition and fees.  He said in 1985, for four-year colleges and universities, 57 percent of the colleges’ education and general budgets came from state and local appropriations.  He said the regional average of 58 percent was higher than the national average of 52 percent.  Dr. Marks said in 2000, state and local appropriations accounted for 39 percent of the education and general budget in Kentucky and the United States, and 42 percent for the region as a whole.  He said at the same time, tuition and fees went from 15 percent to 19 percent of the budget. 


Dr. Marks said revenue from tuition and fees has increased faster than the revenue from state and local appropriations.  He noted that the changes in funding sources for the public two-year colleges was 61 percent from state and local appropriation in 1985, and 52 percent in 2000.  Dr. Marks said tuition and fees went from 15 percent to 20 percent of the education and general budget.


Dr. Marks said the figures discussed above are key background items that shed light on how college affordability changes in Kentucky fit with what is happening regionally and nationally.  He welcomed questions from the members.


Representative Stein asked Dr. Marks if he was familiar with the Postsecondary Education Reform Act passed in 1997 in Kentucky.  She said a goal of this reform was to increase the number of Kentuckians who go from secondary education to postsecondary education.  She also said she appreciated the format of the three subset questions for states.  Representative Stein clarified that Kentucky tuition and fees are higher after adjusting for inflation and the cost to Kentucky families is increasing substantially.  She said this is disturbing news given the number of low-income families in Kentucky and the large number of these students who would be first generation postsecondary students, who need to be encouraged to enroll in higher education.  Representative Stein said it is not feasible to ask low-income Kentucky families to pay over a quarter of their incomes to send their children to college.  She said the only good news is that our state scholarships and grants have kept up with the federal Pell Grants. 


Representative Rasche asked if the lower fifth income for families was adjusted for each state in calculating undergraduate tuition and fees as percentages of family income (lowest fifth of family incomes).  He asked if the high percentage (90 percent) of Kentuckians receiving financial aid was in part due to the increase in tuition as a percentage of income and what part may be attributed to Kentucky attracting first generation postsecondary students from the lower tier of socio-economic families, which could be considered a success story. 


Dr. Marks said the data does not identify who the students are.  He said the high percentage and the fact that Kentucky is lower in region on per capita income would suggest that there is a higher percentage of needy students than in other states.  Dr. Marks said the 90 percent figure must mean there is a difference in Kentucky’s financial aid distribution system, such as informing people of its availability or enrolling larger numbers of students into financial aid programs, which is positive. 


Representative Rasche asked if the Kentucky Educational Excellence Scholarship (KEES) money is tabulated into the figures shown in the SREB handout.  Dr. Marks said the figures were calculated through 2000-2001.  Representative Rasche said the KEES money was not fully implemented by 2001 so it could not have been entirely figured into the percentages.


Representative Marzian asked if tuition and fees were separate from room and board.  Dr. Marks said that it was.  Representative Marzian asked if room and board had been factored what type of impact it may have had on the percentages.  Dr. Marks said adding the cost of room and board would take a much bigger bite in the total college expense.  He said, broadly speaking, that tuition and fees for public four-year colleges and universities is about 41 percent of the total cost.  Dr. Marks said most of the cost of attending college is not the tuition, but the room and board, transportation, books, etc; which comprise 60 percent of the total cost.  He said he focused on tuition and fees because it is more likely to be influenced by policy and there is less flexibility for students than in the cost of room and board. 


Representative Siler asked if there was a companion study conducted for the private colleges.  Dr. Marks said he will look into this, but SREB relies on a number of sources to obtain tuition information, which would include private college information.  He said he would send Representative Siler the data.


Representative Collins asked why the funds available for loans was significantly less for the public two-year colleges.  Dr. Marks said two-year colleges are less expensive to attend and there is a reluctance on the part of students in the shorter term programs to incur debt to complete those programs than the students with the baccalaureate degree goal.  Representative Collins asked what percentage of students in two-year colleges stop with the associate degree.  Dr. Marks did not know that information but said those figures could certainly affect loans or student financial aid availability to two-year college students.


Representative Farmer asked if the numbers comparing Kentucky to the region and the nation are weighted in any way that would alter the percentages.  He said some of the states probably have a higher number of students attending college than in Kentucky.  He wondered if the percentages were based on each state individually or based on a weighted average based on the cost per state per student.  Dr. Marks said the numbers are not weighted – the median price at the four-year colleges adjusted for inflation is used.  Representative Farmer clarified that the figures were raw data based on states individually and Dr. Marks confirmed that assessment.


Senator Westwood asked if the changes in funding sources from 1985 – 2000 included the KEES scholarship monies.  Dr. Marks said the tuition and fees revenue includes what the institutions actually collect.  He said this reporting does not identify where the dollars come from, but that the aid dollars are included.  Senator Westwood said he is surprised by the decline in state and local appropriations after the KEES money was being distributed.  Dr. Marks clarified that the state and local appropriations percentage is just the state appropriation to the colleges for operating expenses and does not include the KEES money which would be accounted for as part of tuition and fees. 


Senator Westwood asked how Virginia could afford to not raise tuition and fees in the public four-year colleges and universities from 1997 to 2002.  Dr. Marks said Virginia had an administration that very overtly had a policy of freezing tuition and offering a 20 percent rollback for several years.  He said even though changes in tuition and fees declined 20 percent, it is still the fourth highest in the region ($3,700) and was one of the most expensive nationally for years.  Dr. Marks noted that Virginia will be increasing their tuition by 30 percent this year for upcoming freshmen.


A motion was made by Representative Stein and seconded by Representative Collins to approve the minutes of the June 3, 2003 meeting.  The motion was approved by voice vote.


Senator Neal asked about the bottom-line figures in relation to the lower socio-economic students entering into school for the first time.  Dr. Marks said the data does not include any enrollment information, and he does not have interstate data that shows family incomes of students.  He said the college presidents and councils would be useful in obtaining this type of information.  Dr. Marks said it is common sense that tuition prices affect student access.  Some students have to decide that they cannot attend college after prices rise.  He said it would be difficult to determine how many students are affected at certain price points.


Senator Neal asked how many students with lower socio-economic status relied on student financial aid.  Dr. Marks said there are national figures, but there is no data related to this in the information that he has.  Senator Neal said this type of information affects policy on all levels.


Representative Marzian asked about the drop in the state and local appropriations as a percentage of total revenue for postsecondary institutions from 57 percent in 1985 to 39 percent in 2000.  She asked how Kentucky colleges and universities were making up this difference.  She knows there are fundraising efforts for postsecondary institutions which she feels is taking time away from the main focus of education.  Dr. Marks said the other elements would be government contracts and grants, earnings from endowments, and fundraising.  He said as the state appropriation declined as a percent of the budget, tuition and fees made up for part of the decrease as well as fundraising efforts and additional federal contracts and grants.  Representative Marzian feels that the state is expecting the colleges and universities to raise a significant amount of money compared to what the state supplied them in the 1980’s and the most recent budget that Kentucky passed did not help education.


Representative Marzian introduced Mr. Thomas Layzell, President, Council on Postsecondary Education (CPE).  She welcomed several university presidents in the audience to the meeting including President Glasser, Eastern Kentucky University; President Alexander, Murray State University; President Ramsey, University of Louisville; President Ransdell, Western Kentucky University; President Eaglin, Morehead State University, President Todd, University of Kentucky, and Gary S. Cox, President of the Association of Independent Kentucky Colleges and Universities.


Mr. Layzell said their were two purposes of the 1997 Kentucky Postsecondary Education Improvement Act.  They were: 1) The development of  a society with a standard of living and quality of life that meets or exceeds the national average; and 2) Increased educational attainment at all levels.  He also said the 1997 Kentucky Postsecondary Education Improvement Act identified six key goals which were listed in the handout provided to members.


Mr. Layzell said there are five questions upon which the CPE bases its efforts.  The issue of affordability falls under question one, which asks, “Are more Kentuckians ready for postsecondary education?”  Is it affordable? 


Mr. Layzell said House Bill 1 generated significant enrollment increases moving from 136,584 in 1998 to 166,793 in 2002.  He said there have been other indicators of the success of postsecondary reform in addition to increased enrollments.  He said students obtaining a high school diploma and/or GED has increased to 81 percent.  He said the percentage of adults with bachelor degrees has increased to 22 percent.  He said graduation rates at Kentucky public postsecondary institutions have increased from 37 percent in 1998 to 44 percent in 2002, and retention rates have increased to 68 percent.


Mr. Layzell said the key features of CPE’s tuition policy are 1) the institutional boards set tuition rates; 2) non-resident rates are higher than resident rates; and 3) tuition revenue should be roughly one-third of total public funds (state appropriation plus tuition and fees).  He said the council monitors tuition using two major measures:  the “ability to pay” measure relative to benchmark institutions; and “postsecondary affordability” as defined by Measuring Up national report card.


Mr. Layzell said the increases in annual tuition and fees for Kentucky public postsecondary institutions for 2003-2004 range from 4 percent up to 23 percent in the Kentucky Community and Technical College System (KCTCS).  He said changes in annual tuition and fees and per capita personal income have a different look but reveal the same trend as the data provided by Dr. Marks with SREB.  The per capita personal income has increased about four percent and tuition and fees has increased 9.1 percent since 1997.  Mr. Layzell said tuition and fees expressed as a percentage of per capita personal income is an alternative measure of people’s ability to pay the cost of college.  There is a two percent difference from 9.8 percent in 1997 to 11.8 percent in 2002 and this means a greater portion of personal income must be used to pay for college.


Mr. Layzell said tuition and fees have been increasing as a source of revenue since 1997-1998.  He said the state general fund allocations have decreased during the same time period from 69 percent to 65 percent. 


Mr. Layzell said the net student cost needs to be looked at closely.  Net student cost is all student expenses, including tuition and mandatory fees plus books and supplies, housing and dining, and living expenses (clothing, transportation, child care, etc.)  minus student financial aid such as federal loans, grants, work-study, and tax credits plus state grants and loans, institutional aid, and private scholarships and grants.

Mr. Layzell explained that the report Measuring Up is a national report card on postsecondary education across the states produced by the National Center for Public Policy in Higher Education.  This was an effort that began in 2000 to give states a basis to see how they are doing in a variety of criteria with their postsecondary education system.  He said this is an important effort, but very much a work in progress.  In terms of college affordability, Kentucky had a grade of B in 2000 and ranked 10th nationally, and received a C in 2002 and ranked 8th nationally.  He said Kentucky performance was close to top states in the measure of a family’s ability to pay for education at public universities and community colleges.  Kentucky ranked 5th lowest in student loan debt.


Mr. Layzell summarized several key issues relating to affordability for attending colleges and universities in Kentucky: 1) Demand for postsecondary education continues to grow; 2) Postsecondary education in Kentucky remains relatively affordable compared to the South and the nation; 3) Tuition and fees have been increasing faster than personal income; 4)Tuition and fees make up a larger portion of an institution’s public funds; 5) Tuition increases have diminished the purchasing power of student financial aid; 6) There is a shift from grant aid to loans that is increasing student indebtedness, and 7) Quality, affordability, and access must be considered together and in the context of the goals of House Bill 1.


Mr. Layzell finished his presentation by saying that the CPE has identified affordability as a key area to study in 2003-2004.  This includes analyzing the tuition and fees policy and the student financial aid policy for Kentucky’s public postsecondary institutions.


Dr. Lee Todd, President, University of Kentucky, and Convener, Kentucky Council of University Presidents, discussed how the goals of House Bill 1 and the tuition costs of Kentucky’s colleges are linked, and why the students and the state will ultimately benefit.  He said the tuition increases have allowed the universities to be more successful and improve the quality of programs while working to meet the ambitious goals set forth in House Bill 1.  Dr. Todd also said that as tuition and fees rise, universities are investing more money into need-based aid.


Dr. Todd said the primary use of tuition funds is fairly consistent across all universities.  He said tuition and fees must increase as funds from state appropriations decline.  Likewise, new faculty had to be hired to take into consideration the increasing enrollments that universities are facing, and modest salary increases were given to faculty.  Dr. Todd said that the University of Kentucky did not give salary increases last year, but could not afford to do that two years in a row and keep qualified faculty and staff on board.  At the same time, health care costs continue to rise.  He stressed that the data indicates the tuition increases do not appear to be negatively impacting accessibility.  Enrollments will be at least the same at all universities this year and will very likely increase.


Dr. Todd said universities are trying to balance affordability with the need to generate sufficient funds to achieve institutional, regional, and statewide goals.  He said tuition rates are still low compared to most of the benchmark institutions or border institutions in states.  He said the leadership of Kentucky’s postsecondary institutions believe that the biggest threat to accessibility is the lack of state funding to support the institutions.  He said without state funding to support the universities’ growth, enrollment will have to be curtailed and programs limited. 


Dr. Todd said the tuition increases at universities have not made up for the loss of state funding or the increasing operating expenses that occur on a daily basis.  He said tuition fees could never be raised to the point of compensating for the loss of state appropriations, as that would certainly hinder accessibility for students.  Dr. Todd said the University of Kentucky only receives 22 percent of their budget from the state.  He said this is made up through research grants, auxiliary services including the hospital, etc.  He said tuition accounts for 11 percent of the budget. 


Dr. Todd said all universities share the challenge created by reduced funding.  They are trying to avoid losing good faculty due to non-competitive salaries.  He said Kentucky is last in salary for faculty of all the benchmark states. 


Dr. Todd said the largest graduating class in the nation’s history will arrive in 2009.  He said all universities will face a challenge to accommodate these potential future students.  Dr. Todd said soaring healthcare costs in the range of 8 to 15 percent are consuming the personnel budgets, and substantial expenditures to keep pace with the rapid evolution of teaching and learning technology are necessary to compete with surrounding states.


Dr. Todd said the tuition increases will produce an economic dividend to the state of Kentucky in both the long and short run.  He said postsecondary education is an investment that pays off over a lifetime.  The median annual income for bachelor’s degree recipients is 80 percent higher than the median income for those with only a high school diploma.  Over a lifetime, the gap in earnings between those with a high school diploma and a bachelor’s degree (or higher) exceeds $1,000,000.


Dr. Todd said the CPE has set a goal to enroll 80,000 more people into postsecondary education to have Kentucky reach the national average.  Assuming a 50 percent graduation rate, by the year 2015, Kentucky would add $22 billion to Kentucky’s economy over the lifetime of these graduates.  He said Kentucky should make this investment now in order to ensure these people go into our working population.


Dr. Todd said the cost of postsecondary education is a shared cost between the state and the student.  He said investment in postsecondary education is the best investment a parent can make for a child, even if it requires taking more personal income. 


Dr. Todd said most states are facing severe fiscal crises and are cutting state support to higher education.  He said the shift in responsibility from the state to the student is an unacknowledged national policy decision.  Basically, Kentucky is passing the user’s tax by not putting money into the higher education system.  Dr. Todd said if state appropriations remain the same in Kentucky, students will have to bear more costs as enrollments increase.


Dr. Todd said one critical thing that Kentucky can do to reduce the cost of a college education is to graduate students on time.  If a student stays in college for five or six years working on a bachelor’s degree, their total tuition cost during that tenure increases by as much as 50 percent.  He said the university costs increase because of dealing with more students for a longer period of time.  For example, at the University of Kentucky, the 2002 graduates took an average of 145 credit hours to earn a bachelor’s degree.  The requirement for graduation is an average of 124 hours.  Thus, the graduates took 21 credit hours above the amount needed.  Dr. Todd said UK now has in place a four-year contract for students that identifies exactly what courses they need in order to graduate on time.


Dr. Todd said UK is identifying new revenue streams for scholarships.  He said UK reallocated $1,000,000 of tuition funds into the need-based scholarships and increased ticket prices at basketball and football games to generate another $1,000,000 to put into scholarships, hopefully with a match from private donors.


Dr. Todd summarized by saying that nearly 20 percent of traditional age undergraduates come from families with incomes below $25,000.  He said the federal government and institutions all offer financial aid to help these low-income students.  Dr. Todd said seven out of ten students receive financial aid.  He said a study by the National Center for Education Statistics reports that the price students paid for a college education, after financial aid, did not change for low-income students between 1992-1993 and 1999-2000.  Dr. Todd said President Alexander recently gave a presentation at Murray State University that talked about the federal tax credit and affordability for low-income families which showed that various forms of student aid in large measures offset the increased cost of attending college.


Dr. Todd said reform is working in Kentucky, but we have to stay the course.  In 1994, less than 50 percent of Kentucky’s high school graduates enrolled in college the following fall (7.8 percent below the national average).  By 2000, more than 58 percent of Kentucky high school graduates invested in postsecondary education, which exceeded the national average by two percent.


Dr. Todd said Kentucky’s public universities have increased their six-year graduation rate from 26.8 percent in 1988 to 33.1 percent in 2002.  He said Kentucky’s percentage with the number of people with a bachelor’s degree has increased four points to 21.6 percent since reform.  In 2002, Kentucky ranked 11th in the nation for growth in the number of citizens with at least a bachelor’s degree.


Dr. Todd thanked the members for the vision of House Bill 1, elementary and secondary education reform, and their support for education.  He said the university presidents want to work closely with members in order to continue to move Kentucky ahead in the area of postsecondary education.


Mr. Ken Walker, Vice-President for Finance, Kentucky Community and Technical College (KCTCS), said President McCall sent his regrets for missing the meeting due to a long-standing commitment that he could not break.  He said that House Bill 1 created KCTCS to be the comprehensive community and technical college system for Kentucky.  Mr. Walker said that KCTCS, under the direction of President McCall, has consolidated colleges, functions, and programs throughout the state.  KCTCS has also provided access to programs at multiple levels such as transfer to baccalaureate programs, applied associate degree programs, diploma and certificate programs, workforce training, remedial education, continuing education, and community development.


Mr. Walker said since 1998, the headcount enrollment at KCTCS has increased almost 50 percent from 45,529 to 67,812 in 2002.  He said the Fall 2003 headcount is projected to grow by at least an additional 3 to 5 percent, resulting in a five-year cumulative increase of more than 56 percent.


Mr. Walker said the retention of first-time students entering into their second year has increased from 1999 from 53.8 percent to 55.4 percent in 2002.  He said KCTCS has already met the goals directed from the CPE for the fall of 2003.  Mr. Walker also said that the credentials awarded to students including associate degrees, diplomas, and certificates has increased almost 50 percent from 6,109 in 1999-2000 to 9,022 in 2001-2002. 


Mr. Walker said since 2000-2001, the KCTCS Board of Regents has established KCTCS tuition rates.    At that time, due to differing fees among the colleges, each of the 28 colleges had a different cost of attendance.  He said the board of regents established two short-term tuition objectives: 1) To equalize tuition and fees for all colleges; and 2) To establish  a single “sticker price” (tuition including fees).  Mr. Walker said both of the objectives were achieved in 2001-2002. 


Mr. Walker said based on CPE guidelines, in August 2001 the board of regents planned for the following tuition rates for 2002-2004: 2002-2003 would be $64 per credit hour, and 2003-2004 would be $68 per credit hour.  He said these rates anticipated that the CPE benchmark funding request for 2002-2004 would be funded, which did not occur.  The 2003-2004 state appropriation for KCTCS is over $20 million less than CPE recommended to the General Assembly for KCTCS.  Therefore, in April 2003, the board of regents established the 2003-2004 tuition rate at $79 per credit hour.


Mr. Walker said in 2002-2003, 73 percent of KCTCS degree-seeking students who enrolled for 6 or more credit hours received federal or state aid, and on average, enrolled for 11 credit hours.  The cost for financial aid students projected for the fall of 2003 is $1,169 and the average aid award is $1,513, leaving $344 available aid to recognize other costs of attendance including transportation, living costs, etc.


            Mr. Walker said there were three reasons for KCTCS to increase tuition.  They are: 1) The comparison to KCTCS benchmark institutions – KCTCS is still below the benchmark median—both in actual dollars and relative to per capita personal income; 2) CPE guidelines regarding tuition revenue as a percentage of public funding (tuition revenue plus state appropriation)—KCTCS is expected to generate in tuition revenue at least 30 percent of public funding; and 3) Additional revenue required by KCTCS to sustain and expand reform initiatives particularly in light of budget cuts in 2001-2002 and 2002-2003. 


            Mr. Walker said KCTCS is supported by four primary sources of revenue including state appropriation, tuition revenue, grants and contracts, and private funds.  He said over the past five years, while postsecondary education appropriation as a percent of the total state budget has increased slightly, the KCTCS portion of that appropriation has decreased by a full percentage point.  He said the state appropriation in nominal dollars has increased since 1988-1989 to 2002-2003. Yet, because of headcount and full-time equivalent (FTE) enrollment increases, the state appropriation per FTE has declined.


            Mr. Walker said the uses of tuition revenue are for increased student financial aid, operating fund increases for academic programs, salary increases for faculty and staff, fixed cost increases for employee benefit programs, and information technology network cost increases.        


            Mr. Walker said KCTCS has implemented ways to increase access for students of modest means by increasing the amount of financial aid available, being geographically accessible, providing programmatic access, and providing virtual access through distance learning courses and programs (currently, over 10,000 course enrollments). 


            Mr. Walker summarized by saying that KCTCS realizes the expectations derived through House Bill 1, is committed to maintaining the momentum that has been growing rapidly since 1998, and finally to providing the quality programs that the students expect.


            Dr. Gary Cox, President, Association of Independent Kentucky Colleges and Universities (AIKCU) made a presentation regarding access and affordability at Kentucky private colleges and universities.  He described the institutions in AIKCU as emphasizing small class sizes, individual attention, community service, and broad-based student involvement.  Dr. Cox said three out of every four students at AIKCU institutions are Kentuckians.


            Dr. Cox said total enrollment at AIKCU colleges and universities in the fall of 2002 was 24,667 students, or 11.1 percent of the total headcount postsecondary enrollment in Kentucky and 18 percent of the undergraduate four-year enrollment.  These institutions awarded 22.4 percent of all baccalaureate degrees in Kentucky in 2001-2002, including a larger percentage of bachelors degrees in key areas of study like education-24 percent, mathematics-34 percent, nursing-25 percent, biology-35 percent, business-24 percent, foreign language-30 percent, and economics-44 percent.


            Dr. Cox said AIKCU’s primary sources of funds are tuition and fees, private gifts, and endowment income.  He said Berea College and Alice Lloyd College are two of the five work colleges in America and do not charge students tuition and fees.  He said AIKCU’s tuition and fees are about 40 percent below the national average for independent colleges. 


            Dr. Cox said tuition varies greatly between the 19 independent colleges and this is primarily due to the diversity between the institutions.  Some institutions serve large populations of students that are not financially able to pay very much, and then there are some institutions that compete with institutions across the nation whose tuition’s are considerably higher than those in Kentucky.


            Dr. Cox said the average freshmen financial aid package for 2000-2001 was paid through: college-funded grants and scholarships- 56 percent; federal loans- 17 percent; federal grants and scholarships- 12 percent; and state grants and scholarships- 15 percent.  He said state student financial programs are extremely important to AIKCU students.


            Dr. Cox said AIKCU deals with the misconception that all rich children are in private colleges, which is not the case.  Dr. Cox said the percent of freshmen receiving aid by program is relatively high: 43 percent receive federal grants; 65 percent utilize state grants and scholarships; 89 percent receive college-funded grants and scholarships; and 61 percent receive federal loans.


            Dr. Cox said because AIKCU has received assistance from the state legislature, fundraising, and other activities as well as holding tuition increases between six and seven percent, the percentage increase of grants and scholarships to students far exceeds the percentage of tuition increases.  He also said students receive support through tuition discounting, which has been 35 percent over the last two years.  Dr. Cox said this is about the national average for independent colleges.


            Dr. Cox said the average net tuition after considering all of the available grants and aid at a private institution in Kentucky is competitive with public institutions, at about $4,400.  Again, this analysis does not include Berea College or Alice Lloyd College.  Dr. Cox said the net tuition at some of AIKCU’s institutions is as low as $500.00. 


            Dr. Cox said a major issue for AIKCU member institutions is return on investment revenue.  He said the decline in that return has been substantial.  He said other key revenue sources include tuition revenue and private giving revenue.


            Dr. Cox said AIKCU makes an important contribution to Kentucky, and enrollment has increased five percent since the 1997 Kentucky Postsecondary Education Reform Act.  He said they will continue to be private institutions in the public interest in Kentucky.


            Representative Stein said in the past two years, Kentucky has had six budget cuts based upon declining state revenue.  She said the Consensus Forecasting Group anticipated a possible additional 3.5 percent cut for Kentucky colleges and universities.  Representative Stein asked Dr. Todd how he was going to handle this.  Dr. Todd said the academic programs were cut 1.7 percent and staff operations were cut 2.3 percent to reallocate $7,000,000 to meet requirements for this year’s budget.  He said if further budget cuts are to be made, he said programs will have to be dropped.  He encouraged the legislators to consider other revenue enhancement measures.  Dr. Todd said the state of Kentucky cannot afford to cut its way to excellence.  He said we need to find a means to come out of this revenue shortfall.  Representative Stein said we need to remember that Kentucky’s purpose at the college and university level is to improve the quality of life for all Kentuckians, and she thanked the university presidents for helping with that goal.


Representative Siler commended the presenters on the information provided.  He said accessibility is driven by geographically offering these public colleges, community college system, extended campus systems, and private colleges.  Representative Siler said  high school students know today that they can obtain the financial aid to attend college if they desire.  He believes Kentucky has to continue to deliver that message to high school students.


Representative Marzian said she hopes the legislature will take their job seriously and not pass a user tax on to the students and then commend ourselves for not raising any taxes.  She reminded the members that the committee will meet next month on Monday, September 8, 2003 due the Labor Day Holiday being on our regular meeting day.  Representative Marzian said members will be receiving the resolution in the mail regarding explaining where the lottery proceeds are distributed in order to better inform the public as to how the dollars are spent on education.


The meeting adjourned at 12:20 p.m.