NOTE: The following DRAFT materials represent the individual work of Task Force members consolidated and shared here for the first time. This distribution is intended to facilitate discussion during the October 12 webinar. Task Force members are asked to review the contents below and be prepared with questions and improvements. This activity represents the first round of an iterative process. It is expected, therefore, that the final version of this document will represent the efforts in the coming weeks to significantly refine and expand the depth and breadth of recommendations.

Task Force members are reminded that they shall not communicate with each other to discuss the contents herein or related topics outside of a publicly noticed phone call.

Tuition DRAFT Recommendation Starting Discussions:

The circumstances confronting the nation’s public colleges and universities, especially the major research universities, are best described by the following statement. It is from an article by David W. Breneman, published in a report by the Association of Governing Boards of Universities and Colleges:

“Clearly, the relationship between public higher education and state government is in flux in ways not seen for decades. The general pattern is one of reduced state support, followed by sharply rising tuition and arguments for less state regulations.”

In the June 2012 edition of the publication, Governing, there is an article by Peter A. Harkness titled, “The Greatest Public Universities in America are at a Tipping Point.” The article contains the following statements:

“The rate of decline in most states for funding their university systems is stunning. Currently, states are spending 20 % less in inflation adjusted dollars on higher education than a decade ago.”

“A five year drop in state support has left funding levels for higher education lower in 29 states than it was in 2006-07.”

“Collectively states spent $90 billion on their public universities in fiscal year 2009, accounting for about 30 % of total revenue, according to Moody’s Investors Services. That is down from a 50 % share two decades ago, and it is continuing to drop.”

Large flagship universities are said to suffer most from these reductions. For example, Reuters.com (7/19/2012) reports that “Institutions such as Penn State, Ohio State, and the University of Michigan now receive less than 7% of their budgets from state appropriations.”

Elsewhere, the University of California at Berkeley is reported to receive approximately 11% of its revenue from state appropriations, and the University of Virginia receives approximately 7% from state support.

Florida’s public universities must contend with some of the more severe challenges. It is reported that Florida’s universities have lost 25 percent of state support in four years (Governing, June 2012).

In a recent edition of The Chronicle of Higher Education, Florida is reported to be among the 19 states that in FY 2011-12 had reductions for higher education in excess of 10.1%. In the 2011 edition of Florida Featured Facts, published by SREB, Florida’s funding per FTE, adjusted for inflation, declined 20% between 2007-08 and 2009-10, as compared with an average decline of 9% among the other 15 Southern states.

Florida’s public universities must contend not only with reductions in state support, but also state restrictions on tuition increases. While major research universities in other states confront losses in state appropriations few, if any, have both major appropriation reductions and comparable limits on tuition. The following comparison highlights Florida universities’ disadvantage.

Institution Tuition

Florida State University $6,403

University of North Carolina $7,694

University of Maryland $8,909

Georgia Tech $10,098

University of Virginia $12,224

University of Florida $6,170

Ohio State University $10,037

University of Wisconsin $10,580

University of Michigan $12,994

Penn State University $16,006

University of Illinois $14,960-$19,880

Florida State University is compared with member institutions of the Atlantic Coast Conference and the University of Florida with member institutions of the American Association of Universities. In fact, both universities compete with all of the listed institutions and many more, such as the University of Michigan ($13,154) and the University of Pittsburg ($15,282 to $19,802).

Apart from a low tuition rate that places Florida’s universities at a distinct disadvantage, the University System of Florida suffers from what is essentially a system-wide tuition cap. Such a restriction has not been found in any other state. What is generally prevalent and certainly more logical is illustrated below.

VIRGINIA TUITION AND MANDATORY

FEES FOR FULL-TIME UNDERGRADUATES 2011-12

Institution Tuition & Fees

Virginia Military Institute $13,184

College of William and Mary $13,132

University of Virginia $11,576

Longwood University $10,530

Virginia Tech $10,509

Christopher Newport University $10,084

Virginia Commonwealth $9,517

George Mason University $9,266

University of Mary Washington $8,806

Old Dominion University $8,144

UVA-Wise $7,721

Radford University $7,320

Virginia State University $7,090

Norfolk State University $6,690

Average 4-Year Institutions $9,534

The tuition rates for FY 12-13 at Florida’s ten universities have been obtained by telephone and are as follows.

FLORIDA TUITION AND MANDATORY FEE FOR FULL-TIME UNDERGRADUATES

Florida International University $6,414

Florida State University $6,403

University of South Florida $6,334

University of Central Florida $6,247

University of West Florida $6,239

University of North Florida $6,235

University of Florida $6,143

Florida Atlantic University $6,140

Florida Gulf Coast University $6,068

Florida A & M University $5,775

The Virginia system average for FY 1011-12 is approximately $3,471 more than the Florida universities’ average for FY 2012-13. The University of Virginia’s tuition rate for FY 2012-13 is reported to have increased by $648. Consequently, a systems comparison for comparable fiscal years would show an even greater difference. For example, the difference between tuition at the University of Virginia and the University of Florida in fiscal year 2011-12 was $5,950. For the current year it is $6,084.

Another example may further illustrate the point. In 2009-10 the University of Virginia’s base tuition was $7,936. The percentage increase for 2010-11 was 11.1%, which provided an increase of $881, resulting in a tuition rate of $8,817. In 2009-10 tuition for universities in Florida was approximately $4,886. Assuming the maximum permissible increase was applied, the resulting tuition rate would have been $5,619. Thus, in 2009-10 tuition at the University of Virginia was $3,050 more than the University of Florida’s. In 2010-11 the difference increased to $3,798.

As clearly revealed in the 2011 OPPAGA study, Florida’s 10 universities differ significantly. They differ in terms of mission, size, age, student characteristics, programs, endowment, research capacity, and other such measures.

A few examples should suffice to illustrate this point. The average SAT for entering freshmen ranges from 1463 to 1914, with seven averaging below 1800 and three above. Doctorates awarded range from 0 to 841, and total research expenditures in diversified non-medical sciences range from $4 million to $457 million. In almost every significant category there are wide ranges, making difficult the justification of a system-wide tuition rate.

Florida applies a tuition pricing policy that does not appear to be the practice in any other state. It would be interesting to study the origin and effect of such a practice upon the various institutions, but it is certain that it is most damaging to major research universities. The University of Florida’s base tuition is the lowest among the Association of American Universities, and tuition at all ten institutions is among the lowest in the nation.

While other major research universities elsewhere in the nation must struggle with reductions in state support, few, if any, must content with both declining state support and tuition caps such as Florida’s major research institutions confront.

For example, between 2007-08 and 2009-10, state appropriations in Florida fell 19% or $443.3 million. Tuition increased 22% or $202.2 million, resulting in net loss of $241.1 million (SREB State Data Exchange). This past year, the reduction in state support was $300,000,000, and rather than the usual 15% tuition increase, the two foremost research universities were limited to 9%.

If the foregoing conditions persist, it should be understood by all interested parties that Florida’s research universities and, to a lesser extent, all of its institutions are vulnerable to “raids,” some of which have already occurred.

In the June 12 edition of Governing, it is reported that a short time ago, the University of North Carolina at Chapel Hill could retain at least 70% of faculty being recruited by other institutions. The success of that retention effort has now declined to 41%, and it is noted that “when they leave, they take their grant money with them.”

Chancellor Holden Thorp warned in his annual address in the fall of 2011 that the “word is out in higher education that the University of North Carolina and some other flagship public campuses are vulnerable to faculty raids.” If UNC is vulnerable, it is prudent to believe that Florida’s universities are even more vulnerable.

What too few appear to appreciate is that once an outstanding research program and the related disciplines are established, if these are permitted to decline, they cannot be re-established overnight. It will require sound strategy, adequate financing, and hard work, and at present, Florida can muster only one of the three.

There is, of course, the question of affordability, and it seems that no matter how many affordable opportunities are expanded throughout the state, the issue continues to impede Florida universities’ research capacity. Since 1957, Florida has established seven universities and 28 community colleges, with 66 campuses, and 181 sites. Of these 28, 25 offer a four-year degree. As of FY 2011-12, the tuition rates at all of these institutions, colleges and universities, were below the national average.

In regard to affordability within the university system, a recent S.U.S. report indicates that a student from a family with an income of $40,000 or less will receive financial assistance in excess of tuition ranging from $657 to $4,481, depending upon the university in which the student enrolls. A student from a family with an income of $100,000 or more will pay a tuition rate ranging from $235 to $2,607, again depending upon the institution selected.

Given that affordability is, at best, a relative concept, it is evident that Florida is in position to give all institutions some tuition relief and to give its major research universities major relief. At any given time, only 10% or less of Florida’s undergraduate population will be attending either the University of Florida or Florida State University. Access to these two institutions is far more a matter of academic qualifications than it is a financial obstacle.

If it is assumed that university research is vital to the revitalization and diversification of the state’s economy, and if it is assumed that state support will continue to decline or, at best, stabilize, the question is what strategy should the state and the universities pursue.

There are several options currently in practice. They range from privatization, to “state related” status, to tuition differentiation by divisional level or by discipline, or by both. A questionable approach is to substantially increase out-of-state tuition; however, there is a limit to the population of out-of-state students capable of paying the necessary tuition, and it is a select group of institutions that can rely upon this approach as a lasting solution. The out-of-state option can be extended to foreign students, as the University of Washington is reported to be recruiting Chinese. The question remains, however, to what extent and for how long will such a practice suffice.

Privatization will confront political opposition, but may become more a matter of fact than of policy. As state support declines as a percentage of a public university’s revenue, the question arises as to how much regulatory control the state should retain.

As stated previously, institutions such as Penn State, Ohio State, and the University of Michigan are reported to receive less than 7% of their budgets from their respective states. The University of California at Berkeley receives approximately 11% of its revenue from the state, and the University of Virginia receives 7%. These institutions, however, do not appear to have attained the regulatory relief afforded “state-related” institutions in Pennsylvania such as the University of Pittsburg and Temple University.

Neither privatization nor state-related status seems to afford a reasonable option for Florida at this time. Thus, differential tuition is presently the most promising solution for Florida’s universities. There are a number of different approaches.

The University of Texas charges liberal arts majors $9,346 and business majors $10,738. The University of Wisconsin has a base tuition of $10,580, but adds $1,000 for undergraduate business and $1,400 for undergraduate engineering. The University of Pittsburg’s tuition for in-state students ranges from $15,582 to $19,802 with higher rates for dental medicine, nursing, health and rehabilitative services. Likewise tuition rates at the University of Illinois range from $14,960 to $19,880.

Some institutions have differential rates for lower and upper divisions in combination with differential rates for specific majors. Ohio State’s tuition and fees may vary by major, college, and area of study.

Even if economic conditions should stabilize or slightly improve, the prospects for significant increases in state support are dimmed by the rising costs of Medicaid, welfare, K-12 education, and retirement programs, all of which have priority over higher education. While tuition increases are not well received, the opposition pales in comparison with significant reductions in Medicaid, K-12 education, and retirement programs.

Fortunately, or unfortunately perhaps, Florida is so far behind in its tuition rates that there is ample room for increases even before approaching the national average or the Association of American Universities institutions’ average. Differentiation facilitates the allocation of funding to both high-need and high cost disciplines, and reduces the necessity of shifting resources from low cost to high cost programs. Properly implemented, it could constrain large increases in tuition for low cost programs.

RECOMMENDATIONS

The following recommendations are grounded in the issues and related data set forth in the foregoing text.

I. It is recommended that the state abandon the present tuition policy which essentially locks all universities into a very narrow range of base tuition rates.

II. It is recommended that the state forego the 15% rule, as it is inconsistent with the above and following recommendations.

III. It is recommended that the Boards of Trustees be given considerably more authority in determining tuition rates for their respective universities, with the provision that the recommended rates must be consistent with Board of Governors guidelines and with the universities respective mission.

IV. It is recommended that in the development of annual budget requests and the related tuition rates, Boards of Trustees must first attend to any system metrics and prescribed standards that their respective institutions have yet to attain.

V. It is recommended that universities having met system-wide metrics and standards may submit requests for funding and related tuition increases for outstanding academic programs and promising research activities.

VI. It is recommended that university Boards of Trustees be given the authority, consistent with the provisions of Recommendation III, to prescribe differentiated tuition rates by academic division, class, and discipline or any combination thereof.

VII. It is recommended that, within a time prescribed by the Board of Governors to be no later than 1 July 2016, the state’s foremost research universities as designated by the Board of Governors be permitted to adopt a base tuition rate equal to the average base rate of the Association of American Universities and that the remaining universities be permitted to attain the national tuition average by this same date.

Governance DRAFT Recommendation Starting Discussions:

Framing the recommendations:

State funding for higher ed has dropped significantly over the past several years as a result of budget shortfalls. In response, the legislature approved differential tuition up to 15% per year, with the responsibility for approving such increases delegated to the BOG.

Differential Tuition has become the “plug” for the universities’ shortfalls. BOG is constitutionally charged with ‘governing’ the SUS. However, other than

differential tuition and fees, the BOG does not control funding of the universities, and funding of specific universities is still largely determined by individual universities advocacy to the legislature and the executive branch for university-specific initiatives.

In this sense, tuition and state funding are inextricably tied to governance. In practice, the BOG cannot govern the SUS when it does not control the funding of its university members

Tuition has increased to the point where it is now 50% of the funding of higher ed for the first time ever, due to the aforementioned budget cuts and the resulting differential tuition/fee increases.

The BOG has made significant strides in developing a long term strategic plan (i.e., thru 2025), based upon:

o Quality (i.e., graduation and retention rates)o Efficiency o Return on investment (i.e., STEM degrees, etc).

In establishing an efficient, effective SUS, BOG has to balance establishing an overall strategic plan that avoids duplication of programs, focuses on STEM and other degrees that drive post-graduate employment and economic development, while enabling individual universities to fulfill their unique missions/niches based upon geography and core competencies:

o Urban serving universities must answer the call to access, including growth resulting from the very successful 2+2 program with Florida colleges.

o Research universities that can drive attraction of business to Florida and economic development must attract nationally recognized faculty that have been fleeing Florida universities due to budget cuts.

o Smaller universities with locally-focused missions add to the enhancement of economic development in their areas.

Recommendations:

The Legislature should provide lump-sum funding to the Board ofGovernors so it can effectively tie university funding to the SUS long term strategic plan and university workplans and reward improved performance on key metrics determined to serve the SUS strategic plan.

o Legislature would consult with BOG in evaluating and accepting BOG funding request based upon its adherence with the agreed-upon strategic plan, instead of reviewing and acting upon 12 separate funding requests of individual universities (which essentially undercuts BOG’s ability to implement the SUS strategic plan).

o Lump-sum funding should be based upon a proactive determination of the appropriate level of funding per student, and the appropriate ratio between state (taxpayer) funding and tuition (student), without regard to financial aid levels that are used to downplay the impact of tuition increases. Such funding level should then become a priority for legislative funding.

o Lump sum funding should also include guaranteed funding of BOG administration to ensure that the BOG has the independence and resources to fulfill its constitutional mission.

The Board of Governors should continue to enhance its metrics-basedaccountability framework to ensure maximum return-on-investment for its students and the State of Florida. Specifically, BOG’s oversight of work plans should include:

o Universities should align their strategic plans with the Board ofGovernors 2025 Strategic Plan for the State University System.

o Ensure that each university identifies its top educational and research priorities and shows how they support the state system objectives through its unique mission, with a view toward eliminating unnecessary duplication of degree programs.

o The State University System should continue its growth of STEM and other degree programs that support the State's greatest economic needs.

o The BOG metrics should include the achievement of meaningful research: Research focused on impacting local/state challenges and

opportunities Research focused on driving economic development:

Attracting business sectors to Florida

Retaining talented graduates in Floridao BOG should recognize and reward development by universities of meaningful

alliances with the private sector that: Enhance ‘business-ready” learning Create post-graduate employment for students engaged in such

alliances Leverage private sector resources to subsidize higher ed

o BOG should continue to incorporate nationally-validated metrics, including peer metrics and private sector studies re efficiencies to ensure return on investment, including the efficient use of facilities capacity

o BOG should incorporate expansion of onlinedegree opportunities to align with technology and increase access to higher education in an efficient and cost-effective manner

SUS and Florida College System should meet annually for the purpose of agreeing on long term components of their respective higher ed strategic plans to ensure consistency of mission and purpose across sectors of higher education, especially in light of 2+2 program graduates.

Accountability DRAFT Recommendation Starting Discussions:

For the next 5 years, Florida universities will:

Establish and maintain an Eminent Degree Program (pick another name; but, 6 digit code) designated as such by BOG based on the following eligibility; 50% of eligibility criteria established by BOG\50% of the eligibility criteria composed of a degree employment rate of 70% or higher in jobs at or above the high skill, high wage ,high demand threshold. In addition, Eminent Degree Programs that keep tuition at or below CPI-U each year would be eligible for a bonus 2X tuition increase ( university BOG approved tuition increase MINUS CPI-U) state allocation (capped).

Participate in the Performance Funding allocation process designed to meet high demand, high wage and high skill careers existing in Florida’s’ broad economic landscape. The Performance Funding awards to universities will be managed by Florida’s BOG under the following guidelines:

A.)Legislative process will determine targeted Performance Funding categories

B.)BOG will determine criteria for selecting award recipients with two constants in the formula:

1.)Minimum award 20% of allocation and 2.) Continuous 2nd and 3rd year funding for initial award recipients based solely on tuition increases of only CPI-U for year 2 and 3 in the program .

As always, we will have to do a budget analysis as Florida’s revenue picture becomes clearer.