Part of the community colleges

Part of the community colleges original mission was conceived as a strategy to meet a surging demand for higher education opportunities after World War II. In the years since that time, they have served to provide open and democratic access to higher education. Across the United States, community colleges have also become essential tools in the nation's economic development. Yet community colleges have become a neglected stepchild of the state's and local higher education systems.

Even before the post-WW II education boom, Community Colleges recognized the value of extending higher education to those who had been excluded because of their income, religion, ethnic origin, race, or even gender. Community Colleges have often been lauded for their wisdom and insight, their philosophy of education, and open access. As a testament to that fact, numerous graduates who would have never had the opportunity to extend their education because of economic restraints and challenges have been able to contribute in countless ways to public life and service. In fact, many community colleges have displayed their famous graduate's names on their web pages or under their mission and values. Community College's dedication of working closely with faculty and their staff to create innovative ideas for student learning and remedial courses has often been used as models in other institution of higher learning.

Although the individual investing in a public education, may have a myopic view of the private benefits, these benefits also "accrue" to other individuals, and may even have a synergistic effect when combined with other social conditions. For example, an individual who gradates with a degree and is more productive in a work environment could also increase the productivity of his or her coworkers. These external benefits could also be called "public benefits" (Paulsen & Smart, 2001, p.98). While higher education cannot be classified as a "pure public good", it could be classified with the term a "publicly provided private good". Researchers have found that three main factors that could be measured quantifiably for this "impure" public good, "social rates of return, "higher education's economic contribution to economic growth", and the "economic effects of post secondary institutions on local communities" (p.99). Researchers that have attempted to measure the benefits found that the rates of return (10-13%) in higher education to be better and an even more "attractive relative to the rates of return on other investments" (p.101).

Unless individual students, the state, and the local community are aware of these public benefits, and the lucrative return on their investment for the public good, they may "under invest" in higher education and miss the benefits of allocating resources to public institutions. The problem for many is an disagreement over the extent of the benefits of nonmonetary and external benefits of higher education, and this argument will always be present until the true benefits of these returns can be measured precisely (Honeyman, Wattenberger, & Westbrook, 1996). Therefore, an equitable funding formula should be used to insure that each party in the society provides and perceives that an equal share of allocated resources is being distributed for the benefits of public education.

This paper will take a stance that" formula budgeting, is either good or bad, but there are good formulas and bad formulas" (Caruthers, 1989, as cited in Honeyman, Wattenberger, & Westbrook, 1996). The proposed formula that is being advocated that had been the original community college funding formula, and called for student tuition, state, and local aid to each cover at least one-third. Therefore, this funding philosophy is being proposed in this paper for the allocation of resources to Community Colleges. This formula will be enrollment driven and based on credit hours, students, and fulltime faculty members. Although according to the latest research, states have begun to eliminate funding formulas. There will also be some recent examples given that argue against this elimination (Honeyman, Wattenberger, & Westbrook, 1996, p.61).

Several incidents will be used that have occurred at Community Colleges because of the high tuition and high aid model to add to the argument for the formula being implemented. Some community colleges have either chosen or been forced to adopt this high tuition and high aid model because of decreased funding from state and local authorities. These are not meant to be arguments against the adoption of this model, but used in this paper to rationalize the use of a more formal and equitable way of allocating resources from students, the state, and local communities.

Finally, the implications that community colleges could be moving towards a more corporate and competitive model because of market forces, the reduction of funds from the state and local sources and the increase of funds from tuition, is purely hypothetical. It is meant to address the issue of depending on the revenue of students and viewing them as customers and adopting competitive strategies that address those issues. It is questionable that these strategies will be effective for community colleges in the long term. As a result, some implications of using them as a long-term strategy are given too.

The one third, one third, one third traditional funding model has been used in the Northeast at New York's community colleges, since 1970. By 1992, the state has dropped its share below one third. This has had the effect of causing student revenues to exceed their one-third share (Mc Call, 1999). This underfunding from state and local sources has led the college to rely too heavily on student tuition and aid as a revenue source

Unfortunately, it is a fact that in recent years, college tuition at public institutions has increased rapidly although the causes are often disputable. Some see the increases as being caused inevitability by the decrease in aid from state and local governments. Others see it as inefficiency and the result of unnecessary spending of campus leaders. Still others see it as the rising costs of new technologies, healthcare for employees, and the costs associated with complying with federal regulations (Paulsen & Smart, 2001, p.326)

One occurrence that does prevail for most states is that when the level of state aid decreases, student tuition is used to fill the gap. Putting aside the array of differences, three main factors emerge. States have been unable to increase the aid they contribute to higher education; colleges are spending more money on student services, computer technology, and faculty and administrative costs. Therefore, for community colleges, with the inclusion of providing more remedial services, and a wider array of student services, the result has been increased tuition cost and fees for students.

These reductions have also have left" little money for remedial education reform, counseling to better prepare students for college's challenges and other innovations to improve completion rates. Just 35 percent of community college entrants earn a certificate or an associate or bachelor's degree within six years, estimates say" (Associated Press, 2010). "In nearly every state, higher education is the largest discretionary item in the state budget. Competition is fierce for scarce state tax dollars, and higher education is typically the last item decided in the state budgeting process "(Katsinas, Tolferson, & Rearney, 2008).

The topic of remedial education reform is one that has caused a lot of heated debate and controversy. Most of the statistics of raw high school graduates attest to the fact that the numbers, need and costs will continue to rise for remedial education. Many educators at community colleges have expressed a "concern" over the increasing need for these courses especially in the number of students that will need English as a Second Language (Paulsen & Smart, 2001). In addition, the cost of good ESL classes is high as low student-faculty ratios have been strongly linked to student success (p.483). Unfortunately, as more states are in a bind and have abandoned formulas, remedial education is the first to be cut from budget allocations (p.484).

For instance, at the Community College of Philadelphia, prior to 2005-6, when it had a state and local funding formula, the college received funding from the state for each FTE taught in its non-credit program. Over 80- percent of the college's non-credit courses are in the areas of Adult Literacy, English as a Second Language, and General Education Development. By 2006-7, the formula was abandoned (Act 46) and the state eliminated all funding of non-credit courses. Therefore, the college charged each student a fee of 70 dollars. In 2009-10, the college has made no change to these fees, but evidently has absorbed the cost of instruction although the number of full time students enrolled in these courses increased from 277 to 371 in this fiscal year. Without a funding formula, the state eventually withdrew its support as shortsighted as that might seem.

Unfortunately, over the last 20 years, massive funding cuts have taken their toll in other ways too, and many conditions necessary for an "optimal education" have been allowed to deteriorate to levels that may even endanger the original mission and vision of Community Colleges. For instance, due to drastic reductions in state aid, many community colleges have increased their hiring of part-time or adjunct faculty as a means of cutting costs, but may have sacrificed too much for the sake of cost. The vitality and dedication of full-time faculties may have been lost in the process. In addition, many of the part time faculty that have been hired also have full time jobs limiting their essential role as leaders and mentors for students at Community Colleges although some research has attested to the value of using part time faculty . Most research has found that many part-time teachers are less prone to use innovative teaching techniques or technology in the classroom. In the long term, this may hinder the ability of many community colleges to provide students and faculty with the benefits that could have been gained from advances in instructional technology both inside and outside the classroom

Finally, with the lack of money to maintain major college infrastructures and buildings, the inevitable deterioration of these structures has occurred to the detriment of both students and administrators. "According to a recent 2007 survey by the American Association of Community Colleges, when asked whether the total amount of deferred maintenance had increased or decreased since 2002-2003, 10 respondents (22%) reported significant increases, 23 reported increases (51%), and 12 (27%) reported that the amount of deferred maintenance was approximately the same (Katsinas, Tolferson, & Rearney, 2008). There were no states in this survey that reported a decrease.

In the Northeast, over the last decade, state funding for the CUNY system has declined by 68 percent, and city funding has been cut by 87 percent. Since 1976, "CUNY has lost 5,000 full-time faculty lines. CUNY is an example of the overreliance on part-time faculty, with a deteriorating physical infrastructure and an academic infrastructure of libraries, services, and programs that are in great need of reinvestment" (Scheuerman, 2000)

At another institution in the Northeast, the Community College of Philadelphia one of the largest community colleges in the city, state and city appropriation decisions are causing a "restructuring" of the college's funding. Student revenues have increased from 36 percent to over 50 percent of the total operating revenues over the past decade. Unfortunately, both the city and state percentages of support for the budget have declined, and it is anticipated to decline again in the 2009-10 year. For example, the city was originally budgeted to contribute 4 million more, in 2008-2009, but because of "economic difficulties" reduced that amount by 2 million. The reduced amount is not based on any percentage or formula. The city funding is a lump-sum appropriation, and contains no separate capital allocation. The state funding formula has also been eliminate since 2006

From a financial and political perspective, community colleges may be even suffering more because of receiving "local tax revenues "than "state operated campuses". Often times, "the governor or legislature may choose not to provide increased financial support for them because they assume that some combination of student and local revenues will make up the difference. This in combination with the "lower academic prestige" and "more diffused financial and political support, has often cost the community colleges in the final stages of budget negotiations (Scheuerman, 2000).

Because of the decrease in state and local aid, some researchers have been very concerned about the rising cost of tuition and its effects on low-income students. Many researchers have found that low-income students are much more sensitive to price differences in tuition than are either middle or upper income students. There is also a lot of evidence that African-American students are the most sensitive although the least affected by factors such as loans. African American students also have higher aspirations even after controlling for economic background. Finally, low-income students have more "unfulfilled aspirations" (Paulsen & Smart, 2001, p.430). More importantly, a perception of financial affordability by low-income students has a direct impact on their persistence in school. Therefore, it is essential to consider these differences for poor, or working class students, and their effects on their perceptions of choices and reduced opportunities (p.434).

An argument that may arise against having the state and local aid of one third each could be the implications this may have on the control of programs, objectives, and curriculum by the Community College. This is also a dilemma in the finance of a corporate entity, as it also concerns two ideas that are on opposite sides of the continuum --- risk and control. In other words, if a corporation incurs more debt, because of bonds or raises equity because of getting more stockholders, it also relinquishes control and critical decision making to those holders of the bonds or stocks, but it reduces its risk in the market. The recent bail out by the US government of three large banks echoed this concern. If a company decides to get more of its financing from its operating activities or as is the case of Community Colleges, student tuition, it is more independent as to the way that the money is used, but it increases its risk in a competitive market. Therefore, a swing towards risk can be defined as one that sacrifices external funding for the control that it might impose on the community college

In spite of that argument, most states when combining their need-based aid for lower family incomes with other forms of aid provided almost half of the revenue for public higher education. In light of this fact, most public institutions retained their financial and administrative autonomy (Paulsen & Smart, 2001, p.327). On the other hand, it also has been found that the perception of low-income students of the debt they incur because of this aid in the form of loans, does not have a positive effect on their persistence at college especially in states that have a high tuition and a high loan models (p.431).

The reduction of state and local funds has also caused Community Colleges to become more dependent on student tuition as a revenue source, and as essential element for covering operating expenses. In this process, some Community Colleges may have succumbed to the very same entrapments that many corporation have in the United States. This has created the recent phenomenon of viewing the student as a consumer, and the importance of their satisfaction, creating marketing initiatives, and demand for their product. It also means differentiating their product or programs by using non-price competition. For example, some of the ways a college could differentiate its product offering is through the quality of service, its delivery methods, specific student focus, or any other sustainable competitive advantage other than price. The increased expense of catering to those concerns and demands has also been a recent theme at many community colleges where tuition plays a more important role in revenue generation. Therefore, increased student tuition and getting it also may mean marketing that is more aggressive and non-price competitive in nature. The reality is that these community colleges have been forced to trade market costs for increased revenues (Paulsen & Smart, 2001, p.237).

Therefore, hypothetically, if current tuition were to continue to increase disproportionately, in relation to the funding from state and local sources, it would imply that Community Colleges would begin to act more like businesses using aggressive marketing, serving customer's demands, having competitors, and acquiring new technologies. The word "strategy" seems to have been used very freely at many Community Colleges. In other words, the high tuition and high aid model may also be leading administrators down the path of "competing for shrinking resources" and forming strategies to achieve competitive advantage (Honeyman, Wattenberger, & Westbrook, 1996). In fact, if this is aligned with idea of a profitable company providing distance training such as Motorola or GE , it could be used as an example of the ways a Community College are moving to create "value" by using their resources to "yield more of a competitive advantage"(p. 216). Unfortunately this "competition for limited resources can be an inclement business" (p. 213). Would Community Colleges lose their public support as part of the deal to sell themselves using corporate competitive strategy?

Unfortunately, once a community college has traveled down this dark and narrow passage, it may discover that in the long term, this competitive advantage may be difficult to maintain. When operating in a monopolistically competitive marketplace, the future or the long run effects of a particular strategy should be examined too. In this case, short-term advantages will accrue to community colleges that move into this market first or as leaders. In a few years, many other community colleges in the area or even state and private colleges will have increased their strategic marketing in response to the leader's marketing efforts and successes. Competitive market strategy is difficult to sustain unless a college can continuously exceed the efforts of its competition. In this case, the college may get much more than bargained for in the first place. Other schools may have matched their advances in the area, and may have learned favorable ways to market their product and differentiate it too. If this were to happen, in the long term, this will lend itself to a zero savings or surplus for community college leaders unless they could keep costs from rising faster than the revenue that is being generated from the increased enrollments. In addition, the college would need to remain competitive in the long term. For example, it would need to gather the current information on "market demand" that would allow the development of curricula which could be implemented to maximize demand and earnings. In addition, other information needs to be extrapolated such as the present market demand for instructional technologies and best way to deliver a product to your customers (students). The increased costs, time, and efforts in this pursuit could easily cancel out the increased enrollments and tuition it brings to the college. Therefore, the college may find itself "always chasing rainbows" and forgetting its original mission and purpose in the community (Paulsen & Smart, 2001, p.240).

Recently, the trend in the business has been to measure training for employees and its actual costs and benefits across company functions to measure the Return on Investment of that training. If funds directed to a community college could be viewed as an investment, this concept from corporate finance can be used to rationalize the equal investment of funds by students, the state, and the local community. In this formula or Return on Investment (ROI), the anticipated benefits are measured against the prospective cost to achieve those benefits. In this particular scenario, instead of financial benefits, Community Colleges would be trying to measure the "maximum social gains" over the anticipated costs expended to attain them (Honeyman, Wattenberger, & Westbrook, 1996, p.31). In addition, the Internal Rate of Return (IRR), which is preferred in higher education, would be a gauge of the return on investment instead of the Net Present Value (NPV) that takes into account the discount rate. The NPV is a much more difficult rate to approximate in higher education, but simpler in the world of corporate finance with the many investment opportunities.

In this scenario, in order to calculate the student's investment, you would need to combine the costs of a student's tuition, books, and supplies, with the income they may have to forgo in order to pursue a higher education. The benefits could be assessed using both the monetary gains" and the "social gains" such as creating better citizens who can give back to their communities, less crime and violence, benefits to other individuals, and recognition and appreciation of cultural services. When attempting to measure qualitative benefits such as "social gains" or "non monetary gains", objective measurement becomes a difficult and sometimes, but it is not impossible. It is far easier to measure the anticipated financial benefits or gains in future income compared to the NPV of an investment in higher education because data that is more objective is available on income and educational levels. In fact, data from the American Association of Community Colleges indicates than an average ROI from a community college education is 3 dollars for every dollar invested or 1:3 ratio (Katsinas, Tolferson, & Rearney, 2008). UCLA recently did a study and found that the ROI for an education at its institution was also 33%.

In conclusion, in order to create institutions that embrace our students equally, including many of the new immigrants, we must address some of the tough issues of financial equity and the change of funding since the 90's that have worked to increase student tuition beyond the cost of living increases. Assuming that Community College's goals and motivations are to provide a democratic education, and to form educated citizens, models need to be introduced that ensure that all students have a chance at success in our colleges including those without the economic means or family income available to them.

Devices that depend on state and local governments to contribute equally to Community Colleges may be fruitless in light of political grand standing. They seem to be a perpetual loop and dilemma in state and local governments about appropriations for higher education. It is simply not working. In fact, it may be actually contributing to the deterioration of a community college's vital infrastructures, and their ability to provide an optimal education and technological innovations for students.

Merely, increasing the aid for students whether that is on a federal or private level will not ensure a solid and reliable revenue source for colleges. These funds are also subject to many of the irregularities, politics, and prejudices that have plagued funding from other sources in the past. "Despite the sizable subsidies received by college students, they and their families pay a significantly higher percentage of costs of their education now than they did 30 years ago (Paulsen and Smart, 2001, p.43). Most recently, the New York Times reported, "The price of a college education rose substantially last year, despite a 2.1 percent decline in the Consumer Price Index from July 2008 to July 2009. Hit hard by state budget cuts, four-year public colleges raised tuition and fees by an average of 6.5 percent last year" (Associated Press, 2010).

The formula funding model was designed to serve three main purposes, "the desire to determine adequate funding", "gain stability and predictability in funding levels" and "increase professionalism among college and university business officers (Honeyman, Wattenberger, & Westbrook, 1996, p.53).

The formula is not being advocated as a panacea that will solve all the problems of allocating resources in higher education. Formulas were never designed to recognize or address the subtleties and nuances of the different missions and visions for community colleges. Formulas do provide a more objective means to allocate resources in a state or locally and may provide more equity and relinquish some of the political power plays involved in funding. Finally, compromises will always be part of any process that involves resource allocation (p.85).

Therefore, the only way to keep tuition and cost controlled within the framework of economic inflation and the consumer price index, and affordable for students and families, is to impose the traditional and equitable formula where student tuition, and state and local aid each contribute to at least one-third of the college's operating costs. This will also control the tendency of state and local authorities to anticipate that the funds they are not contributing now will be somehow be made up or compensated for by another entity. The ongoing joke in New York when three people are seated at a table at an expensive restaurant is "let each one of us leave in a hurry, and on the way out point to the maitre de, and say, "he will be paying the bill".

As a nation, and leaders of community colleges, we must ask the question of what are the financial implications of rising tuition costs: in the context of broader issues of social justice and economic opportunity. How inclusive a nation are we? Do we really seek "liberty and justice for all"? Where do we draw the lines, build the barriers, and deny access?

These difficult financial times may also require us to deepen our understanding of these barriers, knowing that other models need to be taken into account that have worked well in the past, and may better address the intricate complexities of education and opportunity in this society. Educator Henry Giroux once stated, "Democratic societies are noisy. They're about traditions that need to be critically reevaluated by each generation" (1992) Therefore, we may need as leaders to make noise, to continue challenging the status quo, and to dismantle systems of exclusion based on economic status in this country. We need to do this in order to make room for new voices and ideas and for them to flourish. We need to do it to prepare a new generation of students to become better-educated and better citizens. These are the very same ideals that this nation was built upon --- equity, freedom of thought, and new ideas that formed a democracy to make all of these possible for every citizen in this nation.

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