Interim Joint Committee on Education

 

Subcommittee on Postsecondary Education

 

Minutes of the<MeetNo1> 1st Meeting

of the 2008 Interim

 

<MeetMDY1> July 7, 2008

 

The<MeetNo2> first meeting of the Subcommittee on Postsecondary Education of the Interim Joint Committee on Education was held on<Day> Monday,<MeetMDY2> July 7, 2008, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Representative Carl Rollins II, Co-Chair, called the meeting to order, and the secretary called the roll.

 

Present were:

 

Members:<Members> Senator Charlie Borders, Co-Chair; Representative Carl Rollins II, Co-Chair; Senators Alice Forgy Kerr, Johnny Ray Turner, and Ken Winters; Representatives Jim DeCesare, C. B. Embry, Jr., Bill Farmer, Tim Firkins, Tom Riner, Charles Siler, and Addia Wuchner.

 

Guests:  Ms. Heidi Hiemstra, Senior Associate, Research and Analysis, and Mr. Allen Lind, Vice President, Information and Technology, Council on Postsecondary Education

 

LRC Staff:  Ken Warlick, Audrey Carr, and Lisa Moore.

 

Representative Rollins welcomed members and introduced staff and guests. He  introduced Dr. Richard Crofts, Interim President; Dr. John Hayek, Interim Vice President for Finance; and Dr. James Applegate, Vice President for Academic Affairs; Council on Postsecondary Education (CPE), to give a series of presentations relating to college affordability, with an emphasis on national and state trends; the major components of college costs; and updated college affordability data in Kentucky.

 

Dr. Crofts shared some background information of his professional history. He has enjoyed his time in Kentucky serving as the interim president of the CPE. He said the goals established in 1997 for higher education in Kentucky remain the correct goals, but carry a significant cost to achieving them. He said the data being presented is a direct result of the last decade of implementing higher education reform and the costs of the achievements have come largely from increased productivity in Kentucky’s colleges and universities. He said the colleges are enrolling more students and producing more graduates, but have not reached their goals. He also said colleges and universities have increased tuition and fees during the last decade, and the CPE will focus on the issue of students bearing a bigger share of funding their higher education.

 

Dr. Crofts commended the legislature for taking action in making significant increases in the amount of student financial aid that is offered to students and for realizing the increased cost of tuition and fees and the burden these costs place on families. He said the student financial aid program has been an offset to the rising cost of tuition and fees, but data shows that the rapid increases and sources for funding student financial aid are coming to an end.

 

Dr. Applegate discussed how Kentucky can afford the goals for 2020. He said achieving the goals will create the most dramatic economic transformation in Kentucky’s history. Other states who have achieved higher levels of education attainment have reaped substantial benefits. The Milken Institute, in 2002, identified the single factor with the greatest power to explain differences in per capita income between the states as the percentage of college graduates.

 

Dr. Applegate discussed the relationship between private and public education investment costs compared to benefit return on investments. He said private costs include direct costs such as tuition, books, supplies, etc., and indirect costs such as room, board, and transportation. He said public costs include operating subsidy, financial aid, and capital projects. Private benefits include increased earning potential, healthier lives, and increased value on education. Public benefits include a vibrant economy, engaged citizens, reduced crime and dependency, and reduced health care costs.

 

Dr. Applegate explained the map that showed the additional bachelor’s degree holders needed to match the national average in a county by county breakdown. He said many of the students that need to be recruited for college to reach the double the number goals are from counties in which the income levels are lower than Kentucky’s averages, and Kentucky’s per capita income is not at the national average.

 

Representative Rollins said the map is a little misleading depending upon the population in a given county. Dr. Applegate said population is a factor within the map and it was not formulated to consider the number of people as a weight, and maybe it should.

 

Dr. Applegate identified five goals to meet the double the numbers statewide strategy. They are: 1) Raise high school graduation rates; 2) Increase the number of GED graduates and increase the numbers transitioning to college; 3) Enroll more first-time students at the Kentucky Community and Technical College System (KCTCS) and increase transfers to four-year programs; 4) Increase the number of Kentuckians attending and completing college; and 5) Attract college-educated workers to Kentucky and create new jobs. He said several ways to meet these goals is to increase aid, awareness, and access to a greater number of low-income students. He said Indiana has had tremendous success with a program called 21st Century Scholars, which is similar to Kentucky’s GearUp program, in raising their college attendance rates.

 

Dr. Applegate said that increasing the number of GED recipients and getting adults back into college is essential to meeting the double the numbers goal. He said incentives need to be created to attract those groups back into college and financial aid plans offered to them.

 

Senator Borders said that high school graduation rates need to be raised in order for students to be college ready and curb the tremendous expense of remediation classes for students. He also said college registrations have increased, but Kentucky is struggling with graduating its students, and not being prepared for college is a factor in why students drop-out before graduation.

 

Dr. Applegate agreed. He said it is not just about giving students access to higher education, but achieving success as well. He also said that a CPE cost analysis of developmental education indicated that it is $32 million, with half of that being student tuition, and the other half being state appropriation. He said the developmental courses help the students, but are a huge cost factor, and do not contribute towards the requirements for obtaining the BA degree.

 

Senator Borders suggested that maybe the high schools need to be responsible for the cost for the remediation classes needed for students who graduate from their schools. He said this is not a popular idea among school districts, but he feels that high schools must accept responsibility for their students being prepared for college.

 

Representative Riner asked about immigration and the increasing numbers of undereducated people coming into the state with little expectation of obtaining a college degree, and the effects of this population on the overall goals of higher education.

 

Dr. Applegate said that immigration of an uneducated population is a problem. He said the CPE has conducted a migration study to find out what happens to Kentucky’s college graduates. The study indicated that most graduates remain in Kentucky for five years after college graduation. He also said more than a third of out-of-state students who attend Kentucky’s colleges and universities locate in Kentucky to live and work and pay taxes. He said that in order to meet the goals of House Bill 1, the CPE is focused on attracting and retaining an educated population, creating the jobs necessary to keep folks here, and generating the resources that Kentucky needs to be a prosperous state.

 

Senator Winters said the Subcommittee on Elementary and Secondary Education discussed the high school’s responsibility for preparing its students for college and members could expect to receive a report from the subcommittee in the full interim meeting.

 

Representative Rollins discussed remediation and preparation. He asked where is the best place for remediation in the higher education system. If it is decided that the community colleges are the appropriate place to house the remediation classes, regardless of who pays for it, there needs to be a place identified in the system where students would have remediation services available and they should enroll in school at that place. If remediation is provided by the community colleges, the regional and research universities would be able to enforce rigorous admission policies.

 

Senator Winters said rural Kentucky is a major reason for not mandating that community colleges be the only place a student can receive remediation. He indicated many students in his district live within service areas of close proximity to a four-year regional university and have three times the drive to a community college to receive remedial classes.

 

Representative Rollins commented on college affordability in Kentucky. He said he is interested in looking at systematic cost containment as well as specific institution cost containment. He said Kentucky should support its colleges and universities, but there should not be blank checks written to them.

 

Dr. Applegate agreed with Representative Rollins and said Kentucky is part of a national initiative called “Access to Success” with the Lumina Foundation. He said one of the aspects of the national group is cost containment and how to spend money more effectively in higher education institutions.

 

Dr. Hayek discussed the flow of funds in higher education. He said private lenders have dramatically increased to a $17 billion dollar industry due to the increases in tuition over the last few years, and students who are looking for traditional loans beyond what they can receive through the federal government. He said the private loans can be hard to understand in terms of the magnitude of a student’s ability to pay because these loans do not show up when a student level college affordability analysis is done.

 

Dr. Hayek said postsecondary education’s percent change in state appropriation is less than other priority areas. He said postsecondary education has received 43 percent more current dollars in general fund appropriations from fiscal year 1999 to fiscal year 2008, largely due to the increase of 280 percent plus in student financial aid during this period of time.

 

Representative Rollins asked if the change in general fund appropriations included “Bucks for Brains.”  Dr. Hayek said it does not include “Bucks for Brains” or $1.5 billion in approved capital projects.

 

Dr. Hayek said the state versus student share of support for postsecondary education has decreased from two-thirds state support in fiscal year 1998 to approximately one-half in fiscal year 2008. This Kentucky trend is similar to national trends in this regard. He also said the lottery funding expanded student financial aid more than five-fold in the past ten years, but increases are flattening.

 

Dr. Hayek summarized by stating that Kentucky is no longer a low-tuition state. Over the last ten years, resident undergraduate tuition increased on average of 10 percent per year and 12 percent per year over the last five years. He said the state aid experienced aggressive growth early in reform, but has slowed considerably, while federal aid has remained relatively flat.

 

Representative DeCesare would like to see a chart on the growth in capital projects and “Bucks for Brains.” Dr. Hayek will collect the information and distribute it to the members.

 

Dr. Hayek said the statewide college affordability indicators are reviewed on an annual basis in the CPE’s accountability report and tuition setting process. He said key indicators include: college affordability for all families; affordability for low-income families; need-based financial aid, and student loan debt. Since 2000, the percent of income needed for college minus grant aid increased nine percentage points. He said the lowest-income families need to devote 24 percent of income to cover tuition at KCTCS in 2006, up from 14 percent in 1994. State need-based aid as a percent of federal Pell Grants is at 42 percent versus 24 percent in the Southern Regional Education Board (SREB), and Kentucky college students on average borrow less than other students, but annual loan amounts of $3,210 is up 20 percent over the past ten years.

 

Representative Rollins asked if there was a net price, or a percent of income, that is accepted nationwide as an indicator of affordability. Dr. Hayek said affordability varies by state perspectives, demographics, income levels, and income distributions. He said it very hard to pinpoint what is affordable and what is not.  For example, the net cost increased by two percent from 1992 to 2005 for the highest income families making over $100,000 a year. He said for middle income families, the net price increased by seven percentage points, and for low-income families, making $10,000 a year or less, the net price increased seventeen percentage points. This data supports the assumption that the lowest income families are having a harder time sending their children to college.

 

Representative Farmer asked, “Since there is no real standard that defines affordability, is there a definition that Kentucky uses to provide a target of what is affordable?” He asked if Kentucky has a definition that is broad enough or narrow enough to actually describe affordability.

 

Dr. Hayek said his goal for the meeting was to emphasize the issues that Kentucky is looking at when trying to define college affordability, and not limit it to one single definition. He said there are multiple issues that have to be looked at for different types of people, different types of families and students, and in various times of their lives.

 

Senator Winters said there were over 100,000 students in Kentucky who did not complete the Free Application for Federal Student Aid (FAFSA) form to see if they were eligible for financial aid. He said it is critical for all students to complete this form. It is also important for policymakers to remember the endowed scholarships available on various campuses may cause some students not to show up in the system data.

 

Dr. Applegate discussed the implications of the major statewide indicators in terms of their impact on college access. He said the enrollment growth was very high in the first years of reform, but has slowed more recently. Enrollment growth slowed most among full-time students.

 

Dr. Applegate discussed low income students’ access to college. Nationally, the highest-performing low-income students were no more likely to attend college as the lowest-performing high-income students.

 

Representative Rollins mentioned that FAFSA is the basis for determining qualification for student financial aid at any college or university in the nation, but particularly in Kentucky, with the exception of the Kentucky Educational Excellence  Scholarship (KEES). Dr. Applegate said the federal government needs to make the FAFSA form shorter and easier for families to complete, as it is a barrier to many low-income, first-time college going families because they do not want to complete the long and tedious form.

 

Senator Borders said Kentucky is seeing a decrease in recent enrollments in KCTCS. He said high gasoline prices may be preventing low-income students from commuting and attending community colleges. He asked if employers are still offering degree courses and advanced degrees in places where potential students are working.

 

Dr. Applegate said if Kentucky is going to reach the adult learners that have some college, but no degree, relationships need to be strengthened with small and major businesses and provide them incentives to offer education at the workplace, and preferably during work hours. He said the major barriers to adult learners coming back to school include time, cost, childcare, and transportation. He said if MBA’s and associate degrees are being offered in the workplace, and incentives such as part of the tuition is being paid, this is going to attract the workers into the classroom.

 

Senator Borders wants the college courses delivered to the communities as it is much cheaper for an instructor to go to a place of business versus 25 employees using gas to go to a community college or a four-year university that could be a far distance. He said gasoline is impacting everyone’s lives and will continue to affect the enrollment at KCTCS and would like this issue to be seriously considered as a top priority.

 

Representative Wuchner discussed Tax Incentive Financing (TIF) that is offered to attract companies and businesses to Kentucky. She said if a company aligns itself with a TIF for education, the workforce can reap better benefits because if the company leaves the state is left with an educated workforce. She said the TIF application is promising for Kentucky citizens. Dr. Applegate said this is an example of a very smart policy.

 

Representative Farmer asked if there are enough people graduating from high school and going into the pipeline for Kentucky to achieve its goal of doubling the number of college graduates by 2020.

 

Dr. Applegate said there are not enough traditional high school students to meet the goal of doubling the numbers. He said Kentucky has to reach out to its half million adult learners that have some college in order to reach the numbers.

 

Dr. Hayek discussed trends in college cost. He said that Kentucky’s in-state tuition is higher than the SREB average in both two and four year sectors. He also said Kentucky’s tuition is higher than the national average in the two-year sector.

 

Dr. Hayek said tuition in Kentucky has increased at about three to four times the rate of inflation. He said the average five-year increase in the Kentucky median family income is only 2.9 percent, lower than the rate of inflation. He also said productivity and quality has increased significantly during this period. Kentucky is no longer a low-tuition state, and is now above the national average.

 

Representative DeCesare asked what percentage of college costs are fee based. Dr. Hayek said it depends upon the institution. Sometimes, fees are broken out individually, and other times fees are bundled into the overall tuition rate.

 

Representative DeCesare asked what percentage of fee based numbers they used for their chart presentation. Dr. Hayek said it depends upon the institution, but he can provide him with a chart of how the fee numbers have changed over time. Ms. Heidi Hiemstra, Senior Associate, Research and Analysis, CPE, said she would estimate the fees as being less than ten percent of the cost.

 

Senator Borders asked what is attracting the part-time student to Kentucky. Dr. Hayek said it partly because they are the lowest numbers of students so a small increase can make a big difference.

 

Dr. Hayek discussed how students are paying for college. He said many get grants and subsidies from federal and state governments, as well as from institutions. He also said some grants are need-based and others are merit-based, while some student subsidies come through the general fund appropriation to the institution. Other students utilize past income, current income, future income, and in-kind help.

 

Dr. Hayek said there has been a significant growth in nonfederal student loans, unsubsidized Stafford loans, education tax credits, and institutional grants over the past ten years. There has also been significant growth in non-need-based grants as proportion of all state grants over the past ten years.

 

Dr. Hayek said the average debt of a Kentucky graduate is $15,000 according to a report from the Project on College Debt. He said 45 percent of full-time undergraduates borrowed money in 2005-2006, while 4,200 students borrowed more than $10,000 in one year.

 

Dr. Hayek noted that 55 percent of full-time Kentucky students do not borrow any money to attend college, but the students who do borrow, tend to borrow more than $10,000 in one year. He said when students are borrowing at high rates, and accumulating annual loan debt, this greatly diminishes the ability to pay off the loan in a reasonable amount of time.

 

Dr. Applegate said getting low-income families, such as the GearUp students, to apply for a loan for college is a challenge. He said it is difficult enough to get the students interested in college, much less ask them to borrow money to attend.

 

Representative Rollins said students who obtain private loans to attend college need to graduate. Otherwise, a student is probably still in a low-paying job and having to pay back student loans.

 

Senator Borders asked how much more college graduates earn than high school graduates. Dr. Applegate said there have been studies completed on the benefits of having a college degree by state. In some states, a college degree can mean significantly more earnings, and in other states, not so much.

 

Dr. Hayek discussed the differences in funding for students to attend the comprehensive institutions, research institutions, KCTCS colleges, and the independent institutions. He said the independent students have lower incomes on average and higher federal grant aid and higher loan volumes. Part-time students tend to use federal grants as the primary source of aid. He said FASFA non-filers have limited data available. They do receive aid from KEES and institutional grants, and have substantially more out-of-pocket costs.

 

Dr. Hayek said college affordability in Kentucky is a net price, not a sticker price, and determines financial burden. He said paying for college involves prioritizing and making sacrifices, and it is hard to determine who is not attending college because of cost. It is known that a large portion of state and institutional grants are not targeted at low-income students, and there is a considerable reliance on loans at public universities that results in substantial student debt. He also said many students do not apply for aid and a growing number of students are taking online courses.

 

Representative Embry asked what percentage of students is beginning to take college courses online. Dr. Hayek referred the question to Mr. Allen Lind, Vice President, Information and Technology, CPE.

 

Mr. Lind said the number of students taking courses online is growing substantially and over 17 percent of all students have at least completed one course online.

 

Representative Rollins asked how many students take a significant portion, such as half of their coursework, online. Mr. Lind said the fastest growing segment of students taking courses online is the students who are taking all of their courses online.

 

Representative Rollins asked if these courses online were bachelor degree or associate degree programs. Mr. Lind said both associate and bachelor degree programs are offered online.

 

Representative Rollins asked if high school students can take the college courses online. Mr. Lind said there are dual enrollment colleges in high schools and the Kentucky Virtual High School offers courses online for college credit.

 

Dr. Applegate discussed several policy options for the future. They are: provide adequate state appropriations with reasonable increases in tuition and financial aid; increase financial aid for low- to moderate- income students; commit early to fund gaps in college affordability for low-income students; protect against unmanageable student debt; align state and institutional funding with policy goals; and simply process and communicate real costs (current and future) and benefits of attending and graduating from college.

 

With no further business before the committee, the meeting adjourned at 11:50 a.m.