By VICKI GERSON
State share of funding determined last
Community College Finances:
Who'$ on first?
THE EMERGENCE of a strong community college system is the most important event in Illinois education in the last 16 years. The community colleges have increased their enrollments, varied their course programs, gained community acceptance and are generally considered to be successful educational institutions. But from a financial point of view, they are in trouble. Their revenues from property taxes vary depending on changes in assessed valuation, and their revenues from tuition may change if enrollment drops — or increases. Unlike other public institutions of higher education, individual community colleges do not receive direct state appropriations by programs. Instead, a system-wide appropriation is passed to help support all of the educational operating costs. There are no line items for specific programs, administrative costs or faculty salaries. No college receives an appropriation as a percentage increase from the previous year's state appropriation. To receive its share of what is appropriated for the system, an individual college district must file claims every term. Claims are based on enrollment and the types of courses taken. Different types of courses are worth different amounts of state aid. If fewer students than predicted take the higher priced courses, the college may be in big financial trouble since both its state aid and tuition will be less than estimated. The community colleges also receive income directly from local property taxes in their districts, much like local school districts. Finally, they receive tuition from their students, much like the state's universities. But, when it comes to state funding, community college support depends on complicated formulas. The worst experience to date for the system was in fiscal 1976. In that year the state appropriation was based on an enrollment of 145,000 full-time equivalent students, but the actual enrollment was 17 per cent over the estimate. Usually, a supplemental appropriation is passed to cover such a deficiency, but state funds just weren't available to cover the costs of the unpredicted enrollment surge that year. The result was that the community colleges received a prorated share of the appropriation and not what was due to them based on the formula rate. In the previous year, the appropriation also was deficient and a supplemental appropriation of $10 million was passed, but that still left the colleges $6 million short in "promised" funds. By fiscal 1977, the enrollment surge was over and, in fact, not all of the appropriation could be claimed. The public community college system came into existence on July 15, 1965. There are now 39 public community
VICKI GERSON
July 1978/ Illinois Issues /11 college districts operating 51 colleges. In the fall of 1977, there were 533,715 students enrolled in courses or programs at all the community colleges. Enabling legislation allowed districts to be formed to provide the following educational services: 1. the traditional college education in liberal arts for freshman and sophomore students; 2. technical, vocational, occupational and career education; 3. general studies programs; 4. noncredit adult continuing education; 5. community service activities; and 6. student services. Ninety per cent of the educational programs offered by community colleges are associated with the first three educational services. Governing the system Each district has an elected board of trustees except in Chicago and East St. Louis. The Chicago board is appointed by the mayor with consent of the City Council; the state operates and totally funds the East St. Louis College, whose board is appointed by the governor with consent of the Senate. The entire system is coordinated by the Illinois Community College Board (ICCB), which has eight members appointed by the governor, one designated by the Office of Education and one non-voting student member. This board, in turn, is governed by the Illinois Board of Higher Education (IBHE), which makes budget recommendations to the governor for state funding of all higher education, including the community college system. The IBHE has 10 members appointed by the governor, five representing higher education institutions (one from each system) and a non-voting student member. The IBHE also approves changes in educational programs at the community colleges and the universities. Although this system cuts off direct communication between the individual schools and the governor and General Assembly, there are cases when a university or community college has gone directly to a state representative or senator to sponsor individual bills — usually to appropriate money for construction. The strongest community college lobbying group is the Illinois Community College Trustees Association (ICCTA), formed in 1971. There is also a council of public community college presidents plus statewide associations of faculty and students. Funding the system The state's initial promise was to fund 50 per cent of the education operating costs of the community college system, as recommended in the 1964 Master Plan of the IBHE. The state never fulfilled this promise. The state now promises to fund that portion of the educational costs system-wide which local property taxes and tuition cannot pay. This recommendation was made in 1975 by a Blue Ribbon Committee of the IBHE, but the community colleges are not satisfied with the state's interpretation of the plan. In the spring of 1977, the ICCB, trustees association and presidents' council jointly formed an Ad Hoc Committee. Critical of the state's funding effort, the Ad Hoc Committee contended that the state rates based on credit hours had actually declined while inflation had pushed costs up 30 per cent during the period from fiscal 1974 through fiscal 1977. The committee emphasized that local tax revenue per student during the same period had diminished since property tax assessments had not kept pace with enrollment growth. The only alternative was to increase the third basic source of revenue: tuition. The committee reported that all but seven districts during the same period were forced to raise tuition. The total budget for all community colleges for fiscal 1978 is $285,136,681. The state's share is 40 per cent or $113,151,098; local taxes account for 37 per cent of the total revenues at $105,778,097, and tuition totals 20 per cent or $58,597,020. The remaining 3 per cent of the 1978 revenue is $2,812,552 from federal funds (1 per cent) and $4,797,914 from other local revenue sources (2 per cent). The percentages of the total educational expenditures from each source have stabilized since fiscal 1973, when local tax revenues accounted for 45.5 per cent, state funds were at 34.8 per cent, tuition at 15.6 per cent, federal funds at 2.3 per cent and other sources at 1.8 per cent (see table 1). There are other state funds going to the system which the community colleges and the ICCB do not consider as direct state funds. Not included are the annual appropriations by the state for its share of pension funds to the Universities Retirement System; for fiscal 1978, the amount estimated by the governor is $5.1 million for the community college system. Also not included are the appropriations made annually for the Illinois State Scholarship Commission and the Department of Veterans Affairs for scholarships awarded to community college students. For fiscal 1978 the amounts estimated by the governor to be awarded to community college students include $6.6 million for veterans scholarships and $7.1 million for other scholarships. The governor considers these funds as part of the state's share of the community college funding. The state's share of direct funding for education at community colleges comes from three types of grants — credit hour grants, disadvantaged student grants and equalization grants. Credit hour grants provide state support for part of the education costs of a community college. These grants account for the lion's share of state support of the education at the community colleges. To derive the amount the state will — or should — appropriate in credit hour grants, all other sources of revenue (including the state grants for disadvantaged students and equalization aid) are subtracted from the
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projected total education budget (see table 2). The total revenue for instructional programs in fiscal 1979, according to the governor's recommendation, is $305,585,900, which is less than the IBHE originally projected and much less than what the ICCB projected. The governor's revenue figure is based on his projected enrollment of 173,900 full-time equivalent students for fiscal 1979; the ICCB based its revenue figure on an enrollment of 177,300 full-time equivalent students. Full-time equivalent or FTE students are "formula" students. Since community colleges have a tremendous number of part-time students (approximately 71 per cent), the basic unit used in budgeting is the credit hour cost. All courses taken by students during a year are multiplied by the credit hour value of the courses. The "formula" FTE student lakes 30 credit hours of courses during one year; thus, total credit hours are divided by 30 to determine the full-time equivalent enrollment. The community colleges also calculate their education costs on a credit hour basis, which is multiplied by 30 to show the unit cost per FTE student. The unit cost used to estimate the revenues needed for the 1979 fiscal year is based on data from fiscal 1977, the last year for which complete figures from audited reports are available. The community colleges crank all their education costs —administration, faculty and other personnel, library and other services, plus maintenance and other overhead — into the calculation of the educational unit cost per credit hour. There are no line items for these costs in the appropriations bill. The unit cost for fiscal 1977 was $53.18 per credit hour (times 30=$1,595 per FTE student). To allow for inflation and other marginal costs during the 2-year period since fiscal 1977, an additional 9.93 per cent (or 5.28 per credit hour) is tacked on to the fiscal 1977 unit cost. Besides the base unit cost and inflation adjustment, the projected revenue needed for fiscal 1979 includes a small amount for new program development and program improvement. The amount is calculated at $.12 per credit hour. This item for program development or improvement has caused some complications. Since community colleges do not receive appropriations for specified programs at designated campuses, as do universities, they have a harder time justifying new costs. The unit cost ($58.13) plus the inflation adjustment ($5.28) and new program development cost equal the overall average unit cost of $58.58 per credit hour ($1,757 per FTE student). This amount multiplied by the total projected FTE enrollment provides the total projected revenue needed for instructional programs for fiscal 1979: $305,585,900. Securing state funds Even more difficult than estimating costs by using this confusing formula is coming up with the funds to meet the projected costs.
Estimated revenue available from property taxes in fiscal 1979 for all community colleges is $87,416,000. This figure was derived by multiplying the median education tax rate ($.18 per $100 assessed valuation) of the community colleges by the total assessed valuation of the districts. Because tax rates and assessed valuations differ among the community colleges, the revenue produced from property taxes per FTE student also varies tremendously. To assist poorer districts whose tax effort cannot bring in a minimum qualifying amount per FTE student, the state provides aid through the equalization grants. Equalization funding has been provided to community colleges since fiscal 1972. For fiscal 1979 the amount recommended by the governor for equalization grants is $10,355,800, which is more than the ICCB recommended. These funds will assist 12 districts; the ICCB proposal would have assisted nine. Estimated revenue from tuiton available for fiscal 1979 is $67,821,000. This revenue was computed by multiplying the projected FTE student enrollment by the average tuition ($13 per credit hour) charged by community colleges. Other sources of local revenues from contributions or donations for education programs in fiscal 1979 are estimated at $2,330,000 statewide. Community colleges also receive federal grants for educational programs; the total estimated for fiscal 1979 is $12,831,600 for all community colleges. The third type of state grant directly appropriated for community colleges is disadvantaged student aid, which was first appropriated in fiscal 1973. It is provided to enable colleges to offer special counseling, tutoring, testing and remedial-developmental courses for educationally disadvantaged students. The total recommended appropriation for fiscal 1979 is $3,800,000 for all colleges. The last type of revenue available to community colleges for educational programs is indirect state funds. The Division of Adult Vocational-Technical Education (DAVTE), the Illinois Office of Education (IOE) and other state agencies provide grants to individual colleges to support designated education programs. The revenue estimated for fiscal 1979 from these sources is $9,800,000 in grants from DAVTE, and $9,036,000 from IOE and other state agencies. All of these revenue sources — property taxes, equilization grants, tuition, local contributions, federal grants, disadvantaged student grants and grants from DAVTE and IOE — are subtracted from the $305,585,900 in revenue needed to meet the system's education budget in fiscal 1979. The remainder is $102,195,000, the amount recommended by the governor for the credit hour grant appropriation. The question now is whether the July 1978/ Illinois Issues /13 General Assembly will pass the $102,195,000 appropriation for credit hour grants. Since other parts of the community college revenue are from other state appropriations, such as the Illinois State Scholarship Commission and Division of Adult Vocational-Technical Education, the community colleges must also hope that these items pass at the recommended amounts. The estimated cost for new programs and program improvement may also be reduced or even eliminated, which could reduce the total appropriation for credit hour grants. The governor has already recalculated the projected FTE enrollment upon which his recommendation is based for the credit hour grants, and the communities lost some funds when he did. If the General Assembly approves credit hour rates that will provide the $102,195,000 but recommends lower amounts for the other community college items, the colleges will come up short. Similarly, if tuition or property tax income declines, the $102,195,000 will not be enough, since this figure is based on tuition and property tax estimates, not assured income. While planning for courses, salaries and new programs for fiscal 1979, the community colleges don't know what the final state appropriation will be. They also don't know what the rates will be for disbursal of the credit hour grants during fiscal 1979. Disbursing the grants When the General Assembly approves the appropriation for credit hour grants, it must also approve legislation setting the formula rates for disbursal of the grants to the individual colleges. Claims are made each term for state credit hour aid based on actual FTE enrollments in the various types of credit courses. For fiscal 1978, the General Assembly failed to pass the bill setting the rates and the community colleges could not get their credit hour aid. The attorney general had ruled that the appropriation could not be disbursed by the ICCB until legislation was enacted. The bill was finally passed in November 1978. During the first years of state funding of community colleges, the General Assembly set flat rates for credit hour grants. By fiscal 1972, the flat grant rate was $15.50 per credit hour. In fiscal 1973 an additional rate was set to pay more aid for high-cost courses, such as those in medical technology programs. The two rates evolved into five, set according to different education programs. Starting in fiscal 1977, there were 16 rates. Eight of the rates applied to claims per credit hour up to the point when a college reached its FTE enrollment of the previous year. For enrollment growth beyond that point, the rates for the eight types of courses dropped to 70 per cent of the full rates. These separate growth rates are still used. Obviously, this is a very complicated method of disbursing the state apportionment to the individual colleges. Recommending changes The Illinois Community College Board and the Ad Hoc Committee composed of trustees, presidents and ICCB members recommended to the IBHE in December that the state return to the 50 per cent funding plan. Instead of using a statewide tax rate to compute estimated revenues from property taxes and a statewide average tuition rate to estimate revenue from that source, the Ad Hoc Committee recommended that the total education budget revenue be split 50-50. The local community colleges would pay their half from tuition and tax revenues, and the state and federal government sources would pay the other half. The Ad Hoc Committee also recommended that basic credit hour grants, equalization grants and disadvantaged student grants be appropriated to the ICCB and then allocated by the ICCB by formula to each community college district at the beginning of the fiscal year. A list of the proposed allocations would be issued prior to the appropriation process. This list would identify the specific dollar amount for each of the three types of grants for each community college district. The list would be distributed to the IBHE, the governor's Bureau of the Budget, the General Assembly and other interested groups prior to the introduction of the appropriations bill. The allocations would be provided to each district even if enrollments decreased in that fiscal year, but in a case where enrollment had declined, an adjustment would be made during the next fiscal year. These recommendations and others were not approved by the IBHE. One recommendation to ease the cash flow problem at the community colleges is being worked out between the ICCB and the IBHE. If adopted, the colleges would receive their aid from the state on a quarterly basis. This might help the cash flow problem for community colleges — some have had to borrow funds because state aid has been slow to reach them.
Although the Ad Hoc Committee favors a 50-50 split between local and state revenues, it did not recommend a 50-50 split on disbursal of credit hour grants. Instead, the committee supported the IBHE Blue Ribbon plan of five variable rates for different types of programs and the 70 per cent enrollment growth factor. A 50-50 split on disbursal of funds would mean that the variable rates would be dropped. Instead, the cost of a credit hour would be split. If the cost were $60, the college would pay $30 from its local sources and the state would pay the other $30. Some community colleges are in favor of the 50-50 split in disbursal of funds. Fred Wellman, executive director of ICCB, said, "The most equitable funding plan for the community colleges from both the local and state perspectives would be a 50-50 split for calculating both revenue requirements and for disbursal of the credit hour grants." The Ad Hoc Committee had basically returned to the promise of the 1964 Master Plan: "[The] state share [shall] be approximately 50% of the average operating costs of the ... system." James Furman, executive director of the IBHE, said, "The state's job is to actually provide the money that it actually costs to operate the programs, and the 50 per cent factor is not relevant. The 50 per cent issue is an emotional factor and not pertinent to the question of how much the state must provide to meet the costs of the program." 14/ July 1978/ Illinois Issues Dr. Harold McAninch, president of Joliet Junior College and chairman of the Illinois Council of Public Community College Presidents, said, "The concern I have about the funding program at the present time is that its unworkable and continually manipulated to be acceptable to all constituents. Since it deals in averages only, institutions are greatly harmed. Joliet would be in dire financial straits, except we passed a tax referendum last year." According to Dave Viar, executive director of the ICCTA, today's formula is tied to the resource requirements, and, in effect, "If you must raise tuition or raise taxes that increase the local money available, that allows the state to drop the amount of money it must provide. The burden is shifting to the local taxpayers and the students who must pick up the cost for the programs that we [ICCTA] feel have a benefit toward the entire state." Viar fears that because of a shortage of available state funds, the state may adopt an attitude of leaving the local taxpayers responsible for bearing the burden of supporting the community colleges. Viar believes that community colleges must push the legislature for more state money or at least force it to recognize there is a problem. "The community colleges really need to have a definite commitment from the state. The state must give a certain dollar figure and not be vague in its financing," said Viar. Instead of the current situation where colleges must justify their share of state funds each year based on FTE enrollments, Viar would prefer that community colleges be funded the same way the rest of higher education receives funds. As Viar explains, "Universities are funded on a 'need for more' basis. If you received $25 million last year, next year you get a 7 or 8 per cent increase over that. State money also goes to private colleges as flat grants or state scholarships. Yet, community colleges serving approximately 533,715 individuals are on a 0-based budget." The community colleges are the new kid on the block. They must compete for higher education dollars with the public and private universities. But it takes time for a new system to gain the understanding, tradition and respect the community colleges so desperately want. It has taken time for the system to build its image and to explain its goals — providing education that is "different" from that of the traditional institutions of higher education. The funding sources for the community college system appear to be precariously balanced on shifting revenues from property tax revenues, tuition and state aid. The variables which the colleges must use each year to set their education budgets appear to be less than desirable. Before anyone knows what the General Assembly has passed, new programs must be approved and tuition set in time for publication in the college catalogs for the next year. Salaries must be approved and raises granted before knowing exactly what the state will pay. Assessed valuation may go up or down, resulting in more or less tax revenues than first projected. And finally, the students must enroll. If any of these budget factors vary too much, a community college may be in real financial trouble. Some community colleges are already in trouble, others are at the edge, and all are tired of the way the state figures its share of funding them.
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