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Although enrollments are one Indication of the magnitude and importance of the various segments, they do notreflect the important research and service functions of highereducation, nor the greater demands of advanced scholarship.These latter functions are of course concentrated most heavilyIn the four-year institutions, and particularly in the University of California and some of the independent universities.Our study consisted of extensive research of thecurrent literature on financing, gathering key data on theCalifornio nyntem, reviewing the pertinent testiAony presentedto the Joint Committee and other state reports, and discussingftnanclne, problems with key per:lon:1 in the :state governmentand In each inhtliutIonal segment.It would be imponsible tosummarise here all the views we received, but some highlightsand interpretations are worth noting:1.The public segments feel that they have been forced toeducate increasing numbers of students with funds that, interms of constant dollars, have not risen as rapidly asenrollments.The Community Colleges, which provide more than half of thepost-secondary education, suffer from an anachronistic andinflexible funding formula that lingers from the days whenthese institutions were simply extensions of high schools.state support, which has sagged to around 30 percent ofcosts (with the rest of the burden falling on local distrIcto of unequal wealth), Is appropriated as vart of thenchool rund covering yearscertainly a neoLent ofthin magnitude :;luhave independent cons tderation bythe hegislature. The present Cormula Is statutorilyfixed in dollars whose purcha:Ong power continues todecline.Purthermore, the cumbersome A1)A formula adaptedfrom the lower schools takes no account of cost differencesamong programs, and does not reimburse counseling program; which urgently need improvement in just thosedistricts which need them most because they are servingdisproportionate numbers of educationally handicappedstudents. The community college board favors formulafunding because its objectivity of allocation helps to preserve local autonomy, but would prefer a shift towardIwere not asked to make recommendations in this study, only toreview alternatives, we feel compelled to urge that the staterequire the development of comparable and consistent data fromthe various segments.It seems ironic that at a time wheninstitutions are developing highly sophisticated analytictools for intra-institutional and intra-segmental analysisthat state-level planners must deal with incomplete information.-4-

state, rathor than local, support In keeping with thegeneral effort to relieve local tax burdens and to restoreequity to all users of public systems.4The public four-year institutions, all or which aroengaged In the develop; ent of new approaches to cope witha changing educatonal ambience and new student needs (andin this, on the basis of our observations, clearly leadthe nation), are troubled by uncertainty in financing.Year-to-year appropriations, without any long-rangecommitments on which to build long-range programs, areseriously hampering innovative efforts; even creative andimaginative people need the assurance that they can seetheir endevors through. Continued myopic appropriationsprocedures can only serve to submerge creativity in asearch for security, with a consequent loss to the moreinnovative components of the California system of theirbest people.2.Student financial aid needs are only partially being Anet.Roth grants and loans are inadequate to meet the state'sgoal of open access, to post-secondary education.The four-year Institutions are concerned that "self help"-- loans and work-study -- have become too large a proportion of the student aid framework. California's studentgrant program has been effectively managed by the StateScholarship and Loan Commission, but its total volume istrivial as compared with need and with the efforts of mostother states (see Section 7 and Table 5 on page 50a).Consistent with the generally observed pattern that lowstudent charges lead to low levels of student aid, theCommunity Colleges, which are free in California, have verysmall amounts of aid funds to disburse and some have noneat all. This shortcoming surely keeps, or drives, manycapable students out of the system.3.Competition for funding among the segments is intense andwasteful, and has had effects ranging from duplication ofefforts and lack of cooperation to mild paranoia.Some National ComparisonsDespite problems within the system, higher educationin California has done reasonably well for itself relative toother states.The quality of the system is undisputed. Thetables on the following pages show that the state is above thenational median (though not always above the average or mean)in the amounts directed toward post-secondary education andthe level of participation in the system.-5-

4Conll)arlsons Over TimeTabletrce:t the growth ()I' budgets for the publicsystems over the last few years, and demonstrates that over-all,Californians have modestly increased the proportion of publicrevenues devoted to post-secondary education, contrary to thegeneral belief that other public services have cut into education appropriations. The University of California, by contrast,has slipped in its share of state funds despite a 38 percentincrease in dollar appropriations over the last six year:.ii

de IslandCaliforniaMaineSouth ssissippiFloridaWisconsinNorth CarolinaGeorgiaKentuckyNew JerseyHawaiiPennsylvaniaIllinoisAlaskaNew 24572132 32882718 1625New Hampshire50.AlabamaMontanaUtahSouth DakotaVirginiaNebraskaNorth DakotaOklahomaTexasTennesseeOregonNew MexicoKansasMinnesotaWest sCombined State and Local Appropriations for Higher EducationPer Equivalent Full Time Student- -1970 -1971TABLE 1

8.9.2.422.30LouisianaMissouriMississippiWest wareMichigcn3.313.173.153.153.062.942.842.83New PercentEnrol ledWisconsinIdahoSouth oradoUtahHawaiiWyomingOregon3.4.5.6.North New JerseyGeorgiaConnecticutMaineNew YorkSouth CarolinaKentuckyNew HampshireAlaskaArkansasVirginiaTennesseeNorth a29.30.31.32.33.34.35.36.2E.VermontMarylandRhode Island26.27.StatePercentage of Student Enrollment in Public InstitutionsTo Total Popu I ation -- 1970-1971TABLE 9PercentEnrolled

21.22.23.24.25. 11.34West VirginiaAverageOklahoma42.43.44.IowaMarylandNew irginia41.13.6513.5913.1012.8411.94New tahNorth 3.8113.70ArizonaHawaiiNorth DakotaNew tNew JerseyRhode IslandOhioMissouriDelawareArkansasSouth CarolinaVermontTennesseeIndianaFloridaSouth 4.35.36.37.38.39.40.MinnesotaState .6.2.3.4.1.StatePer 1000IncomeAppropriationsCombined State and Local Appropriations for Higher EducationPer 1000 of Per Capita Personal Income- -1970 -1971TABLE 010.0810.02Per S1000IncomeAppropriations

%5 4%5.5%5.3%5.9%ve. of TotalExpended o U of %4.1%Expended for State U & CAmount% of Total(232)222 (588)184 (526)163 (451)127 (377)105 (319)82 (250)713.1% (7.7%)2.8% (7.7%)2.6% (6.9%)2.1% (6.0%)2.0% (5.8%)1.8% (5.2%)1.7% (5.4%)Expended for C.C.'s (1)Amount% of TotalSTATE BUDGET EXPENDITURES FOR HIGHER EDUCATION(Millions of dollars)Data from budget reports of the Legislative Analyst(1) The amounts in parenthesis are totals of state and local funds. Percent figures in parenthesis represent the proportions of thestate's total budget expenditures plus local community college expenditures.(2) Institutional total only. Excludes state scholarships, sTotal State1966-67Table 4908 (1274)826 (1168)805 (1093)745 (995)633 (847)526 (694)482 (643)Amount(1) (2)(14 3%)127%k)12 .-% (17.1%)13 0'4 (15.8%)12 3% (15.7%)12.0 (15.5%)11 3".1.11.6% (14.9%)V-. of T,31Total Public Sege-.

SOURCES - FOR TABLES 1-4TABLE 11.Chambers, M.M., "Appropriations of State Tax Funds forOperating Expenses of Higher Education, 1970-71",Office of Institutional Research, National Associationof Land Grant Colleges, One Dupont Circle, N.W., Washington, D.C.2.U.S. Department of Commerce, "Governmental Finances in1969-70", September 1971.3.U.S. Department of Commerce, "Governmental Finances in970 ", July 1971.4.U.S. Department of Health, Education and Welfare,"Opening Fall Enrollment in Higher Education, 1970, 14.!port on Preliminary Survey", USOE No. 54003-68, 1969.TABLE 21.U.S. Department of Health, Education and Welfare,"Opening Fall Enrollment in Higher Education, 1970,Report on Preliminary Survey", USOE No. 54003-68, 1969.2.U.S. Department of Commerce, "Population Estimates andProjections", Series P-25, No. 468, October 5, 1971.TABLE 31.Chambers, M.M., "Appropriations of State Tax Funds forOperating Expenses of Higher Education, 1970-71",Office of Institutional Research, National Associationof Land Grant Colleges, One Dupont Circle, N.W., Washington, D.C.2.U.S. Department of Commerce, "Governmental Finances in1969-70", September 1971.3.U.S. Department of Commerce, "Governmental Finances in1970", July 1971.4.U.S. Department of Commerce, "Population Estimates andProjections", Series P-25, No. 468, October 5, 1971.5.U.S. Department of Commerce, "Survey of Current Business", August 1971.TABLE 41.Budget Reports of the Legislative Analyst.

The Demands of the FutureWe have not made a detailed analysis of the variousstate and national enrollment projections which have beenmade In recent years.In general, though, forecasts callfor a slow rate of Increase among students of traditionalcollege age In the coming decades.On the other hand, it islikely that the demand for post-secondary education amongpersons beyond college age will increase. Demands for upgrading of skills and adaptation to a rapidly changingtechnology will surely increase the numbers of older personscoming into the system for everything from short courses todegree programs.The final major factor is the influence of policiesand programs instituted by the state and the system as theymove toward fulfilling the goals of access and equity.Ifaid and recruitment programs are expanded, naturally we cananticipate enrollment increases.The number and complexity of these variables makesforecasting risky.Yet they indicate that new and enlargedprograms wl1I place increased demands on the state's financial resources.Fund DemandsOperating funds will have to be increased at roughlythe rate of enrollment growth, plus a factor for risingcosts; some economies in operation might be made, as wediscuss further below, to offset rising operating costs.In the area of capital costs, we anticipate that theneed will be somewhat below the rates of expenditure inrecent years. Major needs will be for construction on newlyestablished campuses, to remedy some imbalances, and to provide new or replacement facilities for fields undergoingrapid change or expansion.Serving the needs of more adultand part-time students may call for new kinds of facilitiesin different kinds of locations.Offsets to increases in capital needs may be foundin at least three ways. First, policies aimed at increasingenrollnents in unfilled independent colleges and universitiescan reduce the need for added space in state institutions.Secondly, leased or improvised facilities could be substituted for regular campus construction in many areas.Andthird, if a significant portion of the emiollment increaseoccurs among adult students who are best served by weekendand evening courses, the rate of utilization of present-12-

I,facilities can be increased, obviating the need for much newconstruction.In summary, post-secondary education will requireincreased funding In the coming decade as it expands itsrange of services.The rate of increase will not be asgreat as that of the sixties, since the enrollment boom hasslowed, '-ut It will be substantial.Our next step is toexplore the sources of money for higher education in a searchfor the best ways to meet present and future needs.Sources of FundingPost-secondary education draws its current supportfrom only a few drincipal sources:the users of its services,state and local governments, the federal government, andphilanthropy. Charges to users are subject to both economiclimitations and philosophic views, and these will be discussed more fully below.The contributions of federal andphilanthropic sources are beyond the control of the stategovernment, which thus has residual responsibility for thecare and feeding of the system.Yet when the state feels apinch in providing support for institutions, there is atemptation to look to these external sources for relief.(New federal higher education legislation promises asubstantial increase in support for post-secondary education.Its full implementation will produce major changes in financing patterns which must be taken into account in state planning.But it is unlikely that its full effect will be feltfor several years.The time lapse between authorization ofprograms and major funding can be considerable.Until 1974or 1975, the states will probably have to depend upon othersources, with added help only in such acute problem areas asinstructional programs in the health services and occupationaleducation, and in student aid. New student aid provisionswill fundamentally affect financing patterns as they arefunded, and this matter is discussed further in later sections.We can lay to rest as well the likelihood of majorhelp from national foundations, except for limited innovativeprograms.California's private institutions, in particular,have received important support from individual, business,and foundation philanthropy, and this flow of resources mustbe encouraged.It should continue to grow at a modest rate,tempered by fluctuations in the economy. For the publicinstitutions, the national foundations can be a source ofshort-term support for creative ideas in instruction andstudent support. But from the standpoint of state budgetplanners, philanthropy is not likely to be an importantsource of increased support.(-13-

Thus It seems apparent that, at least for the nextfew years, the solution to financial problems will gave tobe sought, within the state's bwders, and if present patternsare continued, the bulk of the burden will fall upon thestate itself.Users of the system constitute another potentialsource of increased revenues. There are basically two typesof users:students, who obtain formal instructional services;and others who receive a wide range of services including suchdiverse activities as basic and applied research, studies,consultation, data accumulation and analysis, and entertainment.Systematic data on policies and practices in thesepublic service areas are not now available, but it appearslikely that full cost is not being charged for all such services.Careful analysis of costs, and adoption of a fullpricing policy seems legitimate and fair, and could generatesome additional operating revenues.New data on students' ability to pay, as well assupport needs for those less able to pay, has recently becomeavailable through a Student Resources Survey conducted by theCollege Entrance Examination Board in tandem with this study offinancing. Appendix 3 consists of a summary of the studyresults excerpted from the report.The study tells us someremarkable things about the tenacity and resourcefulness ofstudents who want to get ar education. Although there is asignificant aid gap, as discussed in Section 7, and the evidence that parental contributions to the cost of theirchildren's education falls below expectations, underfundedstudents do stay in the system. Despite this persistence, the,shortage of aid funds must be remedied if universal access isto be achieved.Purthermore, this survey tells us nothingabout those persons who were not, surveyed:those who neverentePod tho system because or their inability, or at least theirperceived Inabillty, to continue their education beyond thesecondary level.Examination of the other end of the scale suggests thatmany students could pay more for their education. The reciprocal of the above deficit observation tells us that many studentswho could afford to pay more are enrolled in California's lowcost institutions. With 17.3* percent of community collegestudents and over 35* percent of public four-year institutionstudents coming from families with incomes of over 18,000 peryear, according to the SRS analysis, there would appear to beuntapped ability to pay.* As reported by respondents to the SHS survey.-14-

Any increase in student payments would have to beaccompanied by increased aid for those already below, orwho would drop below, the deficit point. Loans would alsohelp to cushion the shock for all.The Major OptionsFinding solutions to the state's post-secondary education financing problems is not a simple matter. Everyonehas a stake in the system, and solutions will be found onlyif all who are directly concerned work at it -- state officials,administrative officers, faculty, and students as well.The solutions will De found among relatively fewoption

TITLE Financing Postsecondary Education in California. INSTITUTION Academy for Educational Development, Inc., Palo Alto, Calif. Western Region.; California State Legislature, Sacramento. Joint Committee on the Master Plan for. Higher Education. PUB DATE Jan 73 NOTE. 128p. EDRS PRICE MF- 0.65 HC- 6.58