States balk at higher-ed mandate

The House has cleared a bill that forces states to stabilize taxpayer funding for public colleges.

Efforts to make higher education more affordable are on the threshold of becoming law. The House and Senate have both passed versions of a bill that would increase federal grants for students and crack down on problems in the college loan industry.

But there's a sticking point: The House insists that states maintain consistent funding for public colleges and universities. Governors and state legislators have cried foul, saying the feds don't have the right to dictate such matters.

With an economic downturn threatening state budgets – and concern that higher education is out of reach for a growing number of students – the controversy puts a spotlight on the relationship between state funding and public-college affordability.

"When state budgets are very tight, higher education is usually not funded [as well] because the perspective of a state policymaker is, 'Well, they can raise tuition and find the funds from their students,' " says Ross Hodel, codirector of the Center for the Study of Education Policy at Illinois State University. "The burden for student aid in the '90s and early 2000s clearly shifted from the taxpayer to the tuition-payer, and that's a trend that possibly the 'maintenance of effort' will help address."

The House "maintenance of effort" provision would withhold some federal money if a state failed to provide at least as much as its average spending for higher education over the past five years (not counting expenditures for capital projects and research and development).

"If the federal government is putting money in at the top, states shouldn't be able to take money out at the bottom," says Rachel Racusen, spokeswoman for the House Education and Labor Committee.

But opposition is "visceral" among state executives, says Ray Scheppach, executive director of the National Governors Association (NGA) in Washington. "This is 100 percent state money ... and it's inappropriate for the federal government to set any particular requirement on that money. States are sovereign."

Governors share federal lawmakers' concerns about high tuition, he says, and many are bringing together university leaders, boards of regents, and the private sector to find solutions.

Both the NGA and the National Conference of State Legislatures have said the measure could backfire. "In good times, states are not going to have those 10 or 12 percent increases, because they're going to be held to that higher level the next time there's an economic downturn," Mr. Scheppach says.

The compromise bill – an overdue reauthorization of the Higher Education Act of 1965 – is unlikely to emerge until after Congress returns from an upcoming recess.

Fiscal year 2007 saw a 7.7 percent increase in state and local funding for higher education, outpacing both inflation and enrollment growth, according to a report by State Higher Education Executive Officers. But it couldn't counteract past declines in state support: Per student, appropriations are "lower in constant-dollar terms compared to most years since 1980," the report notes.

Amid the prospect of a recession, a number of states may cut appropriations in their next budget, which frustrates education leaders. In Kentucky, university leaders have warned that the governor's proposed 12 percent cut would slow or reverse progress that's been made to boost the quality of education and the number of graduates, and would force tuition increases.

The Association of State Colleges and Universities sees the federal maintenance-of-effort rule as "a rather modest proposal to ensure that states contribute to access to higher education," says Dan Hurley, the group's director of state relations and policy analysis. He acknowledges that, as some critics point out, public institutions can do more to rein in costs. But he adds that too much of the blame has been placed on colleges, and more responsibility needs to shift back to state officials who set budgets and tuition rates.

The value of the provision would mainly be symbolic, because the money the federal government could withhold is too small to sway states determined to cut their budgets, Mr. Hurley says. The bill would withhold a state's share of $35 million for low-income students distributed through federal Grants for Access and Persistence. The secretary of Education could give waivers to states that experience disaster or severe financial constraints.

Ironically, in the 1990s higher education made such powerful arguments about the benefit of higher lifetime earnings tied to a college degree that lawmakers felt justified in putting more of the burden on students through tuition, Hodel says. But now public opinion may be shifting back toward recognition of the public benefits of a better-educated workforce.

If Congress decides to use the stick of a maintenance-of-effort rule, states now may find it more politically tenable to spread cuts more evenly among sectors. "College has become so expensive for the typical American family that something has got to change," Hodel says.