UPDATE: Flex bill clears first hurdle at Capitol

The Colorado legislative bill aimed at giving higher education institutions more flexibility in financial affairs and in setting tuition rates was unanimously approved with amendments Thursday, April 29, by the Senate Education Committee. On Friday, April 30, it moves to the Senate floor for second reading.

While most amendments to SB10-003 were technical in nature, one proposed by Sen. Pat Steadman, D-Denver, would place a five-year sunset provision on allowing institutions the freedom to determine tuition.

Steadman said he was struck by testimony Wednesday, April 28, from student representatives who said lawmakers were passing the buck and abdicating their responsibility to higher education.

Senate Majority Leader John Morse, D-Colorado Springs, who sponsored the bill, supported the Steadman amendment, despite previously speaking against a sunset clause.

"We will have a new normal and things will be different than they have been," he said. "But we do need to send a message loud and clear that this is a temporary fix. There is more that we need to do."

The bill, the top legislative priority of this session for the University of Colorado, was introduced the first day of the session but was thoroughly revised in April after negotiations with institution presidents and the Department of Higher Education. Its committee introduction generated three hours of testimony on Wednesday, April 28.

A study commission had drafted the bill during the summer of 2009 to help deal with the state financial crunch. The state cut funding to higher education institutions for the 2010-11 fiscal year, but funding from the American Recovery and Reinvestment Act has temporarily backfilled most of it.

Legislators and higher education officials worry that neither state nor federal funding will be available for the 2011-2012 fiscal year, and that could send the institutions into a tailspin.

Legislators acknowledge the bill would be a short-term solution.

"Whittling away at colleges and universities and their programs is a nonstarter," said Senate Minority Leader Josh Penry, R-Grand Junction, who has spearheaded the effort with Morse. He also ruled out tax increases. Instead, he said, lawmakers looked to innovation by giving the colleges and universities a "broader authority to manage their money. Ultimately, students will vote with their feet if the tuition increases are too much."

The main components of the revised bill:

1. Beginning with the 2011-2012 fiscal year, each institution would be allowed to set the amount of tuition for resident and nonresident students with a cap of 9 percent each year unless there are significant decreases in state support.
2. Beginning Nov. 10, 2010, and every future Nov. 10, institutions would have to provide detailed funding reports and financial projections to the Colorado Commission on Higher Education and the Legislature's Joint Budget Committee. The projections would include details of how the institution would respond to a variety of scenarios, including either reduced or increased state funding, and other revenues, including tuition.
3. Institution plans also would include details on how governing boards would ensure accessibility and affordability for low- and middle-income students, how financial aid would be distributed and ways to improve student retention.
4. Once each December, institutions would provide the Colorado Commission on Higher Education a five-year plan of performance goals that would include quality of instruction, operational efficiency, improved student success (including post-graduation employment), and improving state residents' access to and affordability to a quality education. The CCHE would then establish benchmarks and review the progress of each institution. If an institution failed to meet one or more benchmark by 5 percent or more, the institution would lose some of its tuition-setting freedom.
5. Remove international students from the statutorily required limit on nonresident students enrolled in colleges. Without denying spots to in-state students, a greater influx of students from around the world would grow enrollment, diversify the campus experience and boost tuition revenue. The University of Colorado at Boulder has the smallest international student population of any institution in the American Association of Universities. CU enrolls nearly 59,000 students on four campuses; 77 percent of those are in-state students.
6. Allow institutions more flexibility to control financial dealings, including purchasing and awarding contracts, along with buying or selling real estate. In most cases, the institutions must get state approval, and that causes expensive delays, according the colleges and universities.

The Legislature wants the institutions to garner more funding from federal dollars and private donations. CU, and some other institutions, rely on foundations to provide endowments that usually are dedicated to certain academic purposes.

CU President Bruce D. Benson on Wednesday said allowing the institution more flexibility would "add an important arrow to our quiver." He said provisions of the bill would allow the university to operate more efficiently and effectively by reducing paperwork, getting rid of redundancies and delays. He also said it would allow campuses to increase diversity and add more revenue by enrolling more foreign students. The bill would cap the number of foreign students at 12 percent; currently, foreign students make up 4 percent of the student population.

And, he promised, "We would not price education out of the market. I'm a businessman. I wouldn't do that."

Other college and university officials testified Wednesday in support of the bill, saying something needed to be done to avert a possible crisis. Most also acknowledged this could not be a long-term fix.

Jim Polsfut, chair of the Colorado Commission on Higher Education, said he worried that no sunset provision was in the bill.

Others agreed, including Frank Waterous of the Bell Policy Center. He said the bill shifts the funding responsibilities to families and students. "That's not a good long-term strategy," he said, adding that government has the responsibility to help support an educated workforce.

Andrew Bateman, representing the Associated Students of Colorado, said the organization did not necessarily oppose increasing tuition, but he said students want assurance that the bill ensures the proper amount of oversight is maintained.

"We believe the legislature should have oversight. Someone who is accountable to voters," he said. "We don't need to give institutions carte blanche to do what they want."

Others questioned whether some of the bill's provisions went far enough to ensure that institutions would allow "through the window students" – those who don't meet admission standards – to enroll or whether financial aid would be awarded to those who need it most.

Matt Worthington, with the Associated Students of Colorado State University, said tuition hikes are pricing some students out of an education.

"There's nothing innovative about tuition hikes," he said, referring to legislators who said they sought innovation to deal with the higher education crisis. To ensure accessibility for all students, tuition increases should remain under the oversight of the General Assembly. And, he said, students want to be part of the conversation.

David McDermott, controller for the state of Colorado, said allowing institutions the freedom to control financial operations, such as awarding of contracts or purchasing, would go against state statutes. "You're giving them self-approval of the rules and self-approval of what they need to report."

Gov. Bill Ritter had put together a task force, the Higher Education Strategic Planning Steering Committee, to study higher education issues, but it is unclear how the revised SB3 would affect the task force recommendations. The outgoing governor has previously said that any legislation would have to fit with the higher education strategic plan from the task force before it could win his signature.