Testimony of University System of Maryland

Chancellor William E. Kirwan

Senate Bills 750 and 753, and Senate Joint Resolution 8

Senate Budget & Taxation Committee

March 9, 2005

Thank you for the opportunity to comment on Senate Bill 753 (Access to Quality in Higher Education Act of 2005), Senate Bill 750 (Higher Education - Tuition Limitation Based on Adequate Funding), and Senate Joint Resolution 8 (Higher Education - Commission to Study Maryland's Commitment to Higher Education). In various ways, these bills seek to reaffirm higher education as a priority in Maryland, and to promote our shared goals of affordability, accessibility, quality, and predictability.

I want to start by thanking the sponsors of these bills for their clear intent to advance the cause of higher education in Maryland. I also want to thank the members of the Education, Business and Administration Subcommittee, the full Committee, and the entire General Assembly -- for the support you have given us over the past few years. Even when the State was unable to provide financial assistance, you worked with us to improve our ability to manage our institutions. We are very grateful for the support you have shown.

Last year, I testified before this Committee and shared with you a resolution that was unanimously adopted by the Board of Regents in December 2003. That resolution outlined a compact between the University System of Maryland (USM) and the State to promote the goals of affordability, access, quality, predictability and accountability. I believe this resolution continues to reflect the Board's views on access, affordability and quality. I am very pleased to appear before you a year later to report that progress has been made. The Governor's FY 2006 budget proposal provides a substantial boost for USM, and USM institutions have been able to mitigate tuition increases as a result. USM is grateful for the Governor's investment and this Committee's record of support for USM, and we hope you will approve the Governor's budget request.

Many efforts are underway to meet the goals of affordability, access, quality and predictability outside of the legislative process. For the record, I would like to take an opportunity to review the System's contributions to these efforts, which are very consistent with many of the policy goals outlined in the bills under consideration by this committee.

Affordability. For the past two years, the Governor has proposed an increase in State funds for need-based financial aid. The General Assembly approved this request last year and, hopefully, will support the Governor's allocation of new funds for that purpose this year. State investment in need-based aid is an important tool in combating increased tuition costs in a difficult fiscal situation, and Maryland has been ahead of the national curve on this issue. Additionally, late last year the USM Task Force on Financial Aid, which was chaired by Treasurer Nancy Kopp and included members of the General Assembly and the Administration, completed its work. A key recommendation of that Task Force is to focus more institutional financial aid on need-based aid, with an overall goal of reducing the debt burden on our neediest students.

Most importantly, the Governor's FY 2006 budget proposal enabled the Board to hold tuition increases to less than 6%. This increase was well below the double digit increase that would have been necessary without State support.

Predictability. A major goal of these bills is to provide students and their families with information that will allow them to plan for the future cost of tuition. This summer, the Board of Regents and the USM institutions will be finalizing a new system of four-year tuition plans. This planning tool will estimate the tuition level at each institution for the next four years, based in part on a certain assumption about the level of support that will be provided by the State.

This approach does two very important things. First, it lets students, their families, policymakers, and the public know what students can expect to pay for higher education during the upcoming four years, if the assumptions regarding State contributions come to fruition. Second, it accomplishes the goal of this and other bills to connect State appropriations and tuition rates, without circumventing the statutory responsibility of the Board of Regents to set tuition rates for USM institutions.

A statutory cap on tuition is an issue that concerns the Board. Besides the fact that a statutory cap restricts the Board's autonomy, a cap may be received unfavorably by the bond rating agencies. The current process already allows the Governor and the General Assembly to review the annual tuition decisions made by the Board, and affords policymakers the opportunity to adjust general fund revenues and tuition revenues if there is strong disagreement with the Board's decisions. The Board's new four-year tuition policy will require institutions to state what tuition will be at a given level of State funding, well in advance of the Governor's submission and the General Assembly's approval of the budget. In good fiscal times and bad fiscal times, the Board has demonstrated an ability to make responsible decisions on tuition that reflect the level of State funding and the needs of each individual institution. For these reasons, I urge the General Assembly to refrain from reversing its recent efforts to increase USM's autonomy. We believe there are adequate controls and opportunities in place that enable the General Assembly to address any concerns it may have on tuition levels at USM institutions.

Capacity. The Board of Regents is very concerned about the capacity of our institutions to accommodate the anticipated increase in enrollment. As this Committee knows, the Board's recent Effectiveness and Efficiency effort included many policy changes designed to increase the capacity of our institutions.

Overall, our E&E initiative will allow USM to achieve $17.1 million in cost avoidance, and will create space for 2,100 new students over the next 3 years at no additional cost to the State. This represents approximately 20% of the expected enrollment growth during that period and an additional savings of $9.6 million for the state. How is this accomplished? By fundamentally changing our administrative and academic operations - streamlining administrative processes; increasing faculty workload where appropriate; limiting degree requirements to 120 credits; utilizing classroom space during non-peak periods, like Fridays; increasing the emphasis on online learning and out-of-the-classroom credits; and strategically allocating enrollment growth among USM institutions. The E&E efforts will help. The Board and I are concerned, however, about the System's ability to meet enrollment demands and to provide an affordable, high quality education to all qualified students without predictable and substantial assistance from the State. Some type of future funding plan that contains a consideration for enrollment growth would be of enormous benefit to us in planning for the future and in our ability to provide our students with a sense of predictability on tuition. This is an approach the State has embraced in funding K-12 education as well as in funding private colleges and universities and community colleges. It is also an approach that is used as a factor in funding higher education in other States, such as California, Texas, and New Mexico. This element is a very attractive feature of SB 753.

As I testified to last year, USM is not in a position to dictate the "correct" approach for Maryland. Major policy decisions regarding funding mandates and acceptable revenue sources are appropriately the prerogative of the Governor and General Assembly. Nevertheless, I felt it important to be here today to offer comments that, hopefully, are helpful to you and to assure you that the funds the State Maryland invests in USM will be well managed; will be used to help keep higher education affordable; will be used to meet our statutory mandate to build high quality institutions; and will be used to provide education to as many Maryland students as we can accommodate. Most importantly, I am here to reaffirm the Regents commitment to State policymakers in December 2003 - USM wants to be a good partner with the State in meeting our mutual goals of affordability, access, and quality, and predictability. We are committed to work with the Governor, with this Committee, with the General Assembly and with the public to reach a consensus towards these ends.

Higher education funding is a difficult issue. In many States, public higher education is the largest discretionary item in the State budget, which makes it a vulnerable item when fiscal problems exist. Some States have added references to higher education funding in the State Constitution, most notably North Carolina. Other States include a funding factor for enrollment growth. Some States, such as Michigan, have chosen a high tuition/low State-support model while giving the public higher education institutions significant management autonomy from the State. States like North Carolina and California, on the other hand, have a history of providing substantial State support to mitigate the cost to students.

The past few years have been difficult for State governments and public higher education institutions across the country. In Maryland, there has been much debate over how we meet our goals for higher education. Fortunately, there is a consensus amongst the Governor, the General Assembly, and USM students, staff and administrators that reinvestment in higher education is essential.

Considering the lack of consensus regarding how Maryland should move forward, the Commission idea in Senate Joint Resolution 8 may be the preferred option at this time. It would be my hope that in such a forum Maryland policymakers could arrive at a consensus plan for the future of higher education. USM pledges to work with the Commission to help develop such a plan.

Thank you for the opportunity to make these comments. I would be pleased to answer any questions you may have.