Interim Joint Committee on Education

 

Subcommittee on Postsecondary Education

 

Minutes of the<MeetNo1> 2nd Meeting

of the 2008 Interim

 

<MeetMDY1> August 11, 2008

 

The<MeetNo2> second meeting of the Subcommittee on Postsecondary Education of the Interim Joint Committee on Education was held on<Day> Monday,<MeetMDY2> August 11, 2008, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Senator Charlie Borders, 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 R.J. Palmer II, Elizabeth Tori, Johnny Ray Turner, and Ken Winters; Representatives Jim DeCesare, C. B. Embry Jr., Tim Firkins, Mary Lou Marzian, Reginald Meeks, Charles Miller, Frank Rasche, Tom Riner, and Charles Siler.

 

Guests:  Mason Dyer, Association of Independent Kentucky Colleges and Universities; Jo Carole Ellis, Edward Cunningham, and Becky Gilpatrick, Kentucky Higher Education Assistance Authority; Shelley Park, Eastern Kentucky University; Runan Pendergrast, Bluegrass Community Technical College; Jennifer Cosens, Kentucky Association of Student Financial Aid Administrators and Kentucky Higher Education Assistance Authority; Dave Cecil, Transylvania University; Amy Watts, Kentucky Long-Term Policy Research Center; Heidi Hiemstra, Council on Postsecondary Education; Steve Mason, Kentucky State University; and Wayne Young, Kentucky Association of School Administrators.

 

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

 

Senator Borders recognized the co-chairs of the Interim Joint Committee on Education and welcomed guests and committee members. He said this was the second meeting of a series of presentations relating to college affordability.

 

Senator Borders introduced Mr. Edward Cunningham, Executive Director and CEO, and Ms. Jo Carole Ellis, Vice President of Government Relations and Student Services, Kentucky Higher Education Assistance Authority (KHEAA), to discuss the funding, impact, and challenges and innovative alternatives of Kentucky State Financial Aid Programs. Mr. Cunningham said the issue of college affordability if a very critical matter to the Commonwealth and to the country. He turned the presentation over to Ms. Ellis who spoke to the subcommittee about student funding.

 

Ms. Ellis described Kentucky’s three major student financial programs. They include: the College Access Program (CAP) grant, which provides access to students with financial needs; the Kentucky Tuition Grant (KTG), which offers students with financial need a choice of attending an independent institution, and the Kentucky Educational Excellence Scholarship (KEES), which recognizes students based on Grade Point Averages (GPA’s) and ACT scores. As set forth in KRS 154A.130, nearly 100 percent of net lottery proceeds, minus $3 million for literacy initiatives, are earmarked for these programs, with KEES receiving 45 percent, and CAP and KTG receiving 55 percent. She noted that the current biennial budget in 2008-2010 did not meet that provision, and in effect, 78 percent of lottery proceeds were distributed to these programs, instead of 100 percent. She said while financial aid funding continues to flatten out, tuitions continue to rise at Kentucky universities.

 

Ms. Ellis gave an overview of the 2009-2010 biennial budget. She noted that KEES is fully funded for the next two years fluctuating between $91,785,500 and $93,048,400. The CAP fund decreased slightly, but is basically current level funded at $61,615,500 for the next two years. She said KTG funding is level funded as well at $32,800,000 in each year of the biennium.

 

Ms. Ellis said KHEAA includes unfunded need for the financial aid programs when compiling a budget request. She said unfunded need is defined by students who complete the Free Application for Federal Student Aid (FAFSA) form and are eligible for CAP and KTG funds, but do not receive those because all available funds have already been exhausted. She noted that unfunded need was not funded in the upcoming budget request. She also noted that only 78 percent of net lottery proceeds were collected for this biennial budget, which equates to 6,000 students each year not receiving CAP money and 1,500 students not receiving KTG dollars.

 

Ms. Ellis discussed CAP, KTG, and KEES student demographics. She said nearly 100 percent of the KEES recipients are under the age of 24 because KEES is earned in high school and the funds do expire five years after high school graduation. She said 31 percent of the CAP awards went to students age 24 and older. She also explained the differences between dependent students and independent students and financial aid distribution for CAP and KTG among those groups. A detailed summary of charts is provided in the meeting folder located in the Legislative Research Commission (LRC) library.

 

Ms. Ellis discussed the CAP and KTG grant 2008 projected disbursements and unfunded awards. She said $60 million was disbursed to 36,280 students for the CAP awards, but an additional 39,670 students were eligible but did not receive funds. She said 12,488 students received $32 million in KTG funds, while 5,422 students were eligible but did not receive funds. She noted the total funded disbursements equaled $92 million and the total unfunded awards were $73 million.

 

Ms. Ellis discussed the KEES awards and tuition increases. She said KEES maximum award levels have not been increased beyond what was provided in the enabling legislation in 1998. She said the average KEES awards disbursed have been flat for the last few years, but the average tuition and fees at universities have increased substantially.

 

Ms. Ellis discussed access initiatives in other states. She highlighted the Illinois Student Assistance Commission; the State Student Assistance Commission of Indiana; the Ohio Board of Regents; the West Virginia Higher Education Policy Commission; the State Council of Higher Education for Virginia; the Tennessee Student Assistance Corporation; the Missouri Department of Higher Education; and programs in Oklahoma, Maine, and Arkansas. Specific details are in the meeting folder located in the LRC library.

 

Mr. Cunningham discussed student loans and borrower benefits. He said Kentucky was very fortunate to have support from the legislature and the lottery to provide scholarships and grants to students within the Commonwealth. However, he noted that 71 percent of disbursements to Kentucky students are provided in the form of loans. He said the 71 percent does not contain some untrackable numbers such as federal direct loan numbers and loans from private sources such as credit cards and home equity loans, so the figure should be viewed as a conservative number.

 

Mr. Cunningham said the average student in Kentucky leaves school with just over $15,000 in debt. He said Kentucky is fortunate that it is a reasonably costed state because the national average student debt is about $19,000 per student. He said KHEAA provided 70 percents of the loans in 2007 to students in Kentucky and borrower benefits will continue to decline in future years in the Commonwealth.

 

Mr. Cunningham said there have recently been some federal initiatives to help address possible solutions to the financial aid demand. One initiative is House Resolution 5715, which ensures continued access to the Student Loan Act of 2008. He said Kentucky will be participating in this legislation with the Department of Education to the broadest extent possible. This legislation can provide Kentucky with the ability to participate in two programs at the federal level. One program allows the purchase of loans from lenders made or originated for the upcoming 2008-2009 academic year, and the other provides lenders with short-term liquidity to make loans with the option to sell loans to the Department. There are some expectations to meet in order to participate and there is a requirement to have bridge financing ahead of the request to the department for liquidity. He is confident that Kentucky can generate between the $400 and $500 million dollars needed to fully fund requests that KHEAA receives for education loans in the fall of 2008. He said they are waiting for the credit agency report due in the next couple of weeks before an official announcement is made to the institutions within the Commonwealth.

 

Mr. Cunningham discussed the loan forgiveness programs. He said highlights of the program include: incenting students to complete degrees by offering federal student loan forgiveness; targeting to certain high-need areas; not requiring the Commonwealth to provide front-end funding; ease of tracking and minimal administrative costs; Kentucky Higher Education Students Loan Corporations’ “Best In” programs have shown loan forgiveness programs are effective; and House Bill 1 passed in the 2007 Second Special Session created an engineering loan forgiveness program but has not been funded. He noted the program has not been funded to date and hopes to encourage four-year degree completion or completion of other specific degrees of study such as teaching and nursing.

 

Mr. Cunningham said KHEAA implemented a “Go Higher Grant” pilot program two years ago. It was designed to provide student aid to non-traditional, part-time students to encourage them to try higher education. He also said the anticipated result of the program would be that students subsequently take more classes and become eligible for other student aid programs like Pell, or possibly CAP grants. He said this program has recently been expanded to include more eligible students.

 

Mr. Cunningham said he is a member of the advisory board for the Adult Learner Initiative along with representatives from the Kentucky General Assembly. He said the initiative is being coordinated through the Council on Postsecondary Education (CPE) and includes a statewide review of policies that will affect adult students in an effort to increase the number of working-age adults pursuing a college degree. He said the initiative includes a working group on financial aid and KHEAA was pleased to provide the leadership role in this sub-group.   

 

Senator Borders asked for a motion to approve the minutes of the July 7, 2008, meeting upon a quorum being present. Representative Siler made the motion to approve the minutes, seconded by Representative DeCesare. The motion was approved by voice vote.

 

Senator Borders said while the energy problem will not be solved overnight, neither will the financial aid crisis. He also said there is nothing more important for Kentucky than to fund education adequately and ensure that every student has access to postsecondary education. He said there is strong evidence that the states that produce high levels of college graduates also have better economies.

 

Senator Borders is glad that Kentucky places an emphasis on need-based scholarships, but also wants students who can afford to pay their own way to stay in Kentucky and attend college. He is also very pleased about the adult learning initiative and feels every adult deserves a chance to make more than minimum wage and contribute back to society.

 

Representative Siler asked if there is any data that show the success of students in college that had high school GPA’s between 2.0 and 2.5. Ms. Ellis said she does not have the figures with her, but this has been researched in coordination with KEES scholarship recipients. She said 40 percent of KEES recipients lose their scholarship money in college because they are not able to maintain the GPA eligibility once they are enrolled in college. Representative Siler believes a 2.0 GPA is too low as a base for students to receive an award.

 

Senator Borders introduced Leah Stewart, Director of Student Financial Assistance, Northern Kentucky University, Runan Pendergrast, Chief Financial Aid Director, Bluegrass Community and Technical College, and Dave Cecil, Director of Financial Aid, Transylvania University.   He said they will be addressing institutional perspectives on college affordability, impact of federal and state policies, and innovative policy solutions.

 

Ms. Pendergrast said the job of financial aid administrators is to assist students with finding funds to meet their educational costs. She said one source of funding is state grant programs, but there has been no increase in the CAP grant maximum award over the last three years. She said the KTG grant has increased $100.00 over the last three years. As a result, it is increasing Kentucky students’ loan debt.

 

Ms. Stewart said students and families find student loan programs as a viable option to meeting college costs. She said all student loan programs have experienced growth during the last five years with the exception of the Parent Plus loan, which can be attributed to the increase of Parent Plus loan denials in fiscal year 2008, or to the fact that the interest rate was lower in 2006-2007 than 2007-2008. She said there has been a 22 percent increase each year in the loan volume since fiscal year 2004.

 

Mr. Cecil said research has shown that Kentucky’s three financial aid programs are good programs and they just need more funding. He said any student that applies in the fall of 2008 for student financial aid for 2009-2010 will receive a letter that funds have been depleted, thus making the needs for loans greater and acting as a barrier to getting students into college.

 

Mr. Cecil said in order to double the number of college graduates by 2020 then funding for the three financial aid programs needs to be doubled as well. He explained the proposed CAP, KTG, and KEES increases between 2010 and 2020 in depth. The total funding for the three programs would need to increase from $187.4 million in 2010 to $353.1 million in 2020. Specific details are located in the meeting folder in the LRC library.

 

Senator Borders asked if there is a problem with high schools failing to inform their students as sophomores, juniors, and seniors, what funds may be out there and how they should apply for educational funding. Ms. Pendergrast said she did not think that was the problem. She said many universities establish liaisons with high school guidance counselors to help them facilitate and communicate funding options for students. She also said that many colleges and universities have financial aid literacy programs throughout the year that are offered on campus as well as within high schools and the community at-large.

 

Representative Marzian said the amount of money that the financial aid directors are requesting in their proposal is not enough. She said policymakers have not kept up their end of the deal since 1997 when House Bill 1 was passed and universities were asked to double the number of students enrolled in college. She wants to find a funding mechanism to support education because she feels it is the number one legislative policy matter to make the state better as a whole.

 

Mr. Cecil said he feels the CAP, KTG, and KEES programs are good programs that work. He said the KEES program is an intervention program that starts in a student’s first year of high school for making good grades. He also noted that their plan does not add one new state worker at either KHEAA or CPE. Mr. Cunningham said current staff at these agencies will be able to administer the program and so any increase in funding will go directly to the students.

 

Representative Marzian said if tuition prices keep increasing at the current rate, increasing the financial aid amounts students receive in 2020 by $5,000 is not going to help when compared to inflation rates in 2020.

 

Senator Borders said as the chairman for the Committee on Appropriations and Revenue, he would caution that as new monies become available, priorities must be established as to which education programs will be expanded. He said legislative members tend to want to expand every single education program whenever new money is found and the top two or three funding priorities should be established.

 

Representative DeCesare thanked the group for presenting and for offering solutions along with the request for additional funds. He asked if the three presenters were speaking on behalf of all the private and public colleges and universities in the Commonwealth.

 

Mr. Cecil said he was chair of the committee that created the proposal and the committee was made-up of virtually every financial aid director and officer in the state. He said the proposal was accepted unanimously by the committee and every school in the state should have had representation on that committee.

 

Representative DeCesare said the proposal contains funding increases due to escalating tuition prices at local colleges and universities. He asked if any of the presenters had met or talked with the universities to see what help they can provide in containing tuition costs. Mr. Cecil said the financial aid organization has not talked with the universities about why tuition rates are rising.

 

Representative Rollins asked if 2007-2008 was the first year that the loan limits were increased at the federal level. Ms. Pendergrast said the federal loan limits will increase next year. Representative Rollins said the borrowing will increase substantially this year due to the loan limits being set higher. Ms. Stewart said she projects that there will be increases in the Stafford loan programs.

 

Representative Rollins asked which students do not receive CAP funding. Ms. Pendergrast said it is usually the students who apply after March 15 when the funds have already been exhausted. Representative Rollins said that probably includes community and technical college student applicants because these students tend to apply later for financial aid funding because they are independent students. Ms. Pendergrast said that was correct and those students also tend to be the needier students.

 

Representative Rollins said there are many students who Kentucky cannot track at all because they do not complete the FAFSA form. Ms. Ellis replied that there was over a 16 percent increase from 2007-2008 to 2008-2009 in FAFSA filers, but it is still unknown how many students are out there who did not complete the form at all.

 

Dr. John Hayek, CPE, spoke from the audience and said the CPE has the number of students who are not completing the FAFSA forms in a detailed affordability database and he will get the information to Representative Rollins.

 

Senator Winters informed the committee that the next meeting of the Interim Joint Committee on Education will be held at Campbellsville University, which is an independent university, and college affordability items will be discussed in that meeting as well. He also noted that many students attending independent colleges are not liberal arts students, but business and education majors.

Representative Riner asked if a student would still receive KEES money if he or she does not make the qualifying score on the ACT test, but does make the satisfactory score on the SAT. Mr. Cecil said the scores are converted and the student would still receive the KEES grant money if he or she passed the SAT, but not the ACT.

 

Representative Firkins asked why there are so many Kentucky students who are not getting the financial aid they need. Mr. Cecil said the funds simply run out and are exhausted by the time many students complete the forms. Representative Firkins said the legislature is going to have to make a stronger commitment to finding funds for education needs along with the General Assembly body doing a better job of prioritizing the utilization of its resources.

 

Senator Borders introduced Mr. Dave Adkisson, President and CEO of the Kentucky Chamber of Commerce. Mr. Adkisson introduced his staff, Allyson Hamilton, Public Affairs staff, and Diana Taylor, private consultant, who helps the chamber with  policy development work.

 

Mr. Adkisson said he represents the business community of Kentucky and is excited about presenting a specific proposal relating to college affordability. He said the Kentucky Chamber of Commerce shares the concerns about tuition increases and the concerns of the experts that advise us of how to address the rising costs. The Chamber sees a significant contradiction in what is happening in Kentucky with rising tuition costs and goals of doubling the numbers of college graduates adopted in 1997. He also said there is the real problem of students paying for college and then there is a perception of what college really costs with students normally thinking college is more expensive than it really is.

 

Mr. Adkisson presented the key recommendation from the business industry on a simplified, integrated student financial program that ensures affordability of postsecondary education for Kentuckians. He said it is called the Guaranteed Affordability Program (GAP) and is based on the principle of shared responsibility among students, families, postsecondary institutions, and government.

 

Mr. Adkisson said the GAP approach would include: a student contribution equal to earnings from a 40-hour work week during the summer and 10-15 hours per week during the school year at a minimum wage job; a family contribution as determined by the FAFSA process; postsecondary institution contribution from scholarships or endowment funds; and a state government contribution that makes up the difference between the sum of these contributions and the cost of attending a public university or community and technical college. He said the CPE would determine the cost of attendance at a public institution. The CPE would also be responsible for monitoring the program.

 

Mr. Adkisson said students attending Kentucky independent institutions would be eligible to receive an amount based on the “cost-of-attendance” at a public comprehensive university. He also noted that similar programs are being used in Minnesota and Oregon and the program is being studied currently in Indiana.

 

Representative Rollins said Minnesota implemented this program in the 1980’s, but have only 8 percent of people living below the poverty level, compared to 24 percent living below the poverty level in Kentucky, which will make the program much costlier to implement in Kentucky. He also talked about a student’s income contributing to college and said FAFSA takes into consideration a student’s income in its process of determining affordability so he believes the student’s contribution sounds a little high in the GAP approach.

 

Mr. Adkisson said the student contribution amount was recommended by consultants and agrees that some focused discussions would be useful in this area. He said a student should be expected to help pay for his or her college education.

 

Representative Rollins said he anticipates the cost of implementing the GAP program to be an additional $250 to $400 million in addition to what is already being distributed to the programs. He said Kentucky is third in the amount per student in aid that it provides and his biggest concern about the program is that he sees nothing in the GAP proposal that urges universities and colleges to control costs and tuition rates. He said as tuition costs rise, students, families, and state government will be expected to contribute more and he asked whether there should be a limit to the contribution expected of parents.

 

Mr. Adkisson said appropriate checkpoints would have to be put into place to ensure universities are not gaming the system. He is reluctant to put a dollar amount on the cost of implementing this system but believes it deserves a serious look by the legislature.  He said it did cost Oregon an additional $25 million extra over what they were already contributing to implement the program.

 

Representative Rollins said Oregon’s student contribution is 75 percent, which is considerably higher than Kentucky’s proposal. He also said universities should communicate with the public better on their specific ideas on how they want to control costs for Kentucky students.

 

Senator Borders noted that once students are arriving on campus, Kentucky universities need to do a better job of keeping them there. He said the drop-out rate continues to hover a little above 30 percent for college drop-outs.

 

With no further business before the committee, the meeting adjourned at 11:33 a.m.