A Proposition They Can Refuse?

January 14, 2008

On Thursday, with a $14.5 billion deficit looming, California Governor Arnold Schwarzenegger declared a fiscal emergency and proposed 10 percent cuts across the state budget. The deep cuts proposed for the state’s public education system would require lawmakers to suspend Proposition 98, a 1988 measure that sets aside about 40 percent of the General Fund revenues for K-12 and community colleges.

Against that backdrop, California voters will head to the polls in early February to decide whether a certain proportion of that allocation should be strictly reserved for community colleges – and whether California’s fees, already the lowest in the nation, should be reduced from $20 to $15 a credit hour and essentially locked in at such low rates. California's 109 community colleges serve more than 2.6 million students.

“It continues to evolve, the political climate around the initiative. I think initially, when this initiative was first put together, there was a feeling that there would be a lot of support,” said Marilyn Grinsdale, a government relations officer for Citrus College, a community college in California's San Gabriel Valley. “As the budget situation has gotten worse, I think people have suddenly started thinking, ‘We’re afraid we won’t get what we need.’”

“There has been, much to community colleges’ dismay, some opposition coming in from other systems.”

California’s controversial Proposition 92 has pitted the various components of California’s higher education system against one another. Among its supporters are the Community College League of California and community college chancellors, presidents and trustees. Among its opponents are the California State University and University of California Systems, and the powerful California Teachers Association. (Although CTA's statewide affiliate, the Community College Association, broke from its parent organization to support the initiative). The debate has largely denigrated into a turf war: “Proposition 92 if passed could result in unintended problems that will negatively impact the CSU and threaten funding for other critical California programs," CSU says in its statement. “Proposition 92 requires more state funding and reduces student fees for one segment of higher education without regard to the needs of all of higher education. Since it does not create or identify any new revenue sources, unprotected state programs such as UC and CSU would be competing for a smaller share of available General Funds,” UC’s regents said in theirs.

But beyond concerns that tying up a certain portion of the state budget for community colleges could leave other money seekers out in the cold, several higher education policy experts raise real questions about the wisdom of the proposition and its many moving parts.

Proposition 92 is a multi-tentacled organism. In terms of state funding, it unties the community college funding formula from K-12 enrollment. Under current law, a pot of money is reserved based on K-12 enrollment for community colleges and the K-12 system -- therefore community college enrollment doesn't play a role in determining the allocation. Proposition 92 would create a separate pot of money for community colleges, generated by a formula that considers inflation, the young adult population and the state’s unemployment rate (but not, its critics point out, actual community college enrollment. This analysis from the California Budget Project finds that the proposed formula generally overestimates enrollment growth). Proponents argue that this action will create a stable stream of funding for community colleges.

Proposition 92 also alters the governance system, stacking the gubernatorially-appointed Board of Governors with more representatives from community colleges. Again, as the California Budget Project analysis points out, it increases the size of the board from 16 to 19, creating new spots for a community college student, faculty member, and nominee of the state organization representing presidents. It limits the pool from which the governor can appoint candidates, meaning "a majority of the Board of Governors would be present or former stakeholders in the community college system."

And, in addition to limiting fees to $15 a unit (for $450 for a full academic year, compared to $600 currently), it strictly limits future fee increases and requires that they receive the approval of a two-thirds majority of both houses. The legislative analyst document laying out the ballot measure’s impacts estimates that Proposition 92 would result in an increase of state spending of about $300 million per year through 2009-10 ("with unknown impacts annually thereafter"). At the same time, the community college system would stand to lose around $70 million in fee revenue annually.

(The $300 million revenue estimate is premised upon the assumption that Proposition 98, which Proposition 92 is tied to, isn't frozen by lawmakers during a budget crisis, as is the expectation this year).

“I think it’s a bad idea for the community colleges, to be honest,” said Patrick Murphy, a professor of politics who has written about community college finance and the director of the Leo T. McCarthy Center for Public Service and the Common Good at the University of San Francisco. Among his concerns: that the use of "ballot box budgeting" to fence off money for whatever purpose, no matter how noble, represents bad public policy; that decreasing California’s fees would only subsidize students who can already pay while decreasing community college revenue, and that the proportion of money will be seen as a ceiling by state lawmakers, not a floor for an $8 billion system that in a perfect world could use up to another $8 billion, not $300 million, more. Also, Murphy pointed out, by essentially locking in fees at such low rates, the colleges deprive themselves of extra revenue they could reap in the future.

"The timing probably couldn’t have been worse. They’re coming out now where the governor just said we’ve got a $14 billion deficit and we’re going to cut everything 10 percent – it really looks like [they’re saying] ‘We’re going to get ours," Murphy said.

“If it passes," he said, it may be a situation where, "be careful what you wish for. They have gotten themselves absolutely no friends” and legislators are going to remember, he said, that “in times of crisis, you guys were ones who struck out on your own.”

A Clash Over Fees

Scott Lay, president and chief executive officer of the non-profit association, the Community College League of California, and a co-author of the proposition, cited the $525 million cuts to community colleges proposed by Governor Schwarzenegger last week as evidence of why Proposition 92 is needed. “Everything’s on the table that we’ve been warning people about,” said Lay. The league’s preliminary analyses suggest that dropping class sections to absorb the cuts could result in about a 2 percent drop in enrollment system-wide.

And over the next few years, without the proposition, “We’re going to turn away 114,000 students. That’s the mismatch between available funding and projected enrollment in the next three years," Lay said. Budget deficits aside, he said the proposition is needed in part because, given that their funding is currently tied to K-12 enrollment growth, community colleges are poised to suffer as K-12 enrollment drops in upcoming years – even if community college enrollment grows.

“It tries to respond to a genuine concern, which is trying to secure adequate support for community colleges,” Patrick M. Callan, president of the San Jose-based National Center for Public Policy and Higher Education, said of Proposition 92. “And then it just overshoots.”

Central among the concerns is the perennial debate over the low-fee model versus high (or at least higher) fee, high-aid approach. In a 2007 study released by the National Center, William Zumeta and Deborah Frankle found that fees represent less than 5 percent of the total cost of attendance for California community college students – and about 52 percent of full-time students have their fees waived based on financial need. They point out that California students are missing out on Pell Grants and other forms of federal aid (only 15 percent of California community college students enrolled for credit receive Pell Grants, versus 25 percent in other states, while 6 percent of California students receive federal loans versus 17 percent nationally). They argue that fees should actually be modestly increased, and matched with an increase in state appropriations.

“What would help needy students a lot more would be to increase financial aid for them,” added Nancy Shulock, director of the Institute for Higher Education Leadership & Policy at California State University at Sacramento. Given that the proposition is premised on the argument that there are inadequate resources for the community college system, Shulock -- who stressed that she was not taking a position on Proposition 92 -- said “it seems counterproductive to have a provision of the proposition that deprives the system of much-needed resources and doesn’t help needy students because they [already] pay no fees.”

“California has for years really been an outlier with respect to all 49 other states about what fees are….The reason dates back to when community college education was free and California has a huge value on education and believes with very good reason that the tradition in the state of low-cost public higher education helps make, if not made, California the competitive behemoth that it is,” said Shulock.

But, as a result, “In this state, community college fees are not seen as a source of revenue; they’re just seen as a barrier to access. Other states, rightly so in my view, see that fees generate revenues. It’s a fact,” Shulock said.

Proponents of the initiative point to a dramatic, 300,000-student drop in enrollment in California community colleges coincident with the rise in fees from $11 to $26 per credit several years ago (they've since been lowered back to $20). The Zumeta and Frankle paper does find that along with the fee increases came an 8 percent decline in overall enrollment (and 2 percent decline in full-time equivalent students) from fall 2002 to fall 2005. But the authors also identify other factors, including reductions in course offerings due to budget cuts, and point out that enrollment declines began after sections were dropped and before fees were increased.

Yet, Stephen G. Katsinas, director of the Education Policy Center and a professor of higher education administration at the University of Alabama, said that he was not a supporter of the high-tuition, high-aid model: “It flat doesn’t work.”

“From a policy perspective, any policy that keeps tuition and fees low to open the door to higher education and to keep the door open wide is a good thing. State legislatures never fully fund student aid, particularly in bad economic times.”

And Katsinas, who added that he hadn’t been tracking the progress of the initiative, said he certainly understands the impetus nevertheless. His center’s preliminary analysis of federal Integrated Postsecondary Education Data System (IPEDS) numbers finds that the state of California's share of operating expenditures for community colleges fell by 19 percent in 20 years, from 53 percent in fiscal year 1986 to 34 percent in fiscal year 2006.

“It’s not surprising to me that proponents of community colleges would want to support a ballot initiative that would preserve access and tie funding to access, and that’s a good thing,” Katsinas said.

Access and Everything Else

“The proponents of this initiative bill it as a chance for every Californian to go to college. I find that such hyperbole -- a $5 fee reduction," said Mary Gill, a higher education consultant for the No on Prop 92 Campaign who formerly served as interim vice chancellor for government relations for California's community college system. The extra $60 to $75 they'll save on fees a semester, she said, "won’t even buy a new textbook.”

But while she feels the proposed fee structure detracts attention from financial aid opportunities and perpetuates a myth that access has been achieved when it hasn't, ultimately, Gill said, Proposition 92 is "not about fees....The fee decrease is the best way to get young voters to say yes to an initiative that’s got many, many, many other provisions.”

The proposition's proponents, however, point out that community colleges are serving California's most economically disadvantaged. It really is about access, they say. By locking in spending, as K-12's powerful lobby already has successfully accomplished, they want to ensure that the state -- not the students -- continues to cover the majority of the costs of a community college education.

Fees in California are "an indirect tax to offset the state appropriation," said Bill Hewitt, president of the Board of Governors for the Faculty Association of California Community Colleges, a membership-driven professional organization.

“If it fails and it goes down, from my point of view that would be sad," Hewitt said of Proposition 92. "Because I expect the next thing that will happen is the state will continue to want to balance the growth of the community colleges on increased tuition which I think is going to inhibit enrollments and certainly deny access.”

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