Winners and Losers in a Funding Shift

April 28, 2008

During tight budget times, states can expect increased scrutiny of their decisions about how to divvy up resources to public colleges. A common complaint in any economic environment is that flagship universities throw their weight around in statehouses and end up receiving a disproportionate share of public dollars, at the expense of the smaller colleges and regional campuses that arguably rely more on the funds.

That concern is being raised anew in Mississippi more than a week after the state's college board voted to gradually implement a new formula for determining appropriations to public universities. The formula gives the most weight to enrollment and program growth, which typically favors the state's larger institutions.

While some stress that the change unfairly penalizes historically black colleges and other small universities, which often lack the means (or will) to grow, several members of the state board said it's a necessary move that will ensure equitable redistribution of resources.

The Mississippi Board of Trustees of State Institutions of Higher Learning, which administers the state's eight public universities, has long relied on a constant percentage formula to distribute money. In other words, an institution receiving 10 percent of overall appropriations one year would receive the same share during the next cycle no matter the budget fluctuations or changes in its enrollment.

In recent years, Mississippi's universities have added thousands of students. From fall 2002 to fall 2007, for instance, the University of Mississippi grew by 17 percent, to 17,300 from 14,800 students. Most of the state's colleges also saw increases during that time, including Alcorn State University, a historically black college that grew from 3,150 to 3,700 students. But two institutions, including another HBCU, Mississippi Valley State University, lost students -- and others saw only marginal increases.

Some members of Mississippi's college board found it worrisome that at a time of declining or level state funding and diverging enrollment patterns, universities weren't being rewarded for adding students or making campus operations more efficient.

So in 2003, the board approved the formula that relied heavily on full-time enrolled student growth, with the idea of gradually implementing changes. But because of further drops in state funding, the program was put on hold.

The board began making so-called "equity adjustments" two years ago by giving money to Mississippi Valley State and the University of Mississippi for enrollment gains over several years. But the vote last week means the redistribution initiative will begin in earnest.

Over the next six fiscal years, universities will be rewarded not only for "student credit hours produced," but for number of faculty, number of majors, research expenditures, programs added and facilities operation costs. There's also a supplement set aside for colleges with 5,000 students or fewer.

Each year a university's share of the overall pot will be recalculated based on the above criteria and appropriations available from the state legislature. In fiscal 2008, roughly $384 million was distributed to the eight institutions, which have more than 70,000 students combined.

Projections are limited to one year, the board says, because of expected variable changes at colleges. Estimates are that the University of Mississippi will get a boost from roughly $80 million in fiscal 2008 to more than $82 million in the next cycle. Mississippi State and Jackson State Universities, for instance, both would receive the same amount as they did this year. Mississippi Valley State would see a slight drop, as would Alcorn State -- and there's no assurance that those universities wouldn't see even less money in future years as the plan is slowly adopted.

During the meeting, several board members expressed concern about how the formula treats the smaller institutions and historically black colleges. Bettye Henderson Neely, a board member, said that she had a "sick feeling within" about the changes, even though she understands the idea behind redistributing funds. "I don't feel real comfortable with what I'm about to vote on," said Neely, who was part of the unanimous vote in favor of implementing the formula.

Roy Estess, another member, said he's concerned that the supplement for small colleges won't be enough to offset changes that adversely affect them. "I just want to make sure that small institutions are being taken care of," he said. “My concern is people coming and asking, 'Why did you take money from the little boys and give to the big boys.' I'll make sure to explain that we’re not taking money but rebalancing, but it's going to be a real problem to explain.”

Several commissioners came to the defense of the formula and theory behind it, saying that the current disparity of appropriations per full-time enrolled students is harder to explain that changes brought about by the new distribution method.

Thomas C. Meredith, the board's commissioner, said during the meeting that spreading the implementation over six years will give universities that stand to lose money more time to adjust. He defended the formula as a way to promote productivity at the institutions.

"It's a difficult issue whenever you're talking about redistributing money," he said. "Equity and parity to some extend is critical in this regard."

Moses Newsome, vice president for research planning, community and economic development at Mississippi Valley State, who also serves as the college's government relations liaison with the Mississippi Legislature, said although the college would like to receive more funding, the board is making the "best of a bad situation."

"If we had full funding [as a state], we wouldn't have had to implement this," he said. "Since we didn't get anything over level funding, the board had to do something."

Newsome said the university stands to lose less than some of its peer institutions (a roughly $10,000 cut projected in fiscal 2009) because the formula rewards it for, among other things, graduate programs and for the way it makes use of the physical plant.

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