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College Opportunity 2006: Connecting Policy with Practice

Ronald Reagan Building and International Trade Center

Thursday, April 6, 2006

Good morning. It is a pleasure to take part in this important discussion on making college both more accessible and more affordable. I commend the National College Access Network and the Council for Opportunity in Education for sponsoring today's meeting. In many ways, your two organizations have been "ahead of the curve" in recognizing the inextricable interconnection between college cost and college participation. Thanks in part to your efforts, we in higher education are at long last beginning to recognize that we have a crisis in our country regarding college access that we simply must address.

As you know, part of the reason for the crisis is that we have seen a systemic and sustained decline in the rate of investment in higher education at the federal, state and local levels. In the mid-to-late 1970s, as a nation, we invested more than $10 for every $1000 of personal income in higher education. Today that investment stands at about $6 for every $1000 of personal income. That's a whopping 40% decline in the rate of investment over this period. As a result of this decline, state investment on a per full-time student basis has declined 13% since 1990. Per student state funding is an important measure because we look at costs to the student on a per student basis and per student state support is the best way to show the tight connection between the level of state investment and tuition. Unfortunately, the disinvestment trend has accelerated in recent years due to rising healthcare and energy costs, and mandated spending for primary and secondary education. According to a recent SHEEO Report, public investment on a per student basis was about $7100 in 2001. Last year, it was $5800.

As I just suggested, the flip side of the declining rate of public investment is rising tuition rates. Over the period from 1990 to today, the proportion of public college budgets coming from tuition has risen by 50%. And, as this group knows all to well, the cost of a college education is becoming an insurmountable obstacle to attendance for too many students. A recent report form the Advisory on Student Financial Assistance estimated that there were more than 150,000 college capable students who did not attend college last year because they simply couldn't afford it.

For the first time in our nation's history, we are developing an education deficit in relation to rest of the industrialized world. There are warning signals that, if not addressed, could lead to the demise of the US as the world's leader in knowledge creation and dissemination, especially in science and technology. If this were to happen in this era of the knowledge economy, it would surely mean our demise as the world's economic super power.

A few decades ago, we were the leader in high school completion rates and in the college participation rates of high school graduates. Today, we rank seventh among industrialized nations in high school completion rates and ninth in post secondary participation rates. And, we are the only industrialized nation with a declining college participation rate. Our middle and high school students rank near the bottom among all industrialized nations in math and science achievement.

Perhaps some of you have heard a statistic that troubles me greatly. Take 100 eighth graders today and ask, given current high school completion rates, college participation rates, and college graduation rates, how many will have a college degree in 10 years? The answer is shocking - it is 18!! That's 18 out of 100. I ask you, what will those other 82 kids be doing in the America of 2016?

In an economy that puts a premium on a skilled workforce, creativity and innovation, these trends - if unchecked - do not bode well for our nation and its global competitiveness and economic security in the decades ahead. I hardly need to dwell on this point with this audience.

Beyond the impact on our economic and global leadership, we must also recognize that in this information age when the doors to higher education are closed, the American Dream of upward mobility is short circuited. Gone probably forever are the days when a high school degree alone is an adequate credential for a financially secure career. Consider that a child in a family earning in the top quartile has an 80% chance of earning a college degree; a child in a family in the lowest quartile has less than a 10% chance of getting a college degree. In today's world, high ability low income students attend college at the same rate as low ability, high income students. Given the importance of higher education for success in today's world, it is no exaggeration to say that unless this dynamic changes, we will create a large, permanent underclass in our society that not only undermines the ethos of America as the land of opportunity, but may ultimately become a serious threat to our democracy.

Clearly, in terms of both access and affordability, there is a tremendous "disconnect" between public opinion and public policy. On the one hand, people recognize the importance of higher education in today's world as a means of personal advancement Ask any parents and they will almost certainly say that they want their child to get a college education. On the other hand, there is collective attitude that views higher education as more of a "private benefit" than a "public good." This manifests itself in public policy that expects individuals to pay a larger and larger share of the cost, since individuals will be the ones accruing the benefit of the education. What we've lost in this country is the sense of higher education as a "common good" ...the view that we are all better off if every qualified student has a chance at an affordable, high quality higher education. This attitude of higher education as a common good was reflected in the creation of the G.I. bill following World War II, and in the establishment of the Pell Grant program, which at its inception back in the 1970's paid for more than 80% of the average cost of attendance at a public university in America. Today, when higher education is viewed as more of a private benefit, it pays less than 40% of the average cost of attendance.

Recapturing the sense of higher education as a common good is a huge task but one that needs urgent attention. From my perspective, there are a few key things we in higher education can do both to bring the public around on the need to make higher education more of a funding priority and to work within existing parameters to improve access and affordability for those most in need of our help.

On the issue of repositioning public opinion . . . one thing we must do is recapture the public's confidence in our stewardship of public funds. Let's be honest, there is a sense that higher education does not "get it". At a time when sensitivity to cost is so acute that productivity gains are the standard by which success is measured in most sectors of our society, higher education across the country operates under an obsolete model. Educational expenditures at most flagship public universities are rising about 5% annually, driven mostly by double digit or near double digit increases in tuition. We're in an economy where inflation is increasing at about 3% a year and seems to be entrenched at that level. So we have an educational model that simply isn't sustainable in its present form over the long haul. We cannot continue indefinitely with rising costs that are out of line with the overall increase in expenditures in our society. We in higher education must make a firm commitment to act as cost-conscious, cost-effective stewards of our funds, regardless of the source. We must find ways to control the growth of our costs.

Now that's an almost blasphemous statement for someone in higher education to make. Cost consciousness is not in our DNA individually or institutionally. In fact, despite their image as hot beds of liberalism, when it comes to change, universities are among the most conservative institutions in our society. Of course, higher education is not a private sector industry. We can't be held to the same kinds of expectations for cost containment as the business world. Teaching classes of 1000 students might lower costs, but it would have a negative impact on quality. Nevertheless, we in higher education cannot continue to operate ignoring the environment in which much of the rest of the world operates. Furthermore, controlling cost has reached the level of a moral imperative given the issue of access as a function of affordability.

To address this issue in Maryland, the USM launched an effort 18 months ago that we call our Effectiveness and Efficiency Initiative (E&E). E&E is Maryland's concerted effort to see what we could do about controlling the increase in our costs. It has involved the Board of Regents, our presidents and me, as well as faculty and staff from across the System. We are systematically looking at our academic and administrative processes to see how they can be reengineered to operate at lower cost without impacting quality. Today, if you walk onto any of our campuses and mention E&E, you'll get a reaction . . . not always positive to be sure, but you'll get a reaction. It has become part of our culture.

On the administrative side of the house, we did some fairly obvious things that, for whatever reason, had never been done before in Maryland, nor dare I say at most other universities in America. We began using the system as a universal purchasing agent rather than leaving that function to individual campuses. You would be amazed about how much we were able to drive down the cost of software products, computer equipment, etc. Our biggest saving came from purchasing energy as a collective. Given what is happening with energy costs, there has been a huge savings for the system with that. We are also beginning to consolidate backroom operations into single service centers for the entire system. Auditing, financial aide, a lot of things that are sort of invisible to the educational effort but necessary to carry out the work of the university mission, are now being done in a more centralized way.

On the academic side, we looked at time to degree and discovered that many traditional majors had experienced "credit creep," so that majors that required 120 credits in previous decades, now required 130 or more credits...increasing the time to degree and the cost to our students. The board established a policy that stipulates 120 credits as the maximum allowable except for a small number of majors where accreditation requirements mandate more. The board also established a policy that on average students must earn 12 credits outside the classroom. These credits could be earned through advanced placement credit, study abroad, internships, or any other faculty approved means of gaining credit. This policy increases our capacity to serve more students at little or no increase in cost. We also increased faculty teaching responsibilities on average by 10%. This has decreased expenditures on part-time and adjunct faculty. We've also done some very creative things with on-line education in partnership with the community colleges that enable students to complete a four-year degree without ever leaving their communities and at much lower cost for their education than the average across the system.

All told, over the past two years since we have started this initiative, we've taken $40 million out of our costs. Now these aren't numbers we dreamed up. These are an audited $40 million worth of costs taken out of our operations. These savings dropped to our bottom line and have helped hold tuition increases down.

Our E&E initiative received such a positive reaction both in the media and the state capital, that last year the governor specifically cited our E&E efforts as one of the key reasons why the USM was receiving its first budget increase in several years, 6.2%. We have accelerated our efforts and received an even greater increase this year, 12.5%. In fact, with this increase, we were actually able to freeze tuition rates for the 2006-2007 academic year.

I use these examples to illustrate my point that if we in higher education take the lead in cost control, efficiency, and effectiveness . . . then we're going to have the chance to restore public trust and justify an increase in public investment. Ultimately, if America is to continue to lead in the global economy, an infusion of public funds into higher education is essential. However, it is reasonable to assume that, as a first step toward better funding, we need to demonstrate our commitment to cost-conscious actions.

Furthermore, I want to stress that these cost containment efforts should be very visible and public. When higher education steps forward and leads the way as cost-effective, cost-conscious stewards of our funding, and when we form internal and external partnerships to better meet the needs of the students we serve and the businesses that drive our economy, we have to make sure the public is aware of our actions because they demonstrate our willingness to lead the way in addressing the issues of access and affordability.

The second area that demands our attention in higher education is financial aid. To be blunt, I think recent trends in the use of financial aid are a travesty. Traditionally, financial aid was aimed at students who would otherwise not be able to afford college. With the introduction of the HOPE Scholarship Program in Georgia and its counterparts in other states, there was a turning point. Over the past decade, need-based aid has seen a relatively modest increase across the country while merit-based aid has virtually exploded. There is a report coming out that will show that at many leading publics, more than half of institutional aid goes to non-means tested merit aid. For any particular institution, non-means tested merit aid can make sense; it helps attract talented students, it rewards academic achievement, and it improves rankings by US News and other rating entities. The fact is, however, that most of the students receiving these scholarships are already college bound, it is just a matter of where they will go. I am certainly all for recognizing merit but it should be done in addition to, not at the expense of, students where cost makes the difference in whether or not they can attend college.

To make matters even worse, many of these HOPE-like programs are funded through state lotteries, which have been proven to be a regressive "tax" on the poor. So, we actually have what I consider to be a morally indefensible situation where low-income families are subsidizing the higher education of middle and upper income families.

Two years ago, we launched a study of the USM institutions to examine our use of financial aid and we didn't like what discovered. We found out that we were just as guilty as most of the rest of higher education of paying too little attention to our financially neediest students. We discovered that our poorest students were graduating with 25% more debt than the average student. We decided that we could not allow that to continue, As a system, we established a new policy, which says that by fiscal year '09, the lowest income students must graduate with 25% less debt that the institutional average. This is a requirement at every one of our campuses. And, it is just one of several policy changes that have resulted in a huge increase in financial aide for those who need it most. The average across the system is a 30% increase in need-based aid for next year. We've also worked with the Governor to increase support for need-based programs at the state level. During his first three years in office, the Governor has doubled the amount of need-based aid available to Maryland students.

This system-wide approach is being undertaken in conjunction with several campus-based programs. The University of Maryland, College Park has introduced its Pathways initiative, whereby low income students will receive grants from the university or the state instead of loans. Not only with this enable low-income students to graduate from college without accruing significant debt, but it will also serve as a signal to low-income high school students that higher education is accessible and affordable for them. Towson University has launched the 10% Scholars Program, which offers tuition-free admission, as well as a $4,000 annual scholarship, to students ranked in the top ten percent of their graduating classes in Baltimore City. This is a population of capable students that heretofore has had a very low college participation rate.

I close with an observation. As important as the steps I have outlined are . . . the fact is higher education cannot simply "manage" its way out of reduced support and growing enrollment. As important as it is to demonstrate our commitment to access and to holding down costs, we will not prosper as a nation in the decades ahead if we are not successful in our on-going efforts to convince the public that we need and deserve greater investment of public funds.

We need to remind the public that

  • The entrepreneurs that create jobs in the knowledge economy and the highly-skilled workers that fill them . . .come from higher education.
  • The teachers who educate our children from grade school through high school . . . come from higher education.
  • The doctors and nurses who provide our health care . . . come from higher education.
  • The medical and technological innovations that improve our lives every single day . . .come from higher education.
  • The breakthroughs in security matters that will better protect our nation and the world . . . .come from higher education.

Higher education raises incomes and lowers poverty . . . creates opportunities and solves problems...reduces barriers and elevates civic engagement. Higher education changes the lives of the people who will change the world.

These are the reasons why we must ensure access for all qualified students to a high quality higher education. Doing that is our best hope; one might say our only hope for building a bright future for America.

Thank you.