College Funding Dilemma – Should Taxpayers Support Institutions or Students?

By Eric Boehm | PA Independent

HARRISBURG — Consider it the school choice debate for higher education.

If the state is going to spend taxpayer dollars — hundreds of millions of them every year — should those dollars fund the institutions of higher education or the students who are paying more every year to attend those institutions?

It’s a debate that some Republicans in the Pennsylvania General Assembly say the state needs to have as the budget for higher education spending gets squeezed tighter.

This year, Pennsylvania plans to spend more than $500 million on the four so-called “state-related” universities — Penn State, Pittsburgh, Temple and Lincoln — and another $412 million on the Pennsylvania State System of Higher Education, a collection of 14 smaller schools scattered around the state.

At the same time, the state is spending $361 million on student aid that is handled by the Pennsylvania Higher Education Assistance Agency, or PHEAA, which oversees student grants and scholarships.

So which is more effective?  And does it matter?

State Sen. Mike Folmer, R-Lebanon, chairman of the Senate Education Committee, raised the issue in a budget hearing last Thursday with the leaders of Pennsylvania’s four largest taxpayer-subsidized universities.

He asked them to gauge the effect of shifting state spending from a model that tries to fund both sides of the scale.

The university leaders were pretty clear about where they stood.

Dollars following the student instead of funding the institution would “undermine the system and compromise its quality,” said University of Pittsburgh Chancellor Mark Nordenberg.

“The net effect of that would be to seriously undermine the whole system of higher education and, ultimately, access for many in the commonwealth,” said Penn State President Rodney Erickson.

But Folmer says it is an idea that should be considered, particularly as the state budget is squeezed.

“I understand the needs of the universities,” Folmer said. “But we have to remember that those dollars come from taxpayers and we have to find the best way to spend them.”

Meanwhile, the costs of higher education keep increasing.

The state system is expecting a 2.8 percent tuition increase next year in their budget proposal, Garland said.

But the average student that graduates from one of those schools has $26,000 in debt, even with existing subsidies and taxpayer-funded student aid, and less than 35 percent of students graduate in four years.

Of course, in politicians’ perfect world there would be enough money flowing into the state coffers to adequately fund every line item and grant generous increases each year.  Then, the debate could focus on how much the state should spend in support of higher education at the student and institutional levels.

In the real world where state budgets are being crunched by mandatory cost increases like pensions and revenue growth that is not keeping pace, the lawmakers may soon be forced to weigh the costs and benefits of various funding schemes.

But it probably won’t be a major issue this year.

Gov. Tom Corbett and the leaders of the state’s largest publicly funded colleges and universities struck a handshake deal in which the state would promise level-funding for the schools in return for a promise that the school keep tuition increases “as small as possible.”

Funding to PHEAA was cut by about $37 million last year, but Corbett has proposed level-funding for next year’s budget.

The agency offers financial assistance to college students through grants, scholarships and work-study awards with the goal of reducing financial barriers and providing greater access to higher education for Pennsylvania residents.

A secondary goal, as described by the governor’s budget, is to “provide freedom of choice between public and private institutions,” because PHEAA financial aid can be used by students at any of Pennsylvania’s public and private institutions of higher education, not just the state-funded colleges and universities of the PASHEE and state-related systems.

Folmer said he did not understand why the universities would be negatively affected by having more state dollars “follow the student” since they would end up getting those dollars as long as they continued to attract students.

“I believe that state money should follow the child,” he said.

On Monday, Peter Garland, acting chancellor of the PASSHE schools, said a reduction in direct state aid to schools would result in an increase in their tuition costs.  Even if that tuition increase was offset with more state dollars for student aid, the “sticker shock” of the higher prices would keep some students from even considering higher education as an option, he said.

“The sticker price does matter, and it can be a barrier,” he said.

State Sen. Vincent Hughes, D-Philadelphia, minority chairman of the Senate Appropriations Committee and a member of the PHEAA board, said Monday he did not want to create competition between the institutions and the student aid agency.

“As much as we’d like more state dollars to come to PHEAA, we don’t need to take those dollars out of the state-related appropriations, nor the state-owned system,” he said.

But there is a third school of thought out there — one that says Pennsylvania is hitting the balance between the two sides.

Garland said Pennsylvania is somewhat unique in the way that is chooses to fund both sides of the student-college equation.  Many other states chose to fund one side or the other, he said, but the constant debate over the two parts of the funding stream may be an indication the state has found the right balance.

State Sen. Robert Tomlinson, R-Bucks, said that balance is exactly what the state should aim for in the future, even though he said it seems like the cost of higher education increases no matter how much the state spends.

“I don’t think it’s an either-or question,” Tomlinson said. “I think we have to invest in PHEAA, which helps the private schools a lot, and we have to invest in our commonwealth schools also.”

Contact Eric Boehm at Eric@PAIndependent.com