The Palmetto Insider

The blog of the South Carolina Policy Council

Higher-Ed Summit a Good Start, But More Work to Do

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Last week, the governor, lawmakers, higher-education administrators and concerned citizens gathered to discuss state funding for higher education.

Much of the dialogue predictably focused on state spending on higher-education. This is important, but only part of the picture. Left out was:

The overall increase in funding over the past 10 years, especially owing to increased federal funding and increased Other Funds/fine and fee revenue;

The heavy debt load currently carried by our universities and colleges;

And, finally, a focus on educational outcomes.

Total Higher-Ed Spending Has Increased 10 out of 10 Years:

As we wrote in our newest report on higher-education in South Carolina, although General Fund appropriations on higher-ed have declined, federal funding and fine/fee funding has steadily increased over the past 10 years.

  • Total higher-ed appropriations increased from $1.779 billion in FY01-2002 to $3.349 in FY10-2011.
  • Total state spending on four-year public higher-ed institutions grew 10 out of the past 10 years, when all types of funds are combined.
  • The percentage of General Fund spending on higher-ed in South Carolina is among the highest in the South.
  • Administrative spending has outpaced instructional spending over the past 10 years.
  • At the same time, undergraduate tuition rates have skyrocketed 133 percent from an average of $4,275 a year to $9,958 a year.

Debt Exceeds $1 Billion

  • The university system already has an outstanding debt of more than $1 billion in South Carolina’s Higher Education Fund.
  • Current and future interest payments for this debt come to about $500 million.
  • Even since the beginning of the recession, debt incurred for capital projects has increased:
  1. While net depreciable capital assets are about $3 billion, the depreciation of these assets was about $169 million for the state’s 10 public higher-education institutions and 16 technical colleges in FY08-2009.
  2. Yet for the same year, institutions issued about $178 million in debt for capital activities and acquired over $400 million of capital assets. Thus, even in the midst of the recession, universities borrowed and spent more money than they needed to maintain capital buildings and structures.

Performance

Increased higher-ed spending has not translated into better educational outcomes:

  • The four-year graduation rate for bachelor-level students at public institutions in South Carolina is 38.8 percent. 57.2 percent graduate within five years; and 60.5 percent graduate by year six.
  • The retention rate for full-time enrolled freshmen is about 78 percent among public institutions in South Carolina. This means about a quarter of the full-time freshman class drop out from their initially enrolled institutions after their first year.

As suggested in one of our recent blogs, public institutions need to be creative and innovative in using existing resources – especially capital structures and human resources.

Some questions university administrators need to ask are:

Are we already maximizing the utility of existing buildings – or could we have more flexible scheduling and use buildings better?

What is the core mission of our higher-educational institutions – education or economic development?

Are our budgets and debt margins sustainable in relation to state and national economic projections?

Are we providing a student-focused education and “learning value” for our students given the tuition rate they are being charged?

All in all, the governor’s summit has sparked some debate on the future of higher-education in South Carolina. This is a good start.

However, lawmakers and administrators need to refocus this conversation on streamlining inputs – such as capital investment – maximizing existing capabilities, and improving educational outcomes.

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Written by Simon Wong

October 4, 2010 at 11:24 am

Posted in Education

Tagged with , ,

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