Protecting the “Job Drivers”

Community colleges in North Carolina are in a turmoil. They have more students than ever, and their funding is about to be squeezed. Recognizing this, the state board of the community college system (NCCCS) has come up with a proposal that better matches state funding with actual costs. Under the plan, the state would appropriate more money for classes that cost more to teach. 

Under the present policy, colleges are reimbursed by the state on the basis of how many students are enrolled, regardless of which classes they are taking. This can be troublesome since some classes—those using expensive technical equipment such as health care and lab-based science—cost significantly more to teach than others, such as history or composition classes. Their higher costs have meant fewer such courses. In spite of supposedly open-admissions policies, for example, Wake Technical Community College has restricted admission to its nursing program because the school cannot afford enough high-cost classes.

The new proposal comes amid other recent policy experiments around the country intended to wring more efficiency out of the inefficiency-soaked wet towel that is higher education. One such proposal is the much-criticized effort by Texas A&M to assign a dollar value to each professor based on the number of students taught and research dollars granted. Another is the UNC system’s idea to tie enrollment growth and state appropriations to several measures of school performance (the Pope Center’s Jay Schalin criticized the idea as potentially counterproductive).

The community colleges’ proposed funding formula, which could reasonably be called a rationalization of reimbursements, was spurred by today’s economic conditions.  “When there’s overall less money,” said community college system vice president for business and finance Jennifer Haygood, “it becomes harder and harder to fund high-cost programs.” The new formula won’t necessarily result in more money for the expensive classes, but will protect them from some of the cuts that would otherwise be made.

One reason to protect the more costly courses, says Haygood, is that they “are often the most likely to lead to a job.” At a recent meeting, community college board president Scott Ralls even went so far as to label them “job drivers.”

The new formula has been approved by the state board of community colleges, and Governor Beverly Perdue included it in her budget proposal presented February 17, but it is still subject to passage by the General Assembly. If the new formula is passed, it will go into effect for the 2011-2012 fiscal year.

To put the importance of state funding to community colleges in context, currently about 66 percent of the system’s $1.65 billion budget comes from North Carolina’s  general fund.  Only 19 percent of funding comes from students via tuition and fees, 12 percent from local funds, and the remaining 3 percent from the federal government and various grants.

Community college coursework is divided into two major parts. “Curriculum” classes usually lead to an associate’s degree or other certification, such as a nursing degree. “Continuing education” incorporates courses that may be used for transfer to other academic programs as well as non-degree courses that lead to industry-specific certification.

The new reimbursement formula would apply to both. The formula would also represent a move toward parity in funding of the two kinds of coursework, something Haygood views as an important goal.  Currently, curriculum classes have a favored status; they are reimbursed at higher rates than continuing education classes, regardless of the nature of the classes. Under the new proposal, at least some continuing ed classes will receive the same funding as some curriculum classes.

The basic idea is to create three tiers of classes. Curriculum classes will be divided into two tiers. The most expensive—lab-based science, technical education, or healthcare-related—will comprise Tier 1. All other classes will be Tier 2. Continuing education classes will be divided into Tiers 2 and 3.

Tier 1 classes will be reimbursed at a rate 15 percent higher than Tier 2, and Tier 3 will be reimbursed at 15 percent less than Tier 2. With Tier 2 as the standard, the numbers will range from $3,512.45 per full-time student equivalent (Tier 1) to $2,596.08 per FTE (Tier 3).  A school’s actual reimbursement will depend on the number of students taking each type of course.

The differential between the tiers (15 percent) was somewhat arbitrary. However, the numbers in total were selected when the system officials realized that they would be facing substantial budget cuts. They estimated that the total reimbursement from the state general fund would be $25 million less than last year.

While the governor agreed with this tiered proposal, her proposed cuts were deeper than expected. At the most recent state community college board meeting there was much wailing and gnashing of teeth—figuratively speaking, anyway. Board members and officials were distraught because Perdue’s budget proposal would appropriate $992 million from the state, $28 million dollars less than the community colleges had requested and $96 million less than last year. She also cut a requested tuition increase from $10 per credit hour to $5.50 per credit hour, putting an extra squeeze on the colleges.

North Carolina community college system board president Scott Ralls complained that this was the first time in the system’s half-century history in which the system had to deal with less money than the year before.

My Pope Center colleague Jay Schalin has expressed sympathy for the plight of the community colleges. He argued that those colleges already do a lot with a little and should therefore be subject to some benign neglect from those wielding the budget-cutting axe. They operate over three times as many campuses as the UNC system, receive in total less than half the money UNC schools receive from the state, and still offer considerably cheaper tuition.

Now it looks like they’ll have to get even leaner. But hard times sometimes bring good ideas. The step toward differential reimbursement may be one of them.