Community College Finance - Christopher M. Mullin - ebook

Community College Finance ebook

Christopher M. Mullin

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Smart financial management means more students served Community College Finance provides an introduction to best practices for community college leaders and their boards, with guidance on the complex regulations, processes, and considerations surrounding the financial management of these unique institutions. As community colleges continue to increase in importance, this book provides non-technical yet extensive information to guide current and future leaders toward the establishment of effective processes to secure and maintain the funding that is so crucial to the education and future of millions of students nationwide. Readers will gain insight into the background and foundation of Community College Finance and learn the essentials of practice in today's economic and political climate. The discussion covers student financial aid, tuition, budgeting, and more, and explores the future of federal policy and what it means for the institutions that play such a critical role in the nation's educational system. Over eight million students attend more than a thousand community colleges in the United States today, and those colleges are now facing the retirement of their founding generation of leadership. Meanwhile, the balance between traditional funding sources is shifting as new models and approaches are being implemented, and comprehensive, guiding resources are lacking. This book fills that need with expert insight reflecting current realities and a true understanding of the challenges community colleges face. Readers will: * Delve into factors affecting funding and the cost of attendance * Develop a budgeting style and process that serves the institution * Learn to manage fiscal crises effectively without reducing standards * Consider the future of federal policy and how it will affect budgeting At a time when a difficult economy raises questions about the value of higher education, the value that community colleges offer becomes ever more clear. Community College Finance provides the guidance leaders need to help their institutions flourish.

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Table of Contents

Title Page

Copyright

Dedication

List of Figures and Tables

Figures

Tables

Acknowledgments

Preface

Purpose and Structure

Audience

About the Authors

Part One: Sources of Revenue

Chapter One: Factors Influencing Community College Finance

The Public Community College Movement

Community Colleges and Unemployment

The Origin of Public Resources

Competition for Public Resources

Conclusion

Questions

Chapter Two: The Shifting Balance of Revenue

Balancing Interests

Harmonizing Financing Policy Actions

Conclusion

Questions

Chapter Three: Institutional Support

Community College Revenues

Trends in Revenue

Types of Revenue

Perspectives on Funding

Conclusion

Questions

Chapter Four: Tuition and Fees and the Cost of Attendance

Tuition

Trends in Tuition and Fee Prices

Cost of Attendance

Conclusion

Questions

Chapter Five: Student Financial Aid

Higher Education Act and the Federal Role

Applying for Federal Aid

The Pell Grant Program

The Federal Student Loans Programs and Student Borrowing

Campus-Based Student Aid Programs

Federal Tax Incentives for Higher Education Attendance

Veterans' Benefits

State Student Financial Assistance

Institutional Aid

Federal Student Aid, Institutional Policy, and Administrative Costs

Conclusions

Questions

Chapter Six: Infrastructure and Funding Issues

The Concern for Educational Facilities

Problems with Community College and Higher Education Facilities

Funding Facility Needs

What Is Coming in College Construction?

Conclusion

Questions

Part Two: Expending Fiscal Resources

Chapter Seven: Institutional Expenditures

Community College Expenditures

Expenditure Trends

Budgeting

Conclusion

Questions

Chapter Eight: Aligning Mission and Money

Community College Completion

Measuring the Mission

Conclusion

Questions

Chapter Nine: Costs, Efficiency, and Productivity

Institutional Costs

Efficiency and Productivity

Conclusion

Questions

Chapter Ten: College as an Investment

The Purpose of College

Students: Consumers or Investments?

Return on Investment

Strategic Investments

Conclusion

Questions

Part Three: Leadership Resources

Chapter Eleven: Funding Formulas

Enrollment-Based Funding Formulas

Performance-Based Funding Formulas

Toward a Typology of Performance Funding Formulas

Conclusion

Questions

Chapter Twelve: Setting Prices

Tuition-Setting Authority

Tuition Pricing Models

Student Price Response

Conclusion

Questions

Chapter Thirteen: Managing a Fiscal Crisis

Governmental Responses

Institutional Responses

Conclusion

Questions

Chapter Fourteen: Tenets of Advocacy

Setting an Agenda

Generating Allies

Advocacy at Different Levels of Government

Further Dimensions of Advocacy: Rewards and Risks

Conclusion

Questions

Chapter Fifteen: Future Forces in Community College Finance

Federal Support

Practices and Innovations

Conclusion

Questions

Appendix: Principles of Taxation

Ability to Pay

Benefits Received

Neutrality

Justice and Equity

Adequacy of Yield

Stability of Yield

Flexibility of Yield

Economy of Administration

Ease of Payment

References

More from Wiley

Index

End User License Agreement

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Guide

Cover

Table of Contents

Preface

Part One: Sources of Revenue

Begin Reading

List of Illustrations

Figure 1.1

Figure 1.2

Figure 1.3

Figure 1.4

Figure 1.5

Figure 2.1

Figure 2.2

Figure 2.3

Figure 2.4

Figure 3.1

Figure 4.1

Figure 4.2

Figure 7.1

Figure 8.1

Figure 8.2

Figure 8.3

Figure 8.4

Figure 8.5

Figure 9.1

Figure 9.2

Figure 9.3

Figure 10.1

Figure 12.1

Figure 12.2

List of Tables

Table 1.1

Table 2.1

Table 3.1

Table 3.2

Table 4.1

Table 6.1

Table 7.1

Table 7.2

Table 7.3

Table 7.4

Table 8.1

Table 9.1

Table 10.1

Table 10.2

Table 11.1

Table 11.2

Table 11.3

Table 12.1

Table 12.2

Table 13.1

Table 13.2

Table 15.1

Table A.1

Table A.2

Community College Finance

A Guide for Institutional Leaders

Christopher M. Mullin,David S. Baime,and David S. Honeyman

 

Cover Image: Patrick Kalyanapu | Getty

Cover Design: Wiley

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Library of Congress Cataloging-in-Publication Data is on file.

978-1-118-95491-1 (hbk.)

978-1-118-95495-9 (ebk.)

978-1-118-95493-5 (ebk.)

FIRST EDITION

To the loves of my life:

My parents, siblings, children, and wife

For my family and friends—in whom I have been most blessed

List of Figures and Tables

Figures

1.1 The Number of Community Colleges, by Type and Source: 1901 to 2010

1.2 Enrollment Growth in Public Community Colleges Indexed to the First Year of the Decade: 1950s to 2000s

1.3 Fall Enrollment at Public Community Colleges, by Gender: 1960 to 2010

1.4 Annual Percent Change in Community College Enrollment and theNational Unemployment Rate: 1972 to 2012

1.5 Distribution of State Expenditures for Health, Education, and Economic Affairs: 1959 to 2012

2.1 Distribution of Expenditures to Finance Higher Education: 1959 to 2012

2.2 Percent of Operating Revenues for Virginia Community Colleges, by Source: 1966–1967 to 2012–2013

2.3 Percent of Operating Revenue for California Community Colleges, by Source: Fiscal Year 1965–1966 to 2010–2011

2.4 Percent of Operating Revenue for Illinois Community Colleges, by Source: Fiscal Year 1966–1967 to 2012–2013

3.1 Total Revenues per Student at Public Community Colleges and Four-Year Institutions Indexed to 2005–2006: 2005–2006 to 2011–2012

4.1 Trends in Inflation-Adjusted Tuition and Fee Prices for Public Two-Year Institutions Published by the College Board and the National Center for Education Statistics: 1987–1988 to 2012–2013

4.2 National Average Required Fees Amount: 1999–2000 to 2012–2013

7.1 E&GExpenditures per Student at Public Community Colleges and Four-Year Institutions Indexed to 2005–2006: 2005–2006 to 2011–2012

8.1 Comparing Changes in Two Measures of Educational Attainment

8.2 Educational Attainment Levels in Countries for 25- to 64-Year-Olds (Percentage of the Population), with Top Four Countries Ranked: 1991 to 2010

8.3 Six-Year Outcomes for Students Beginning at a Community College in Fall 2003

8.4 Milestone Events

8.5 Percentage of the U.S. Population Aged 18 and Older with a Certification, License, or Educational Certificate, by Level of Educational Attainment: 2012

9.1 Average Credit Hour Weights for Lower Division Programs, by Academic Program: 2012

9.2 Completions and Total Operating Revenue per FTE (2010 Dollars) at Community Colleges: Select Years

9.3 Freshman Class Enrollment Counts at 31 Private, Highly Selective Liberal Arts Colleges Constituting the Membership of the Consortium on Financing Higher Education (COFHE): 1991 to 2011

10.1 Lifetime Earnings Overlap, by Level of Educational Attainment

12.1 In-District, In-State, and Out-of-State Tuition and Fees: 2012–2013

12.2 Four-Year Difference in the Charge per Credit Hour Between Guaranteed Tuition and Other Tuition Pricing Models

Tables

1.1 Fall Term Enrollment at Community Colleges, by Race/Ethnicity: Select Years

2.1 Arguments for and Against Maintenance-of-Effort Provisions

3.1 Community College Revenues, by Category: 2011–2012

3.2 Sources of Support for Students, by Sector: 2011–2012

4.1 Required Fee Types for Five Select Colleges: 2013–2014

6.1 Useful Life of Building Components

7.1 Community College Expenditures, by Category: 2011–2012

7.2 Faculty Composition of Community Colleges: Fall 2012

7.3 Average Salary for Faculty on 9- or 10-Month Contracts, by Faculty Status and State: 2011–2012

7.4 Budget Models

8.1 The Alignment of Outcome Metrics with the AACC Voluntary Framework of Accountability

9.1 Outcome Utilized in Recent Studies of Efficiency/Productivity

10.1 Changes in Weekly Earnings, Estimated Taxes Paid, and Unemployment Associated with Each Change in Educational Attainment: 2012

10.2 Lukila Community College Model Focusing on Credential Attainment

11.1 Characteristics of a Funding Formula or Guidelines

11.2 Three Types of Performance-Based Accountability

11.3 Arguments Against Performance Funding and Responses to Them

12.1 Multiple Criterion Model Example

12.2 Required Input and Output Elements Used in Net Price Calculators

13.1 A Typology of Proposed Adjustments to the Pell Grant Program: 2010–2011

13.2 Institutional Actions in Response to a Fiscal Crisis

15.1 State and Local Sales Tax Rates

A.1 State and Local Tax Burdens by Rank: Fiscal Year 2010

A.2 Internal Revenue Service Collections, Costs: Fiscal Years 2005–2009

Acknowledgments

We would like to acknowledge the numerous community college chancellors, presidents, administrators, faculty, and staff we have had the pleasure to work with during our professional tenure. Their input and frank conversations regarding approaches to higher education signify all that is right with the educational enterprise.

We would also like to express our appreciation for the editorial staff at Jossey-Bass. We are particularly grateful to both David Brightman, who served as the catalyst for the book, and Erin Null, who served as the steward of its development. Additionally, Shauna Robinson promptly and politely answered the various questions we had during the production process, making the experience ever more enjoyable.

In 1992 David Pierce hired David Baime to work at the American Association of Community Colleges, and the result has been a tremendously satisfying journey. Dave was as kind as the day is long, and that was accompanied by a marvelous self-deprecating humor, dogged intelligence, and complete honesty. He is missed.

Christopher M. Mullin. I would like to acknowledge the support of my family as I worked on this book. Of particular importance is the support of my wife, Candide, who kept the family going during the missed dinners, soccer practices, and weekends. I would not have been able to embark on this project without her support and that of my kids, Mila and Luke. Finally, I would like to acknowledge the contributions of my coauthors, David Baime and David Honeyman, who have served as both mentor and boss. From David Baime I have learned the importance of integrity, credibility, and responsiveness in one's professional life. I have also learned a great deal about the community college sector and the higher educational landscape through the opportunities Baime allowed me to partake in, along with the conversations we had while colleagues at the American Association of Community Colleges. David Honeyman introduced me to the world of community college finance—how caring for students was integral to the study of educational finance and how to maintain one's sense of self in a world dominated by ego—but most important, he facilitated my growth rather than directing it.

Preface

The last book that directly addressed financial leadership in the American community college was John Lombardi's Managing Finances in Community Colleges (1973). Since that time much has changed. The number of students attending community colleges has grown from 2.5 million to over 8 million, the number of community colleges from just over 900 to over 1,000, the Pell Grant program was implemented and now supports 3.5 million community college students, the importance of the role of tuition and fee revenues has increased substantially, and the support for infrastructure and facilities has evolved.

A multitude of books have focused directly on community colleges, but few have focused on finances in community colleges. And even these contributions to the literature were focused on financing trends facing community colleges or their economics (Breneman & Nelson, 1981; Garms, 1977); only an occasional case study or chapter has focused on the practical aspects of community college finance.

This void may be due to the less-prominent role community colleges have played in the overall dialogue about higher education or the intense focus on tuition and fees and related student financial aid at four-year colleges that is evident in much of the higher education finance literature. It may also be the result of a generation of leaders who joined the community college movement as young professionals and have grown with it, shaping it along the way, and have been focused primarily on practice.

While all reasons (and others not mentioned here) are important, it is for this last reason that this book may be of the greatest importance. The ongoing change in leadership (Campbell, 2002; Phillippe & Tekle, 2013a) requires the education of new leaders, who arguably are more challenged than those from previous generations. At the same time, an increased focus on the community college in the twenty-first century necessitates a resource for noncommunity college scholars to better understand institutional finances. Too often the authors have been asked to explain community college finance to scholars who are making substantial policy recommendations, because there were no resource documents to address their questions.

Purpose and Structure

The goal of this book is to aid in the sound fiscal management of the community college, as well as to provide an analysis that helps those working outside of a college environment. We hope to achieve this goal by informing practitioners and scholars of both fundamental and advanced aspects of community college finance, by presenting an examination of community college finance in three distinct yet interrelated parts.

Part One: Community College Revenues

Part One focuses on where the money comes from. It begins with a chapter that discusses the foundational factors influencing revenues in the community college sector. The next chapter illustrates, in three different states, how revenue sources have changed over time and actions that may be implemented to stabilize funding.

Chapter Three details the categories of revenues for community colleges as well as their relative importance. Chapter Four focuses on tuition and fees and the total cost of education, including a discussion of tuition and fee philosophies that have been a hallmark of community college funding. Chapter Five examines the increasingly important role of student financial aid.

While postsecondary education evolves to provide more opportunities via asynchronous technologies that remove the barrier of place, community colleges remain as anchor institutions within their communities, for both the students and the community stakeholders with whom they engage. Addressing this, Chapter Six examines infrastructure funding, which is a critical and challenging component of community college finance. It covers public-private partnerships, replacement costs, and bonding.

Part Two: Expending Fiscal Resources

Part Two focuses on expenditures. Chapter Seven begins with a description of expenditure categories and continues with an overview of budgeting approaches. This discussion of expenditures is advanced in Chapter Eight, with a focus on the metrics being used to shape the community college mission in the current student success– and performance-based culture.

Chapter Nine discusses the use of cost studies in institutional management and introduces some of the related guiding perspectives of costs and productivity and efficiency. Chapter Ten examines the implications, at the campus level, of whether education is treated as an investment or a cost. Differences between sectors of higher education are presented, along with a discussion of practices to help ensure that institutional actions are economically and educationally justifiable.

Part Three: Leadership Resources

Part Three provides practical information to guide the management of fiscal policy by institutional leadership. Chapter Eleven presents foundational information related to enrollment- and performance-based funding models. Chapter Twelve clarifies the entities responsible for setting tuition and fees at community colleges and details some approaches that may be used in determining them. The next chapter provides practical answers to managing a fiscal crisis—unfortunately an all-too-common phenomenon—by drawing from previous experience. It suggests that planning for a fiscal downturn is the responsibility of community college leaders before one materializes.

Prior to the prospective discussion of community college finance provided in Chapter Fifteen, the authors discuss the role of advocacy in generating support for community colleges. Chapter Fourteen emphasizes the role of advocacy for college officials responsible for the financing of a department, unit, program, or college.

Audience

Nearly 90 percent of institutional chief financial officers are accountants or have a master's degree in business administration. While financial officers should find this book informative, it is written for all members of the college leadership team, from presidents to trustees to executive leadership staff. Effectively executing these positions requires knowledge of general concepts related to financial matters as well as a familiarity with various practices to best guide decision making. We also think this book, with its discussion of the philosophies and practices that drive fiscal policy for this key sector of higher education, should appeal to scholars with an interest in community college finance, academic researchers, policy analysts, legislative affairs staff, consultants, and graduate students.

Each chapter of the book stands on its own and may be used independently. However, the interlocking nature of all aspects of community college funding suggests this book is best used as a whole rather than in parts. The book is appropriate for use in institutional “grow your own” programs and graduate programs with a focus on higher education administration and/or community college leadership, by state agency staff and leadership, and by the larger policy and foundation community eager to better understand why college leaders make the decisions they do.

This book is ideal for a graduate higher education finance course, especially the more than 60 degree-granting programs with a community college focus. Often these courses cover the policy aspects of fiscal leadership, and though there are many research articles and books to be read, those treating the practical side are, surprisingly, less abundant. We hope that with the addition of this book to the literature, more will follow.

About the Authors

Christopher M. Mullin is assistant vice chancellor for policy and research at the State University System of Florida, Board of Governors. He is the co-author of Higher Education Finance Research: Policy, Politics, and Practice and coeditor of Data Use in the Community College: New Directions for Institutional Research.

David S. Baime has served as the chief architect of federal policy and strategy from the community college perspective for nearly 20 years as senior vice president of government relations and policy analysis at the American Association of Community Colleges in Washington, DC.

David S. Honeyman is emeritus professor at the School of Human Development and Organizational Studies in Education at University of Florida, Gainesville. He is the author of A Struggle to Survive: Funding Higher Education in the Next Century.

Part One

Sources of Revenue

Chapter OneFactors Influencing Community College Finance

America's social experiment with broad access to postsecondary education was initiated with the Morrill Act of 1862 (P.L. 37–108), which expanded publicly controlled and supported institutions of higher learning to those who either were destined for college or had the courage to attend (Morrill, 1887). This latter element—paying attention to the courage of people to attend college—embodies the open access philosophy of much of higher education.

In 1901, the first community college was established in Joliet, Illinois. The ensuing years witnessed the establishment of many more community colleges under both public and private control, often under the initiative of local efforts supported by state leaders.

In the middle of the twentieth century, states began making commitments to continue the legacy of the land-grant colleges by extending postsecondary educational opportunity to the masses, beginning the modern community college movement. The starting point for the development of community colleges in each state varied (Yarrington, 1966), but it was supported in part by the development of coordinated state systems of public higher education and in the establishment of some state community college systems (Tollefson, Garrett, Ingram, & Associates, 1999).

For many years, community colleges were not exclusively public colleges; in 1950 the balance between public and private institutions was nearly equal, with 297 public community colleges and 227 privately controlled community colleges. The public community college movement took root between 1960 and 1980, with the number of public institutions increasing from 328 to 945, while over the same time period the number of private community colleges decreased by 72, to 182 (Figure 1.1). By 2010 public community colleges greatly outnumbered private community colleges, at 978 and 87, respectively.

Figure 1.1 The Number of Community Colleges, by Type and Source: 1901 to 2010

Note: Three trends are provided for the number of community colleges. The American Association of Community Colleges (AACC) provides a count of member-eligible institutions that meet certain criteria and includes both public and private institutions. One reason the AACC trend line does not drop off as the others do in 2010 is that the criteria allow for the awarding of bachelor's degrees, whereas the other two data sources do not count an institution as a community college if it offers just one bachelor's degree.

Sources: Adapted from American Association of Community Colleges (2010), Phillippe and González Sullivan (2005), Snyder and Dillow (2013).

Over time, higher education structures and governing arrangements developed by states have changed in the way in which they have provided educational opportunity. For example, states like Kentucky, Louisiana, Connecticut, Minnesota, Maine, Hawaii, and Alaska have, in the past 20 years, completely restructured their postsecondary education systems, while other states such as California and Illinois have stood firm in their vision. However, irrespective of the overarching state system, the innovation of the community college has expanded educational opportunity to the masses. Within these institutions, millions of economically and socially marginalized people have found their footing. Through the lens of time this chapter examines the factors shaping community college finance, including enrollments, employment, and competitors for resources.

The Public Community College Movement

Traditionally and primarily, though not exclusively, community colleges have been funded on the basis of enrollments, either by the governmental appropriations that are derived from enrollments or through tuition and fee revenue. This differs from those of their public higher education counterparts that receive substantial revenue from research activities, endowments, or other auxiliary services such as hospitals. These non-enrollment resources are enormous: total revenues for public four-year institutions are nearly five times as much as total revenues for community colleges, at $261.2 and $56.2 billion, respectively, in the 2011–2012 school year (Snyder & Dillow, 2014). Given the disproportionate reliance on enrollment-based revenue, the community college “movement” was fueled in large part by being able to identify new markets of students underserved by “traditional” institutions of higher education, while also enrolling students interested in transferring to a senior college.

Setting aside the financial dimension of enrollments, what is less emphasized in today's outcome-oriented climate is the central significance of access in the community college. Of particular importance at the community college is participation by nontraditional populations: those students who are not aged 18 to 24, do not live on campus, and do not have parental resources to help cover the costs of attendance. In 2015, the challenge for many community colleges is to ensure that nontraditional students are served well, given their intrinsic role in the nation's long-term prosperity. The community college leaders of the country recognize that enrollment in college is in and of itself an achievement, albeit not a sufficient one in most cases. So while some policymakers bemoan the fact that colleges are funded simply through people's being in seats—and therefore, they would assert, lacking accountability—the policymakers also show both a misunderstanding and an appreciation of the efforts of national and local leaders to remove barriers to opportunity and mobility that is accomplished through their local community college. We now briefly discuss a few factors that have contributed to the growth of the community college movement and, as a result, its funding.

Enrollment Trends

The GI Bill awakened the nation's awareness of the value of postsecondary education, as millions of returning servicemen who had not previously had postsecondary education ambitions attended college. Yet while community college enrollment doubled during the 1950s, the years following the end of the Second World War were not “boom” years for the community college sector to the extent commonly believed. In 1947 just over 163,000 students were enrolled at a public community college. By 1957 enrollment had increased to 315,990, a 94% increase. The period of greatest growth for the community college movement would occur in the next decade.

During the 1960s, growth in the community college sector was massive, increasing nearly fivefold, from approximately 400,000 to 2,000,000 (Figure 1.2). Enrollment growth in the community college sector continued in the 1970s when 1.86 million additional students were enrolled.

Figure 1.2 Enrollment Growth in Public Community Colleges Indexed to the First Year of the Decade: 1950s to 2000s

Note: Year “1” reflects the first year of the decade. For example, for the 1950s, year 1 represents 1950, year 2 represents 1951, and so on.

Source: Adapted from Snyder and Dillow (2014).

Enrollment and Age

Since 1968, increased participation in higher education has been the trend across all age groups. Between 1968 and 2012 the percentage of each age group increased as follows (U.S. Census, 2014):

For ages 18 and 19, from 35.9% to 47.3%

For ages 20 and 21, from 31.2% to 51.4%

For ages 22 through 24, from 12.7% to 29.8%

For ages 25 through 29, from 6.0% to 13.6%

For ages 30 through 34, from 3.4% to 7.4%

Data for 2012 indicate that community colleges enrolled a large number of nontraditional students: both younger, those under 18, and older, those over 24 (American Association of Community Colleges, 2014). Between 1993 and 2009, the percentage of the national community college student body under the age of 18 increased from 1.6% to 7.0% (Mullin, 2012d). These are, of course, primarily dual enrollment students; that is, high school students who are also taking community college courses in one of a variety of settings. At the same time, 71% of the student body was over the age of 22. So although the median age was 22, the average age of the community college student body in 2012 was 28, due to a large older student population mathematically pulling the mean (average) age to 28 (American Association of Community Colleges, 2014). These enrollment patterns outside of the traditional 18-to-24-year-old undergraduate student body had much to do with the growth of community colleges, as these nontraditional students have traditionally been less represented in other sectors of higher education (though, as will be discussed, this has changed somewhat with the growth of corporate for-profit colleges).

Enrollment and Gender

Women students became a majority of community college enrollments in the late 1970s, a trend that continues to the time of this writing (Figure 1.3). Between 1960 and 2010, the gender balance of community colleges shifted from 1.8 men for every woman on campus to 0.8 man for every woman.

Figure 1.3 Fall Enrollment at Public Community Colleges, by Gender: 1960 to 2010

Source: Adapted from Grant and Lind (1973), Snyder and Hoffman (1995), and Snyder and Dillow (2013).

Chapter TwoThe Shifting Balance of Revenue

While sharing some characteristics with their private and for-profit peers, public institutions obviously differ in one key way: they are financed by state and, in some instances, local appropriations. This funding is inevitably accompanied by oversight and accountability requirements. As a result, colleges are beholden to individual policymakers who may or may not share their perspectives. At the same time, however, external public support can be a huge institutional benefit. Whatever the case, the shifting composition of institutional revenues toward students (that is, tuition and fees), even as state policymakers diminish their support (often while increasingly exerting greater institutional control), presents significant challenges.

Over the past 50 years, the percentages of funding for higher education from its three primary sources have changed dramatically. Figure 2.1 illustrates the proportion coming from state and local funding and that coming from tuition and fees. These shifts are of the highest substantive importance to colleges and have critical political and policy ramifications as well.

Figure 2.1

Chapter ThreeInstitutional Support

As we have discussed, community colleges receive support for operations from a multitude of sources, ranging from tuition and fees, as other sectors of higher education are supported, to, in some cases, local appropriations, as K–12 school districts are funded. This diversity of revenue sources makes community college finance challenging to understand and analyze.

Without a firm grasp of some of the dynamics that lie behind the various sources of revenue, it becomes even more challenging for leaders to be effective fiscal stewards and to advocate effectively for funding. To help current and future institutional leaders better understand the sources of institutional support, this chapter examines revenue sources as well as their trends. Some of this discussion is necessarily technical. The chapter closes with a discussion to enhance a general understanding of financial data.

Community College Revenues

For an institution to be eligible to participate in federal student aid programs (Title IV of the Higher Education Act), it must report data to the U.S. government's Integrated Postsecondary Education Data System, known most commonly by its acronym, IPEDS. These data are then presented to the public through a number of publication vehicles of the U.S. Department of Education—such as College Navigator, the Digest of Education Statistics, or the Condition of Education—and are made public for use by analysts (prominently by the Delta Cost Project), professors, institutional researchers, the media, and so on. (The Delta Cost Project presents national data and accounts for the changing classification of institutions by providing ten years of data for a matched set of institutions, or a set of the same institutions, over a given period of time.)

Nationally, community college revenues totaled $56. 2 billion for 2011–12, the most recent year for which data were available. These revenues and the source from which they were derived, as presented in Table 3.1, provide necessary context for examining community college revenues.

Table 3.1 Community College Revenues, by Category: 2011–2012

Revenue Category

Amount (in thousands)

Percent or Total

Amount per Student

Total Revenues

$56,153,074

$13,542

Tuition and Fees

$9,407,634

16.8%

$2,269

Federal Appropriations

$120,279

0.2%

$29

Federal Grants and Contracts

$1,931,982

3.4%

$466

Federal Nonoperating Grants

$11,941,246

21.3%

$2,880

State Appropriations

$13,034,033

23.2%

$3,143

State Grants and Contracts

$1,477,802

2.6%

$356

State Nonoperating Grants

$1,161,061

2.1%

$280

Local Appropriations

$9,697,357

17.3%

$2,339

Local Grants and Contracts

$570,728

1.0%

$138

Local Nonoperating Grants

$101,569

0.2%

$24

Other

$6,810,952

11.9%

$1,618

Source: Adapted from Snyder and Dillow (2014).

Tuition and Fees

Tuition and fees accounted for 16.8% of all community college revenues in 2011–2012. The composition of this increasingly important source of funding is slightly more complex than may at first appear. This section endeavors to provide some clarity about this funding stream, examining what is and is not counted in the category.

For public community colleges reporting on this category of revenues, institutions were instructed to “[r]eport all tuition & fees (including student activity fees) assessed against students for education purposes. Include revenues for tuition and fees net of discounts & allowances from institutional and governmental scholarships, waivers, etc. (report gross revenues minus discounts and allowances). Include here those tuition and fees that are remitted to the state as an offset to state appropriations” (National Center for Education Statistics [NCES], 2013a, page number not provided).

Therefore, there is a difference between tuition and fee revenue and tuition and fee prices per se. Whereas tuition and fees can be multiplied by a number of students to estimate total revenues, the source of those revenues is not always the student. For the purposes of IPEDS, data used nationally, institutions are instructed to report tuition and fees net of discounts and allowances as opposed to the gross amount. This means that there are additional, tuition-based revenues that flow into the institution's coffers but are not reported in this category. Many of them are reported under federal and state nonoperational grants, as will be discussed later. Many of these sources are provided in Table 3.2.

Table 3.2Sources of Support for Students, by Sector: 2011–2012

Source of Support

Sector

Public two-year

Public four-year

Private

For-profit

Federal Pell Grant

38%

38%

36%

64%

Federal Direct Subsidized Loan

15%

41%

53%

69%

Institutional Need-based Grant

12%

12%

37%

1%

Federal Direct Unsubsidized Loan

11%

40%

53%

66%

State Need-based Grant

8%

16%

18%

4%

Private Grant

4%

11%

17%

3%

Employer Aid (Students and Parents)

4%

6%

9%

6%

Employer Aid (includes staff)

4%

6%

10%

6%

Federal Supplemental Educational Opportunity Grant (FSEOG)

3%

5%

10%

14%

State Merit-only Grant

3%

6%

4%

*

Veterans' Benefits and Dept. of Defense

3%

3%

4%

8%

Veterans' Benefits

3%

3%

3%

8%

Federal Work Study

2%

5%

21%

1%

Private Loan

2%

7%

12%

12%

Institutional Merit-only Grant

1%

9%

37%

*

Institutional Tuition and Fee Waiver

1%

3%

4%

*

Vocational Rehabilitation & Training

1%

0%

*

*

Athletic Scholarship

0%

1%

4%

*

Federal Non Title IV Grant

0%

1%

1%

*

State Work Study

0%

*

*

*

Federal Direct PLUS Loan

0%

7%

12%

5%

State Non-need Grant

*

1%

2%

0%

State Loan

*

0%

0%

*

Institutional Work Study

*

1%

4%

*

Institutional Tuition Waiver for Staff

*

0%

*

*

Institutional Loan

*

0%

1%

*

Federal Perkins Loan

*

3%

8%

2%

*Note: Denotes unstable estimate. These data illustrate a representative sample of all undergraduate students in each sector for the given year. Sources of support were presented in descending order for percentage of students participating in the program at community colleges.

Source: Authors' analysis of National Postsecondary Student Aid Study 2012 data (National Center for Education Statistics, 2014d).

For public community colleges, the largest source of financial support was the Federal Pell Grant Program; 38% of community college students received a Pell grant. This was followed by federal subsidized loans (15% of students) and institutional need-based grants (12% of students). Table 3.2 also illustrates the extent to which students in the three other sectors of higher education used these student aid sources. Student financial aid is discussed in more detail in Chapter Five.

Federal Revenues

In total, federal funds accounted for 24.9% of all community college revenues in 2011–2012. These revenues were reported to IPEDS in three categories: appropriations, grants and contracts, and nonoperating grants. This section examines the federal funding categories.

Appropriations

Federal appropriations accounted for less than 1% of all community college revenues in 2011–2012. For this category of revenues, institutions were instructed to “[r]eport all amounts received by the institution through acts of a federal legislative body, except grants and contracts. Funds reported in this category are for meeting current operating expenses, not for specific projects or programs. An example is federal land-grant appropriations” (National Center for Education Statistics, 2013a, page number not provided). Clearly, these direct appropriations are not a significant source of community college funding.

An analysis of IPEDS data by the authors found that 31 community colleges received federal appropriations in 2011–2012. Northern Oklahoma College in Tonkawa, Oklahoma, received the largest appropriation ($10,182,007), and Middlesex Community College in Bedford, Massachusetts, had the distinction of receiving the smallest ($776).

Federal Grants and Contracts

Federal grants and contracts accounted for 3.4% of all community college revenues in 2011–2012. For this category of revenues, institutions were instructed to “[r]eport revenues from federal governmental agencies that are for specific research projects or other types of programs and that are classified as operating revenues. Examples are research projects and similar activities for which amounts are received or expenditures are reimbursable under the terms of a grant or contract. Include federal land grant appropriations if considered operating revenue. Do not include Pell Grants or other federal student aid here” (National Center for Education Statistics, 2013a, page number not provided).

An analysis of IPEDS data by the authors found the vast majority of community colleges received federal operating contract and grant funds in 2011–2012. Of those institutions receiving funds, Fox Valley Technical College in Appleton, WI received the largest amount ($36.5 million) and James Sprunt Community College in Kenansville, NC received the smallest amount ($343).

Federal Nonoperating Grants

Federal nonoperating grants accounted for 21.3% of all community college revenues in 2011–2012. For this category of revenues, institutions were instructed to “[r]eport all amounts reported as nonoperating revenues from federal governmental agencies that are provided on a nonexchange basis. Include Pell Grants and other Federal student grant aid, including Veterans Education Benefits here. Do not include revenues from the Federal Direct Student Loan (FDSL) Program. Do not include capital grants & gifts” (National Center for Education Statistics, 2013a, page number not provided). Ivy Tech Community College, which reports to IPEDS as a system, received the largest amount, at $246.4 million. Many of these funds are based on federal student aid in the form of grants, as detailed in Table 3.2.

State Revenues

In total, state revenues accounted for 27.9% of all community college revenues in 2011–2012. These revenues were reported by colleges to IPEDS in three categories: appropriations, grants and contracts, and nonoperating grants. This section clarifies state revenue funding categories by examining what is included in each category.

Appropriations

State appropriations accounted for 23.2% of all community college revenues in 2011–2012. For this category of revenues, institutions were instructed to “[r]eport all amounts received by the institution through acts of a state legislative body” (National Center for Education Statistics, 2013a, page number not provided).

State contributions to community colleges revenues have not been large compared with those provided to other sectors. State tax appropriations received by community colleges the 1974–75 to 2009–10 academic years made up approximately 20% of revenues to higher education (Mullin, 2010a).

State Grants and Contracts

State grants and contracts accounted for 2.6% of all community college revenues in 2011–2012. For this category, institutions were instructed to “[r]eport revenues from state governmental agencies that are for specific research projects or other types of programs and that are classified as operating revenues. Examples are research projects and similar activities for which amounts are received or expenditures are reimbursable under the terms of a grant or contract” (National Center for Education Statistics, 2013a, page number not provided).

State Nonoperating Grants

State nonoperating grants accounted for 2.1% of all community college revenues in 2011–2012. For this category of revenues, institutions were instructed to “[r]eport all amounts reported as nonoperating revenues from state governmental agencies that are provided on a nonexchange basis. Do not include capital grants & gifts” (National Center for Education Statistics, 2013a, page number not provided).

Local Revenues

In total, local revenues accounted for 18.5% of all community college revenues in 2011–2012. These revenues were reported by colleges to IPEDS in three categories: appropriations, grants and contracts, and nonoperating grants. This section outlines what is included in each category.

Appropriations

Local appropriations accounted for 17.3% of all community college revenues in 2011–2012. For this category of revenues, institutions were instructed to “[r]eport all amounts received from property or other taxes assessed directly by or for an institution below the state level. Include any other similar general support provided to the institution from governments below the state level, including local government appropriations” (National Center for Education Statistics, 2013a, page number not provided).

The varying degree to which local sponsors fund community colleges has led to the distinction between what are termed state-aided community colleges and state community colleges. Palmer (2008) defined state-aided community colleges as “states in which local tax appropriations account for at least 10% of total government funding for all community colleges in the state,” whereas state community colleges received little or no local tax appropriations. Yet as state support continued to decline, Garrett (1999) made the observation that “Now, more than ever before, it can be said that public community colleges have changed from being state-supported to being state-assisted” (p. 10).

Local Grants and Contracts

Local grants and contracts accounted for 1.0% of all community college revenues in 2011–2012. For this category of revenues, institutions were instructed to “[r]eport revenues from local governmental agencies that are for specific research projects or other types of programs and that are classified as operating revenues. Examples are research projects and similar activities for which amounts are received or expenditures are reimbursable under the terms of a grant or contract” (National Center for Education Statistics, 2013a, page number not provided).

Local Nonoperating Grants

Local nonoperating grants accounted for 0.2% of all community college revenues in 2011–2012. For this category of revenues, institutions were instructed to “[r]eport all amounts reported as nonoperating revenues from local governmental agencies and organizations that are provided on a nonexchange basis. Do not include capital grants & gifts” (National Center for Education Statistics, 2013a, page number not provided).

Other

In total, revenues from other sources accounted for 11.9% of all community college revenues in 2011–2012. These revenues originate from disparate sources.

Sales and services of auxiliary enterprises and other operating revenues accounted for 3.63% and 1.69% of total community college revenues, respectively. In addition, gifts (0.47%), investment income (0.31%), other nonoperating revenues (1.25%), other revenues (0.97%), and 0.2% from additions to permanent endowments were included in the “Other” category.

Some of these categories are more reflective of the revenue sources of other sectors of higher education. And in that vein, there are surely opportunities to increase the importance of gifts and permanent endowments at community colleges. It is from these sources that institutional grant aid for students often originates, which, as was illustrated in Table 3.2, has become an increasingly important source of support for community college students.

The last two categories that contributed to the “Other” category were capital appropriations (2.96%) and capital contracts and grants (0.65%). The acquisition of these funds is often a challenge, as state funding for capital projects faces direct competition with K–12 and university projects, as well as the fact that the projects themselves are so expensive.

Trends in Revenue

Figure 3.1